Chinese Economy Being Burnt by The Cost of Coal

China’s coal bill in 2007 reached a total external cost of 1.7 trillion Yuan ($250bn), equivalent to 7.1 per cent of China’s gross domestic product the same year.

These are the findings of a new report commissioned by Greenpeace, the Energy Foundation and WWF-China. The three organizations have urged the Chinese Government to set up a fairer pricing system for coal.

The report, The True Cost of Coal, outlines the external costs to China of using coal by including the costs of air and water pollution, ecosystem degradation, damage to infrastructure, human injuries and loss of life, and takes into account the distortion of government regulations.

Chen Dongmei, Director of Climate Change and Energy Programme WWF China, said: “Any reform of the coal pricing system will not only influence the cost of natural resources and environment but how we provide services needed for an increasing population and growing economy within limited natural resources.”

With each tonne of coal consumed in 2007 alone, China paid an extra RMB150 for environmental damage, the report shows. This figure does not factor in the costs of the impacts of climate change resulting from coal combustion, which would make China’s coal bill significantly higher.

“Environmental and social damages are underestimated while using coal in China, as a result of market failures and weakness in government regulations,” said economist Mao Yushi, lead author of the report.

“In order to address these problems, China needs to count these external costs and make the coal price reflect its true costs.”

Chief Representative of the Energy Foundation Dr. Yang Fuqiang said: “It makes economic sense for the government to adjust the coal pricing system to reflect its true costs.”

The report points out that, despite a 23 per cent coal price rise caused by the internalization measures, the plan would have little impact on China’s economic growth. On the other hand, it would increase China’s long-term international competitiveness.

“Recognizing the true cost of coal would create incentives to developing cleaner, sustainable energy sources,” said Yang Ailun, Climate and Energy Campaign Manager of Greenpeace China.

The True Cost of Coal report was written by experts from the Unirule Institute of Economics, the Energy Research Institute of the National Development and Reform Commission, Renmin University of China, the Academy of Social Sciences of Shanxi, the School of Public Health at Peking University and the National Centre for Disease Control and Prevention.

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