Beyond Fossil Fuels: Fiscal Transition BRICS | Case Study: China

Key Messages

• As the clean energy transition advances, India, along with the other BRICS governments, needs to start preparing its budget for a fiscal transition out of revenues from fossil fuel production and consumption. The clean energy transition offers alternatives to fossil fuels and thus can lead to the decrease in government revenues in two ways: through a drop in fossil fuel prices and, over the longer term, through the shrinkage of absolute amounts of fossil fuel production and consumption.
• In 2017, taxes and other revenues from fossil fuel production and consumption amounted to 4.2 per cent of general government revenue in China. These revenues should be used strategically to help diversify the economy away from fossil fuels and cover the social costs of transition, including for vulnerable groups of consumers, workers and communities currently depending on fossil fuels.
• The government’s budget is being eroded by subsidies to both fossil fuel production and consumption. Phasing out these subsidies in a socially equitable way will both increase government revenues and promote a transition beyond fossil fuels.

This case study is part of the report Beyond Fossil Fuels: Fiscal transition in BRICS. The report consists of a) a cross-country analysis for all BRICS countries (Brazil, Russia, India, China and South Africa), which offers initial recommendations on aligning BRICS fiscal policies with a clean energy transition, and b) five country briefs that present the aggregated data on both revenues and subsidies related to fossil fuels in each country. The cross-country analysis and each of the five country briefs can be downloaded separately from the report’s home page. 

This analysis has been prepared in partnership with the Leave it in the Ground Initiative.