$1 tn over 30 years: the huge cost of pivoting away from coal
- The first-of-its-kind study, published last week, attempted to estimate the cost of phasing down coal mines and coal plants, along with the costs of ensuring socio-economic stability in coal-dependent regions.
Highlights:
- As India moves toward achieving net-zero emissions by 2070, transitioning away from coal presents a complex challenge. A recent study by the International Forum for Environment, Sustainability and Technology (iForest) estimates that this transition will require over $1 trillion (Rs 84 lakh crore) over the next 30 years. The study outlines the costs of phasing down coal mines and power plants while ensuring that the transition is equitable and inclusive, particularly for coal-dependent communities and workers.
Coal's Central Role in India's Energy Mix:
- India is the second-largest coal producer globally, with coal providing a critical portion of the country’s energy needs. Over 369,000 workers are directly employed by public sector coal entities, with many more involved in private mining, thermal power generation, logistics, and transportation.
- As India grows its renewable energy capacity, moving away from coal will require significant attention to the livelihoods of those dependent on the sector.
What Constitutes a ‘Just’ Energy Transition?
- A “just” energy transition aims for an equitable and inclusive shift towards a low-carbon economy, ensuring that workers, communities, and regions dependent on fossil fuels are not left behind. This means providing alternative employment opportunities, economic diversification, and social safety nets to cushion the impact of the transition.
The Costs of a Just Transition:
- Based on assessments of four coal-dependent districts in India and international examples, the study outlines eight key cost components:
- Mine closures and repurposing for new uses
- Retirement and repurposing of coal plants for clean energy
- Labour skilling for green jobs
- Economic diversification to create new business opportunities
- Community support to help transition affected regions
- Green energy investments to replace coal
- Revenue substitution to cover lost income for coal-dependent states
- Planning costs for managing the transition
- Approximately 48% of the estimated $1 trillion will be needed for green energy investments, including building renewable energy infrastructure to replace coal.
Funding the Transition:
- Funding this enormous undertaking will require a mix of public and private investments. Public funding, primarily through grants and subsidies, will focus on "non-energy" costs like community support and skilling programs. Private investments are expected to cover much of the "energy" costs, such as building new green energy projects.
- India also has access to $4 billion in district mineral foundation funds, collected from miners, which can be used to support new businesses in coal regions. In addition, Corporate Social Responsibility (CSR) funds can help bolster community resilience and economic diversification.
International Models of a Just Transition:
- Countries like South Africa and Germany offer valuable lessons for India.
- South Africa’s Just Energy Transition Investment Plan (JET-IP), supported by international funding from the UK, US, and EU, will require $98 billion over two decades to phase down coal. Concessional loans, grants, and public-private partnerships are key financing tools.
- Germany has legislated a coal phase-out by 2038, with an outlay of $55 billion to close coal mines and coal plants while supporting coal-dependent regions through economic diversification.
Insights from Coal-Dependent Districts in India:
- The study examined four heavily coal-dependent districts: Korba (Chhattisgarh), Bokaro and Ramgarh (Jharkhand), and Angul (Odisha). These areas were assessed for their economic reliance on coal and the cost of transitioning to a greener economy.
- For example, Bokaro has an economy where 54% of the district’s domestic product is tied to coal and related industries like steel and cement. The study estimates that phasing down coal in Bokaro would require Rs 1.01 lakh crore over the next 30 years to rehabilitate workers, repurpose mines, and develop new green energy production at existing coal sites.
Prelims Takeaways:
- Energy Transition Investment Plans (JET-IP)
- iForest (International Forum for Environment, Sustainability and Technology).