India, the first major economy to commit to a moratorium on new coal plants
By Y P Prakash
India is planning to amend its National Electricity Policy draft, which would result in a halt in the construction of new coal-fired power plants. This move would make India the first major economy to commit to a moratorium on new coal plants. By phasing out these plants, India can significantly reduce its greenhouse gas emissions, combat climate change, improve air quality, create jobs in the clean energy sector, enhance energy independence, and protect its natural resources. This decision is a significant advancement for India’s climate ambitions and a major victory for climate activists. It demonstrates India’s dedication to meeting its climate commitments and taking bold steps to reduce emissions, marking a positive development for both India and the world.
India is set to stop constructing new coal-fired power plants, except for those already in the pipeline, by removing a key clause from the final draft of its National Electricity Policy (NEP). This decision, if approved by the federal cabinet chaired by Prime Minister Narendra Modi, would be a significant boost in the global fight against climate change. Currently, China would be the only major economy open to new requests for significant coal-fired capacity. India and China account for approximately 80% of all active coal projects, as many developing nations are reducing capacity to meet climate targets.
As of January 2023, only 20 countries have more than one planned coal project, according to E3G, an independent climate think tank. After extensive deliberations, government sources have stated that India has concluded that new coal additions, aside from those already in the pipeline, will not be necessary. The sources, who declined to be identified due to lack of authorization, also mentioned that the new policy, if approved, would not impact the 28.2 GW of coal-based power currently under construction.
India, along with China, has been advocating for countries to have the freedom to choose their own emissions reduction roadmap. While India has the second-highest proposed coal power capacity after China, it had previously resisted setting a timeline for phasing out coal, citing low per-capita emissions, a surge in renewable energy capacity, and the demand for inexpensive fuel sources that are expected to dominate electricity generation in India for decades. However, activists have been urging for a halt to new coal-fired plants to reduce the share of polluting fuel in the overall power output.
The revised NEP draft, India’s first attempt to update its electricity policy since 2005, also proposes delaying the retirement of old coal-fired plants until renewable energy storage becomes financially viable. Currently, around 13 GW of old coal-fired power plants have been designated to continue operating beyond their retirement deadline to meet high power demand.
The initial NEP draft in 2021 had suggested the addition of new coal-fired capacity, albeit with tighter technology standards to reduce pollution. However, the final draft, which will shape India’s energy policy for the next decade, no longer includes any references to new coal-fired power. In contrast, China’s National Development and Reform Commission stated in a March 2022 document that it will “rationally build advanced coal-fired power plants based on development needs.” China plans to construct around 100 new coal-fired power plants to support wind and solar capacity, despite its stated intention to reduce coal’s role.
This policy revision could also have implications for long-term coal prices and miners in countries like Indonesia, Australia, and South Africa, as India is the world’s second-largest coal importer.
India will advocate for a “just energy transition” during the G-20 discussions, according to a top government official. The country recognizes that around 5 million people depend directly on coal mining and aims to pursue a balanced growth model based on the principles of Common but Differentiated Responsibilities and Respective Capabilities. The government acknowledges the need to address the challenges related to livelihoods, alternative vocations, skilling, healthcare, and education for these coal mining communities.
India has identified 30 mines where coal mining has concluded, and a 2-3 year closure process has commenced. The reclaimed land from these mines is being put to environmentally friendly use, such as creating forests using fly ash or utilizing it for agricultural purposes. While coal remains crucial for achieving economic growth targets, the government is promoting greater private sector participation in coal mining. The goal is to have private enterprises account for a fourth of the total coal extraction by 2030, with encouraging responses received during the seventh round of coal mine auctions.
To date, 87 mines have been allotted to private sector companies through six rounds of auctions since 2020. The target is to reach a peak installed capacity of 500 million tonnes by private enterprises. It typically takes up to four years for a mine to commence production after allotment, but four of the 87 mines have already begun production, and the majority of the remaining mines are expected to start production by Fiscal Year 2025. The country aims to increase overall coal production to 1,012 million tonnes in Fiscal Year 2024, up from 892 million tonnes in Fiscal Year 2023, with production continuing to rise until it reaches a peak around 2040. After that, reliance on renewable sources will increase, and coal production will plateau.
Regarding the power ministry’s decision not to construct new thermal power plants beyond those already under construction, the coal ministry assures that there is sufficient capacity to supply coal to existing power plants. Efforts are being made to reduce coal imports wherever possible, focusing on substituting imported coal with domestic sources within two years. However, coking coal, used in steel plants, will still need to be imported as there is no local production.
The specific agenda and consensus sought by India during the G-20 energy transitions working group meeting were not disclosed by the government official.
Meanwhile, China stands out as the sole major power still engaged in constructing new coal-fired power plants, having added 48.4 gigawatts of capacity in 2021, surpassing the combined total of the rest of the world. China’s reliance on coal for electricity generation, rapid economic growth, and energy security concerns contribute to this trend.
As the largest emitter of greenhouse gases globally, China’s heavy reliance on coal poses a significant challenge to its climate objectives. Coal accounted for 60% of China’s electricity generation in 2020. While China has pledged to peak its emissions by 2030 and achieve carbon neutrality by 2060, substantial progress in reducing coal dependency is necessary to meet these goals.
Transitioning away from coal presents several challenges for China. One obstacle is the relatively high cost of renewable energy. Although solar and wind power are becoming more competitive, they remain costlier in certain instances. Additionally, China needs to enhance infrastructure for renewable energy, including investments in transmission lines and storage facilities, to accommodate a larger proportion of renewables in its energy mix.
The transition away from coal represents a formidable undertaking for China, yet it is vital to realize its climate objectives. As the world’s largest greenhouse gas emitter, China’s continued reliance on coal significantly hampers global efforts to address climate change. By prioritizing investments in renewable energy and gradually phasing out coal, China can assume a leading role in the global transition towards a sustainable and clean energy future. Some experts believe that China needs to take more aggressive action to meet these goals.
