The High Cost of India’s Transition from Coal to Green Energy

What’s in today’s article?

• Why in News?
• Coal Resource in India
• Ensuring a Just Energy Transition in India
• International Support for Coal Phase-Down – Case Studies
• Findings from the Study of Coal-Dependent Districts in India

Why in News?

A recent study by iForest (International Forum for Environment, Sustainability and Technology) reveals that India will need over $1 trillion (Rs 84 lakh crore) over the next 30 years for a just transition away from coal. 

The study, the first of its kind, estimates the costs of phasing down coal mines and plants while ensuring socio-economic stability in coal-dependent regions. 

Coal Resource in India

• Statistics
  • According to the National Coal Inventory of 2023, the total estimated coal reserve (resource) of India is 378.21billion tonnes as of 01.04.2023.
• Coal Production
  • The all India Production of coal during 2023-24 was 997.83 MT with a positive growth of 11.71%.
• Coal Import
  • As per the present Import policy, coal can be freely imported (under Open General Licence) by the consumers themselves considering their needs based on their commercial consideration.
  • Coking Coal is being imported by Steel sector mainly to bridge the gap between the requirement and indigenous availability and to improve the quality. 
  • Other sectors like Power sector, cement etc. and coal traders are importing non-coking coal.
  • Total coal import during 2023-24 was 261 million tonnes.

Ensuring a Just Energy Transition in India

• About Just Energy Transition and challenges associated
  • A "just" energy transition refers to an equitable and inclusive shift towards a low-carbon economy that takes into account the needs of workers and communities dependent on fossil fuels. 
  • As the world's second-largest coal producer, India employs a vast number of individuals in coal mining, thermal power plants, logistics, and related sectors. 
    • Public sector coal companies alone employ over 3.6 lakh workers, with many more in the private sector.
  • As India aims for net-zero emissions by 2070, growing its renewable energy capacity will be crucial. 
  • However, ensuring that coal-dependent workers and regions are not left behind in this transition poses a major financial challenge. 
  • Balancing economic stability with climate goals will require significant investment.
• Costs associated with a just transition
  • A study on India's just transition from coal, based on assessments of coal-dependent districts and international examples from South Africa, Germany, and Poland, identified eight key cost components. 
  • These include: 
    • mine closures and site repurposing, 
    • retiring coal plants and converting them to clean energy, 
    • skilling workers for green jobs, 
    • fostering new businesses, 
    • community support, 
    • green energy investments, 
    • compensating states for revenue loss, and 
    • planning costs.
  • Nearly 48% of the estimated $1 trillion required over the next 30 years will be needed for green investments to replace coal-based energy infrastructure with cleaner alternatives.
  • Source of funds for this transition
  • Funding India’s just transition away from coal will require a mix of public and private investments. 
  • Public funding, through grants and subsidies, will primarily address "non-energy" costs such as community support, skilling coal workers for green jobs, and aiding new businesses.
  •  India’s $4 billion District Mineral Foundation funds, collected from miners, along with Corporate Social Responsibility (CSR) funds, can be used to support new businesses and coal-dependent communities.
  • Private investments, on the other hand, are expected to cover most of the "energy costs," focusing on developing clean energy projects and green infrastructure.

International Support for Coal Phase-Down – Case Studies

• South Africa’s Just Energy Transition
  • South Africa’s Just Energy Transition Investment Plan (JET-IP) will receive international financial support from countries such as the UK, France, Germany, the US, the EU, the Netherlands, and Denmark. 
  • The plan requires $98 billion over two decades, with $8.5 billion to be provided between 2023-2027. 
  • Most of the funds will go towards green energy investments, with financing through concessional loans, grants, and public-private partnerships.
• Germany’s Legislative Action on Coal Phase-Out
  • Germany has enacted legislation to phase out coal power by 2038, with over $55 billion allocated to close coal mines and power plants. 
  • The funds will also be used to support coal-dependent regions by fostering economic development.

Findings from the Study of Coal-Dependent Districts in India

• The study focused on four coal-dependent districts: Korba (Chhattisgarh), Bokaro and Ramgarh (Jharkhand), and Angul (Odisha), to assess their reliance on coal and estimate the costs of a just transition.
• In Bokaro, coal-based industries contribute 54% of the district's domestic product, employing around 1,39,000 workers in coal mining, power plants, and related sectors like steel and cement. 
• The study estimates that a full coal phase-down in Bokaro will begin after 2040 and will require Rs 1.01 lakh crore over 30 years to rehabilitate workers, repurpose coal sites, and develop green energy infrastructure.

Q.1. What are the major costs associated with India’s transition from coal?

India's transition will require over $1 trillion, including costs for mine closures, worker reskilling, clean energy investments, and community support in coal-dependent regions.

Q.2. How will India fund the transition away from coal?

The transition will rely on a mix of public and private investments, with public funds supporting socio-economic initiatives and private investments covering energy costs for developing green infrastructure.

News: $1 trillion over 30 years: the huge cost of pivoting away from coal | Ministry of Coal