China Subsidies

China—partial estimate 15.42 billion; complete estimate is not available

The amount of subsidies that China provides to its fossil fuel industry has long remained a mystery. However, in September 2016, the US and China agreed upon a fossil fuel peer review process. The review was intended to stimulate a reform of such subsidies, which both countries saw as a needed step in combatting climate change. China released a list of its major subsidies as highlighted below:

China’s Self Report identified nine fossil fuel subsidies in need of reform, amongst them, subsidies supporting extraction and refining, for electricity and heat generation, and for end-user transportation and household consumption. The table below includes estimates of the fiscal cost of these nine subsidies, how long they have been in place, and the proposed method to reform them. A lack of data meant estimates of fiscal costs could only be provided for three policies.

China was not even able to estimate the annual cost of six of the nine policies it identified as subsidies, citing a rapidly changing policy environment. The remaining three totaled around US$15.42 billion—almost all of which was directed to lowering petrol prices. The government’s submission to the peer review set out a framework for “rationalizing” subsidies, without setting a timeline, simply tagging some policies as short-medium term and some as medium-long term.

“Although the production and consumption of non-fossil energy is booming worldwide in recent decades, it can be predicted that for a long time in the future, production and consumption of fossil fuels is still dominant,” said the Chinese government document, adding that: “The excessive total fossil fuel consumption in China is, to a certain degree, linked to the unsatisfactory system and mechanism relating to energy subsidies.”

Learn More

“Us and China Release Fossil Fuel Subsidy Peer Reviews,” Karl Matiesen, The Guardian, September 15, 2016 https://www.theguardian.com/environment/2016/sep/20/us-and-china-release-fossil-fuel-subsidy-peer-reviews

“China to Reform Fossil Fuel Subsidies,” Liu Shuang, China Dialogue November 16, 2016

https://chinadialogue.net/article/show/single/en/9396-China-to-reform-fossil-fuel-subsidies-