Green energy transition can fund universal health coverage
The green energy transition is generating potential new financial streams that low and middle income countries could direct toward universal health coverage. Government support that keeps energy prices below supply costs through direct payments or price controls often consumes a large share of public spending. Reducing these subsidies while introducing carbon pricing and capturing new royalties from critical minerals would free up resources for public services.
Fossil fuel subsidies displace domestic health spending
Fossil fuel subsidies remain acutely sensitive to international oil prices. When Russia invaded Ukraine in 2022, global subsidy expenditure reached $1.4tn, marking a 50% increase in a single year. A new peak is projected for 2026 as governments respond to oil price surges driven by ongoing conflicts in the Middle East through tax cuts and price caps.
These high subsidy costs directly threaten public health budgets. A study of 126 countries estimates that each additional dollar spent on fossil fuel subsidies displaced $0.35 of domestic health spending between 2015 and 2019. Meanwhile, the annual financing gap for universal health coverage in low and middle income countries sits between $20bn and $54bn for the 2026-30 period. Progress has stalled as foreign health aid decreases, leaving health spending projected to fall in over 80% of low income countries by 2030.
Reform Lessons from Indonesia and Brazil
Historical reform efforts demonstrate both the potential and the fragility of shifting subsidy funds toward public health. In November 2014, Indonesian President Joko Widodo reduced fuel subsidies and increased petrol and diesel prices by roughly 31% and 36%. By January 2015, petrol subsidies were entirely eliminated. Fuel subsidies dropped from 19% of government spending in 2014 to under 7% in 2015, helping fund the expansion of the national health insurance scheme known as Jaminan Kesehatan Nasional.
However, reforms often prove short-lived when price mechanisms are not tied to international markets. Indonesia suspended its automatic adjustment mechanism in 2017, and subsidies surged again during the 2022 price spikes. In Brazil, a 2013 law earmarked 25% of oil royalties from new extraction contracts for municipal healthcare. An evaluation found no overall effect on health spending except in municipalities receiving above-average per capita royalties, hindered by fiscal substitution and rules preventing the use of royalties for payroll expenses.
Critical mineral demand risks reviving the resource curse
The global push for electric vehicles, solar panels, and energy storage has driven massive demand for critical minerals such as lithium, cobalt, and rare earth elements. Demand is projected to grow by nearly 400% for lithium and 30% for copper by 2040. While wealthy economies race to secure long-term supply deals, most low and middle income resource-rich countries lack the fiscal frameworks required to capture a fair share of the revenue.
This dynamic risks reviving the resource curse, where wealth concentrates among a small elite while public services and local health needs go unmet. The distribution of potential revenue does not align with health needs. Upper middle and high income countries account for approximately 75% of both fossil fuel subsidies and projected critical mineral revenues, while low income countries face the largest universal health coverage financing gaps despite generating minimal transition revenues.
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