Phasing out coal in India – Rationale and Challenges- Explained Pointwise

According to a study by environment and climate change research think-tank iForest (International Forum for Environment, Sustainability, and Technology), India would require over $1 trillion or Rs. 84 lakh crores over the next 30 years, for phasing out coal in India. According to the report, coal will remain central to India’s energy mix for at least another decade, and phasing out coal in India poses a massive challenge.

According to The Energy and Resources Institute (TERI), India needs to phase out coal altogether by 2050, to achieve net-zero greenhouse gas emissions. This is due to the fact that coal remains the most important and abundant fossil fuel in India. However, with India having the 2nd largest coal share in electricity generation globally, and with 94 GW of coal-based power plants under planning and under construction in India, there remain substantial challenges in phasing out of coal in India.

What is the status of coal usage around the world and in India?

The following image shows the share of coal in electricity generation in 2017.

What is the need for phasing out coal?

1. Mitigation of the impact of Climate Change – According to the IPCC’s Special Report Global Warming of 1.5 °C, phase out of coal by 2050 is necessary to limit global warming to 1.5 °C.

2. Health benefits – Coal is a major contributor to air pollution, and is responsible for more than 800,000 premature deaths per year globally. Phase out of coal will reduce millions of cases of serious and minor illness.

3. Reduction of negative economic implications- The phasing out of coal in India will reduce the negative economic implications associated with the use of coal, such as increased healthcare costs and a higher number of lost working days.

4. Energy independence and fiscal benefits – Reduction of coal imports promotes energy independence, and improves the balance of payments. Further, it also helps to reduce geopolitical tensions in purchasing coal. For ex- India can reduce importing coal and save on its Forex reserves.

5. Lower costs of renewable energy – Renewable energy is rapidly emerging as a lower cost option for new power generation. It is estimated that by 2025, electricity generation from new renewable energy infrastructure will get cheaper than power generation from new coal infrastructure.

What are the challenges in phasing out coal in India?

Phasing out the entire coal sector in India is a complex issue. There are many associated issues involved in phasing out coal. These are mentioned below-

1. Deprivation of the geographic advantage of resource-rich state- According to the Geological Survey of India, India has 319.02 Billion tonnes (BT) of cumulative coal reserves in India. Out of these, 219.65 BT (68% of total reserves) are present in only 3 states- Jharkhand, Orissa, and Chhattisgarh. Phasing out coal will reduce their economic capacity, as the entire economy of these states is dependent upon coal for other developments.

2. Huge Job cuts/losses- According to a PIB press release, public sector coal-producing entities alone employ a workforce of 3,69,053 individuals and many more individuals are employed in the private sector, thermal power plants that run on coal, transportation, logistics. Phasing out coal in India will create a huge job loss across the sector.

3. Reduction in Taxes- In FY20, the Centre alone collected approximately Rs 29,200 crore in GST compensation cess from coal. Phasing out coal will impact India’s tax collection.

4. The economic influence of coal in freight movement- Coal alone accounts for around 40 percent of the total freight revenue in Indian Railways and trucks. So, phasing out coal will reduce the logistical revenue of India.

5. Stranded assets risk- Economic shifts and policy changes may turn coal-fired power plants into stranded assets(non-performing assets). This will rapidly decrease their value, or may turn them into liabilities.

6. Economic Cost in phasing out- The German coal phaseout plan calls for an investment of more than 50 billion euros for mining and plant operators. Similar investment is not feasible in India.

What initiatives have been taken for phasing out Coal Worldwide?

What should be the Way Ahead for India?

1. Deployment of clean energy on a mass scale- According to The Energy and Resources Institute (TERI), If India needs to achieve a net-zero greenhouse gas emissions target, then the share of renewables in the power mix needs to climb to 90%.

2. Focus on energy efficiency- Instead of phasing out coal immediately, India can move towards energy-efficient buildings, lighting, appliances, and industrial practices. This will help faster phase-out of coal in the future. The government has to encourage all states and UTs to make their respective carbon-neutral plan. For ex- Carbon-neutral plan of UT of Ladakh and Sikkim state.

3. Carbon sequestration plans- India needs to develop both natural and man-made Carbon Sequestration practices. The use of biofuels can help reduce emissions from light commercial vehicles, tractors in agriculture.

4. Public funding- Public funding, through grants and subsidies, and private investments in green energy plants and infrastructure will help in phasing out coal.

5. Proper use of DMF and Corporate Social Responsibility (CSR) funds- India has nearly $4 billion in district mineral foundations funds. This fund can be used as a resource, along with CSR funds, for supporting new businesses in coal districts, and to support communities.

Phasing out coal is essential not only for India but for all countries. But developed countries that started their Industrialisation by burning coal has to adopt the Common but differentiated responsibilities and respective capabilities (CBDR-RC) for phasing out coal. This will not only provide adequate time for developing countries like India and Least Developed Countries but also fix their responsibility also.