The environmental and social costs of China's reliance on coal as an energy source have been grossly underestimated, a joint study by environmentalists and economists says. For each tonne of coal consumed last year, China paid 150 yuan (HK$170) extra in environmental damage, according to 'The True Cost of Coal'. The report, commissioned by Greenpeace, the US-based Energy Foundation and WWF, was written by prominent mainland economists. The report estimated that the true cost of coal in China last year was about 1.75 trillion yuan, nearly 7.1 per cent of gross domestic product that year. The figure would be even higher if the impact of climate change were included, according to the report. 'Environmental and social damages are underestimated for using coal in China, as a result of market failures and weakness in government regulations,' said Mao Yushi , lead author of the report and founder of the privately funded Unirule Institute of Economics. 'China must count these external costs and make the coal price reflect its true costs.' The so-called external costs were air and water pollution, ecological degradation, increasing health costs, mining accidents and infrastructure damage. It also took into account the price distortion caused by government regulations, such as land-ownership policies and poor worker safety and compensation systems, which keep the cost of coal down. Coal accounts for 70 per cent of China's primary energy consumption and is the biggest single source of air pollution across the country. It causes 85 per cent of sulfur dioxide emissions, 67 per cent of nitrogen oxide emissions and 70 per cent of airborne particles. Mining has contaminated water, degraded land and caused massive land subsidence. Coal is also responsible for China's enormous carbon dioxide emissions, which are believed to have made the nation the world's largest greenhouse gas emitter. Quoting the report, Yang Fuqiang , chief representative of the mainland office of the Energy Foundation, urged Beijing to impose energy and environmental taxes. His view was supported by Professor Mao, whose study showed that the introduction of a coal tax would raise prices by up to 23 per cent and reduce consumption by about 12 per cent. 'But the taxation measures would have little impact on China's economic growth,' the report said. 'On the contrary, it would make China more competitive globally in the long run and increase China's social wealth by 942 billion yuan. 'The government of China has the opportunity to make a real improvement to the environment by reforming the current coal pricing system. Yang Ailun , Greenpeace's climate and energy campaign manager, said recognising the true cost of coal would create incentives to developing cleaner, sustainable energy.