Phasing Out Coal in India – Explained, Pointwise

Introduction

Coal is the largest source of electricity in the world. Recently, the UN Secretary-General urged wealthy nations to end coal use by 2030. But, about 30% of the primary energy supply of the G20 countries depends on coal. Further, only a negligible decrease in coal use(0.9%) is observed between 2012 and 2017 in G20 Countries. So phasing out coal is not an easy step despite setting Net Zero carbon emission by developed countries. Phasing out coal in India is a bigger challenge than in developed countries.

A few of the International Organisations and few developed countries are asking India to adopt a net-zero emissions target. But it is not an easy step. According to The Energy and Resources Institute(TERI), to achieve net-zero greenhouse gas emissions India needs to phase out coal altogether by 2050. This is because coal is the most important and abundant fossil fuel in India.

According to the 2017 data, almost 94 GW of coal-based power plants are planned(announced, pre-permitted or permitted) or already under construction in India. Further, India also has the 2nd largest coal share in electricity generation globally. This underlines the challenge in phasing out coal in India.

Needs to phase out coal
  1. Climate change: Coal-fired electricity generation accounts for 30% of global
    carbon dioxide (CO2) emissions in 2018.
    According to the IPCC’s Special Report Global Warming of 1.5 °C, a near-total reduction in the use of coal and other fossil fuels for electricity generation by 2050 is necessary to limit global warming to 1.5 °C. So to achieve the Paris climate deal reduction of coal is essential.
  2. Health benefits: Coal is a major and is often the leading contributor to air pollution. Estimates found that coal burning is responsible for more than 800,000 premature deaths per year globally. Further, coal is also the reason for many millions of cases of serious and minor illness. This also has economic implications, like increased healthcare costs and a higher number of lost working days.
  3. Costs: Renewable energy rapidly emerged as the lowest cost option of new power generation. By 2025, electricity generation from new renewable energy infrastructure will get cheaper than power generation from new coal infrastructure.
  4. Energy independence and fiscal benefits: Reducing coal imports promotes energy independence, improves the balance of payments. Further, it can also reduce geopolitical tensions in purchasing coal. For example, India can reduce importing coal and save Forex reserves.
Capacity of Coal usage around the world

China has the biggest energy supply from coal. China alone accounts for nearly half of the world’s coal consumption.

In 2017, the G20 countries accounted for 85% of global coal exports. The major exporters include Australia (37% of global coal exports), Indonesia (16%), Russia (12%). So phasing out coal will impact their coal export revenue and create associated job loss, etc.

However, countries like the UK, Italy, France, the European Union, the United States shows strong commitment and reduction in coal usage due to their policies. Such as pre-retiring coal plants, the introduction of the carbon tax, etc.

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

Capacity of Coal usage in India
  1. India holds the 5th biggest coal reserves in the world. Around 7% of the world’s proven coal reserves are located in India.
  2. According to the Ministry of renewable energy, the total installed capacity of renewable energy is 368.98 GW. But still this only accounts for 23.39% of India’s energy mix. On the other hand, the coal sector accounts for more than 60% of India’s energy mix. This shows the importance of Coal in India.
  3. In FY20, India consumed approximately 942 million tonnes (MT) of coal. Of that 730 MT was produced domestically.
  4. India is also the 3rd biggest coal importer among G20 countries. Further, India also accounts for 12% of global coal imports.
  5. According to the monthly production pattern of the Ministry of Coal, the Majority of Coal was used in Power production and Captive Power Plant(CPP).
Challenges in Phasing out coal in India

Phasing out the entire coal sector is not an easy task in India. There are many associate issues involve in phasing out coal. Such as,

  1. Depriving the geographic advantage of resource-rich state: According to the Geological Survey of India, India has 319.02 Billion tonnes(bt) cumulative coal reserves in India. Of these 219.65 bt(68% of total reserves) present in only 3 states.  Jharkhand, Orissa, and Chhattisgarh. The entire economy of these states depends upon coal for other developments. Phasing out coal will reduce their economic capacity.
  2. 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
  3. The economic influence of coal in freight movement: Coal alone accounts for 40 percent of the total freight revenue in Indian Railways and trucks. So, phasing out coal will reduce the revenue of Railways in India.
  4. The impact of Job loss: Using different employment factors, one study has mentioned direct coal jobs at 7,44,984. This figure does not include contract employees, Captive mine workers, employees in coal transportation, coal consuming sectors like steel, power, etc. Phasing out coal in India will create a huge job loss across the sector.
  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 they may turn into liabilities. This process is already observed in some G20 countries.
  6. Economic Cost in phasing out: Phasing out coal is not an easy task considering the associated cost involved in the transition. For example, The German coal phaseout plan calls for an investment of more than 50 billion euros for mining and plant operators, impacted regions and employees. Similar investment is not feasible in India.
Suggestions to phase out Coal in 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%(From 23.39% now). So India needs to deploy clean energy on a large scale.
  2. Adopting net-zero emissions target: Various environmentalist and even the CEO of NITI Aayog wants India to embrace the Net-Zero emission target. It is important to note that there is also a Private member bill submitted in Lok Sabha, urging the Indian government to commit a net-zero emissions target by 2050. So, India needs to adopt such a target.
  3. 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.
  4. The government has to encourage all states and UTs to make their respective carbon-neutral plan.
    • The UT of Ladakh and Sikkim state are already planning such a carbon-neutral plan.
    • Further, at the local level cities like  Bengaluru and Chennai, the Panchayat of Meenangadi in Wayanad, Kerala also planning such a carbon-neutral plan.
  5. Other initiatives like,
    • India also has to develop both natural and man-made Carbon Sequestration practices. 
    • Use of biofuels: Can help reduce emissions from light commercial vehicles, tractors in agriculture.
Conclusion

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.

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