Authors: Ajay Gambhir and Shivika Mittal, Imperial College London, Sandeep Pai, CSIS, and Fergus Green, University College London
India made headlines at the COP26 summit in November 2021 after it announced net-zero targets by 2070 on the first day but intervened to water down the Glasgow Climate Pact on the final day. Instead of a ‘phase out’ of coal power, countries must only accelerate efforts toward a ‘phase down’.
India’s move has been criticised as a setback for global efforts to phase out the burning of coal — the dirtiest fossil fuel. A variety of modelled scenarios generally agree that coal needs to be phased out as fast as possible.
Yet phasing out coal power poses serious challenges to India. Nearly 30 million Indians still lack electricity access and two-thirds of rural households with electricity suffer outages more than once a day. The livelihoods of tens of millions of people in at least six Indian states are directly or indirectly tied to the coal sector. India’s dependency on coal is complex. For example, transporting coal by rail generates revenue that cross-subsidises commuter rail fares.
To spur its energy transition, India needs to find a socially just way to implement it. The concept of a ‘just transition’ was central to climate negotiations in Glasgow. The Paris Agreement text makes clear that tackling climate change must ‘tak[e] into account the imperatives of a just transition of the workforce and the creation of decent work and quality jobs’. It is now recognised that a truly just transition is not only about protecting workforces, but also protecting the welfare and survival of those whose income are threatened by a rapid shift away from fossil fuels.
Key elements of a just transition involve crossing the global North–South divide through financial, technological and capacity building support. Unfortunately, the necessary support has been in short supply. There remains a large gap between the annual sum of US$100 billion promised to developing countries over a decade ago by wealthier nations and the money actually committed.
Even if delivered, this would amount to a small fraction of the finance actually required. It is estimated that US$300 billion in annual investment is needed globally to shift energy systems towards achieving the goals set out by the Paris Agreement. Indian Prime Minister Narendra Modi highlighted the need for US$1 trillion for India alone over the next decade to mitigate and adapt to climate change. Whatever the exact figure, it won’t be cheap to wean India off coal, given it has over 200 gigawatts of coal plants and over 700 million tonnes of annual coal production.
A significant increase in sustainable development finance would be a valuable first step but is far from sufficient. The complex web of relationships that comprise India’s political economy — often simplistically described as ‘corruption’ — as well as the mountainous debt (totalling US$80 billion) that India’s electricity distribution companies hold will not suddenly disappear when finance is forthcoming. Considerable institution building is also required if finance is to flow where it is actually needed. Yet, attempts to accelerate development in poorer countries through institutional reform over the past decades have often failed.
Given the very different historical and social contexts in different countries, a bespoke approach to just transitions is most promising. The US$8.5 billion just transition funding to support South Africa’s shift away from coal provides a useful test case. Details so far announced are minimal, but the objectives include accelerated decarbonisation of the electricity system and protection of vulnerable workers and communities. This will require sustainable management of the approximately US$24 billion debt held by Eskom — the country’s public electric utility — through substantial policy reform.
Given the poor record of developed countries in delivering climate finance to date, the world will be watching to see if this funding is provided in the form of grants and concessional finance rather than loans, and whether the finance achieves its just transition objectives. The success of this pilot funding is crucial, as countries like Indonesia have sought similar funds as a condition to accelerate their coal transition.
With increasing pressure on India to phase coal out, policymakers in Delhi might make its coal transition similarly conditional upon adequate financial and institutional support. Otherwise it won’t be politically or economically feasible. India’s coal and related sectors are an ecosystem that provide energy services, jobs and approximately US$12 billion in revenue. Support will be required to help transition this ecosystem by decommissioning coal plants and mines, providing decent alternative jobs, managing power companies’ debt and investing in green technologies. Private financing shortfalls remain, and there will need to be significant institutional investment to meet India’s ambitious renewable energy goals.
There was intense disappointment at the last-minute changes to the Glasgow Pact requested by India and supported by China. But the intervention has played a critical role in highlighting how important international support will be if developing countries dependent on coal are to justly transition toward phasing out coal.
Dr Ajay Gambhir is a Senior Research Fellow at the Grantham Institute for Climate Change and the Environment, Imperial College London.
Dr Shivika Mittal is a Research Associate at the Grantham Institute for Climate Change and the Environment, Imperial College London.
Dr Sandeep Pai is Senior Research Lead in the Energy Security and Climate Change Program at the Center for Strategic and International Studies.
Dr Fergus Green is a Lecturer in the Department of Political Science at University College London.