This paper investigates the health impacts of fossil fuel-driven energy production by exploiting a unique Colombian electricity pricing policy. This policy triggers increased thermal energy production when wholesale electricity prices exceed a pre-determined scarcity price, resulting in heightened local pollution levels. Comparing municipalities near high-capacity thermal plants to those near low-capacity plants, the study reveals a significant increase in cardiovascular-related emergency room mortality (56%) and respiratory-related morbidity (9%) in areas with heightened thermal energy production. These findings translate into substantial health costs, estimated at 996 million USD, considering lives lost and increased healthcare expenditures. The study’s focus on Colombia contributes valuable insights into the health consequences of fossil fuel-based energy production in lower-income countries, shedding light on the global implications of energy source choices.