India’s coal transition: A market case for decarbonisation
- The study has been authored by Vivan Sharan and Samir Saran, ORF
Progress as the world has designed and defined it requires material production which, in turn, requires energy. Historically, therefore, fossil fuels like coal were key in economic growth across geographies. Today the developed economies stand on the edifice of fossil fuels, carbon-intensive industries and lifestyles that have resulted in global warming. The same growth path is now being questioned, and the poor and developing countries are being asked to build, find and fund newer low- and nocarbon models to lift their people out of poverty and achieve their development goals.
Consequently, there are growing calls for India to declare a net-zero year: To offset its carbon emissions by various processes of GHG absorption and removal. India is aware that such calls are irrational, and despite international pressure, has avoided making pledges or setting hard targets, beyond its commitments at the Paris climate conference in 2015. Indeed, “net-zero” is not possible with India’s current levels of reliance on coal. Its shift away from this fuel will depend largely on the quantum of additional money and resources that can be invested into alternative energy. However, as global climate finance has both under-performed and been subject to clever redesignation, countries such as India remain in dire need of green financing.
In August 2020, UN Secretary-General António Guterres urged India to give up coal immediately. He asked that the country refrain from making any new thermal power investments after 2020, and criticised its decision to hold auctions for 41 coal blocks earlier that year. Similarly, in March this year, in a message to the Powering Past Coal Alliance Summit, the Secretary-General urged all governments to “end the deadly addiction to coal” by cancelling all global coal projects in the pipeline. Pre-pandemic, India had the second largest pipeline of new coal projects in the world. He also called the phasing out of coal from the electricity sector “the single most important step to get in line with the 1.5-degree goal of the Paris Agreement.”
For much of human history, photosynthesis was the primary source of mechanical energy. Human and animal muscles, powered by food and fodder, made the world go around. Photosynthesis was also at the root of heat energy derived from burning wood. Eventually, coal replaced wood as the dominant source of heat energy, but still represented the energy of photosynthesis stockpiled over hundreds of years. The advent of the steam engine in the 17th century helped humans change the heat energy released from coal, to mechanical energy. This development also upended the paradigm of material production. According to a recent estimate, coal was accounting for well over 90% of energy consumption in England by the mid-19th century, owing in large part to the steam engine.
For long, researchers had been divided over the question of whether coal was pivotal to the industrial revolution. Some scholars regarded the switch to coal as a “necessary condition for the industrial revolution.” Others held that the “Industrial Revolution did not absolutely ‘need’ steam…nor was steam power absolutely dependent on coal.” A November 2020 paper by Fernihough and O’Rourke may just have settled the question: Using a database of European cities spanning the centuries from 1300 to 1900, the authors found that those located closer to coal fields were more likely to grow faster.
Those cities, the researchers wrote, “located 49 km from the nearest coalfield grew 21.1% faster after 1,750 than cities located 85 km further away.” It is no wonder then, that in March this year, International Energy Agency (IEA) chief Fatih Birol said it will not be fair to ask developing nations like India to stop using coal without giving international financial assistance to address the economic challenges that will result from such a move. He noted that “many countries, so-called advanced economies, came to this industrialised levels and income levels by using a lot of coal,” and named the United States, Europe, and Japan. This article explores this line of enquiry by examining the consumption of coal across developed and developing countries, and mapping it against key metrics of energy transition.
It finds that countries such as India—with their high dependence on coal and a simultaneous growth spurt in renewables—can be the most effective location for climate finance. This is plausible given that per capita coal consumption in India is still far below that of the developed world, and economic transitions are both inevitable and required to be ‘green’.
To be sure, India is struggling with a coal shortage, which has the potential to derail its post-Covid-19 recovery; the same is true for China. Consequently, there is growing scepticism in developed countries that both India and China will double down on coal and increase production to overcome supply challenges in the future. While such concerns are not unwarranted, they are not unique to the developing world. Germany, for instance, in the first six months of 2021 ramped up its coal-based generation, which contributed 27% of the country’s electricity demand.8 Three factors contributed to this rise: Increase in energy demand amidst the successive waves of the Covid-19 pandemic, increased prices of natural gas, and reduction in electricity generation from renewable energy (particularly wind.) Coal is often the bedrock of energy generation, and its use is impacted by complex market processes that cannot be reduced to normative choices.
(The study has been authored by Vivan Sharan and Samir Saran, ORF)