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Do Fossil Fuel Subsidies Crowd Out Health Expenditure? A Country-Level Longitudinal Analysis.

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Fossil fuel subsidies (FFS) significantly reduce health spending globally. Eliminating these subsidies is crucial for achieving Sustainable Development Goal 3 (Good Health and Well-Being) and climate action.

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Area of Science:

  • Public Health
  • Environmental Economics
  • Global Health Policy

Background:

  • Countries globally spend billions on fossil fuel subsidies (FFS), impacting public health and environmental sustainability.
  • FFS undermine progress toward Sustainable Development Goals (SDG) 3 (Good Health and Well-Being) and 13 (Climate Action).
  • The effect of FFS on social protection and health expenditure remains inadequately quantified.

Purpose of the Study:

  • To determine if FFS globally lead to a reduction in health expenditure.
  • To quantify the causal relationship between FFS and domestic health spending.

Main Methods:

  • Utilized panel data from 126 countries between 2015-2019.
  • Employed an instrumental variable approach using international energy trade exposure and crude oil price fluctuations.
  • Estimated the causal impact of FFS on health expenditure per capita.

Main Results:

  • In 2019, 17 countries spent over 5% of GDP on FFS, exceeding health expenditure in 15 of them.
  • A 1% increase in FFS per capita correlated with a 0.05% decrease in domestic health expenditure per capita (95% CI -0.08% to -0.02%).
  • This decrease was driven by rising international oil prices and countries' trade exposure.

Conclusions:

  • FFS have a detrimental, causal impact on global health expenditure.
  • Eliminating FFS is essential for enhancing health spending and achieving SDG3.
  • Reducing FFS offers a dual benefit of improved public health and climate change mitigation.