India’s coal dependence is hard to shake off. Here’s why

Why 1974? It was founded then, after the 1973 oil crisis, when there was an Arab-Israeli war and the oil-producing Arab nations decided to stop exporting to countries they thought were supporting Israel.

Oh, was it bad? Gas stations ran out of fuel because people began panic buying, oil prices went up by 350% in the US, industries suffered and many people lost their jobs. So since then, IEA has been working to ensure no such disruption in energy supply happens.

And IEA says we still can’t do without coal? Yes.

For how long? Well, they track the decline in global unabated coal really…

What’s global un-whatever coal? It’s unabated coal or the coal that freely releases emissions, without abatement mechanisms such as capturing the emission and using it to produce something else like other fuels or building materials, or storing it deep underground.

Have we stopped using this unabated coal then? Hardly. The IEA’s best case scenario, or the net-zero emission scenario, sees its use end by 2040.

What are the other scenarios? With the current policies, its use falls by 5% by 2030. If the countries keep their climate-mitigation promises, it falls by 10% by the same year. If the countries are doing better and are on track to net-zero scenario, then it falls by 55% by the same year.

Why can’t we do it sooner? To phase out coal, we need to stop construction of new coal plants and simultaneously reduce emissions from the current, coal-fired plants. IEA says the first is easier to achieve because the countries have strong economic and environmental incentives to use low-emission sources of electricity…

Environmental I understand, but economic? For one, the price of generating renewable energy is coming down. But more importantly, financial markets and other countries are not keen to fund coal-fired plants anymore. The IEA report says that all G7 countries have committed to ending new support for unabated coal-fired power and China has pledged to end support for building new coal plants abroad.

Why is the second part, of reducing emissions, tougher? Many people and local economies are usually dependent on the coal mines and coal-fired power plants. As the IEA report says, “Coal-dependent regions are often highly specialised ‘mono-industry’ areas, where the economy and the local identity are closely tied to the coal value chain.” To manage closures successfully, the welfare of the workers and the communities have to be considered, and also the repurposing of the affected land has to be done right. It is a long-term project that requires the government’s active interest.

But, won’t shutting down plants also mean loss of revenue? Yes, it is called retiring the plants… and yes, IEA estimates there is $1 trillion dollars still to be made from younger plants, mostly in Asia.

Why particularly Asia? Countries have pledged to retire these plants when they are 35 years old. While that is okay for advanced economies where these coal-fired plants are nearly that old, in Asia, these plants are 13 years old on an average. Also, these economies have more rapidly increasing energy demand which can barely be met even with a rapid increase in low-carbon generation.  Then banks who have financed many of these coal-projects could be left with dud assets, and this is particularly true in India where over 50 GW of financially stressed coal assets are already weighing on the banking system.