Health cost of China’s fossil fuel subsidies highlighted

Faster action is needed to phase out subsidies that are costing at least US$1.7 trillion each year, reports Catherine Early

China’s efforts to reform subsidies for coal, oil and gas have been criticised by health campaigners, who argue that the cost of premature deaths caused by air pollution far outweighs the cost of subsidies.

China subsidises consumers and producers of coal, oil and gas to the tune of US$96 billion, based on 2014 data, according to a report by the Health and Environment Alliance (HEAL). But the cost to the nation’s health through air pollution was around US$1.7 trillion the same year. Most of this stems from China’s use of coal, which fills the air with harmful particulates (PM2.5), the campaigners point out.

The report compares the cost of fossil fuel subsidies globally with the cost of the health problems they cause, including respiratory and heart disease, and strokes. It found that the use of fossil fuels in the G20 group of nations in 2014 resulted in health costs estimated to be six times higher than the subsidies paid out – US$2.76 trillion compared with US$444 billion.

These costs are “serious underestimates”, HEAL warns, since they cover costs associated with premature deaths but not those relating to ill-health, such as medication, hospitalisation and the loss of productivity.

HEAL, which has more than 75 member organisations, representing health professionals, not-for-profit health insurers, patients, citizens and environmental experts, is aiming to build public pressure for fossil fuel subsidy reform, with a complete phase out by 2020 in developed countries, and by 2025 in developing countries. Its recommendations for policy makers include identifying the subsidies that cause disease; redirecting funds for fossil fuel subsidies towards projects that improve health and tackle climate change; and prioritising social equality in subsidy reform.

Slow progress

G20 leaders vowed in 2009 to phase out fossil fuel subsidies but have mostly failed to implement changes. China has begun the process, working with the US on a peer review of subsidies that included the country’s first systematic cross-departmental review of fossil fuels. The final report of the peer review was published in September 2016, and for the first time, the Chinese government proposed an explicit roadmap for energy subsidy reform including a timetable and specific actions.   

It identified nine fossil fuel subsidies in need of reform, among them, subsidies supporting extraction and refining, for electricity and heat generation, and for end-user transportation and household consumption.

Under the roadmap, two subsidies – exemptions from consumption taxes for fuels produced and used by oil and gas firms – are to be reformed between 2015 and 2020, while reform of the remaining seven policies is expected before 2030.

The group also called for an improvement of the data and understanding of the environmental impacts of fossil fuel subsidies in China in terms of greenhouse gas emissions and other forms of pollution.

But health campaigners say the peer review report “left a lot to be desired”, because it failed to provide estimates for all the subsidies, identifying mostly those related to petrol, and largely omitting coal. HEAL complained the phase out deadlines are also unclear. China’s support to the coal industry alone totalled around US$18 billion in 2015, HEAL notes.   

Unequal impacts

Health impacts of air pollution fall disproportionately on the poor, HEAL notes. China’s middle-class can afford to seek shelter, drive to work, work inside, have their children play in indoor playgrounds, buy home air filters or leave the city when necessary. “The unprivileged struggle to find the resources to guard themselves from the poisonous air and oftentimes can only afford ineffective face masks,” it states. Poor people have lower awareness of the negative health impact of air pollution, it adds.

The report acknowledges other action China has taken to reduce fossil fuel dependency, including boosting renewable energy generation and ordering 28 out of 31 mainland provinces to stop permitting new coal plants. But campaigners urged the country to commit to an early deadline for scrapping fossil fuel subsidies.

“If China eliminated subsidies to fossil fuels and its energy prices would reflect their true costs, up to 66% of currently occurring premature deaths could be avoided, because of improved air quality through less coal use,” the report states.

Coal power represents a particular threat to health and needs to be rapidly phased out, according to professor Hugh Montgomery, co-chair of the Lancet Commission and director of the UCL Institute for Human Health and Performance. “The threat to human health from climate change and fossil fuel use has been grossly underestimated,” he said.

Genon Jensen, executive director of HEAL, said that while global leaders continued to pledge to tackle climate change, they still gave out billions of dollars to subsidise fossil fuels that cause the problem, as well as fuelling ill health. “It is time to seize the opportunity to improve the health of millions of people worldwide by abandoning subsidies to the deadly fossil fuel industry,” he said.