Stopping Payments to Polluters: Clearing the air with fossil fuel subsidy reform in China and India

The document examines the scale of fossil fuel subsidies in China and India, arguing that reforming these payments is essential for improving urban air quality and meeting Paris Agreement targets. It highlights specific reform mechanisms, such as India's Direct Benefit Transfer for LPG and China's voluntary G20 peer reviews, while drawing on Indonesia's experience in reallocating subsidy savings toward social welfare and infrastructure. The brief emphasizes that successful reform requires phased approaches to protect vulnerable consumers and workers, as well as the reallocation of funds toward renewable energy and social services.

• Fossil fuel subsidies in China and India are substantial, with 2014 consumer subsidies in India estimated at USD 38.2 billion and consumption subsidies in China estimated by the IEA at USD 17.4 billion.
• India has implemented targeted subsidy mechanisms to protect vulnerable populations, specifically the Direct Benefit Transfer (DBT) for LPG, which uses biometric identity cards (Aadhaar) to send payments directly to bank accounts.
• China has utilized voluntary peer reviews within the G20 framework to improve transparency and identify inefficient subsidies, including a significant review process with the United States in 2016.
• In China, non-financial subsidies such as guaranteed minimum run hours for coal generators have hindered the transition to renewables by causing the curtailment of renewable energy generation.
• India has used fiscal instruments to discourage fossil fuel use and fund clean energy, including a cess on coal production that was increased to INR 400 per tonne in March 2016.
• Indonesia provides a model for the reallocation of subsidy savings; after reforming gasoline and diesel subsidies in 2014, it saved USD 15.6 billion, which was redirected toward social welfare, infrastructure, and regional transfers.
• China has addressed coal overcapacity by introducing a warning system in March 2016, which led to 28 provinces being ordered to stop the approval or construction of new coal power plants.

APA

Kitson, L., Gerasimchuk, I., Garg, V., Duan, H., & Sanchez, L. (2017). Stopping Payments to Polluters: Clearing the air with fossil fuel subsidy reform in China and India. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/stopping-payments-polluters-ffs-reform-china-india.pdf

Chicago

Kitson, Lucy, Ivetta Gerasimchuk, Vibhuti Garg, Hongxia Duan, and Lourdes Sanchez. Stopping Payments to Polluters: Clearing the air with fossil fuel subsidy reform in China and India. International Institute for Sustainable Development, 2017. https://www.iisd.org/system/files/publications/stopping-payments-polluters-ffs-reform-china-india.pdf.

Wikipedia

{{cite report |last1=Kitson |first1=Lucy |last2=Gerasimchuk |first2=Ivetta |last3=Garg |first3=Vibhuti |last4=Duan |first4=Hongxia |last5=Sanchez |first5=Lourdes |title=Stopping Payments to Polluters: Clearing the air with fossil fuel subsidy reform in China and India |publisher=International Institute for Sustainable Development |date=March 2017 |url=https://www.iisd.org/system/files/publications/stopping-payments-polluters-ffs-reform-china-india.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kitson2017stopping, author = {Kitson, Lucy and Gerasimchuk, Ivetta and Garg, Vibhuti and Duan, Hongxia and Sanchez, Lourdes}, title = {{Stopping Payments to Polluters: Clearing the air with fossil fuel subsidy reform in China and India}}, institution = {International Institute for Sustainable Development}, year = {2017}, month = mar, url = {https://www.iisd.org/system/files/publications/stopping-payments-polluters-ffs-reform-china-india.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }