Tag: just transition

Just energy transition’ must Shape net-zero pathways for fossil-fuel-dependent districts.

In the last 18 months, several modelling studies have been published on the costs and benefits of net zero emissions in India. A few days back, another modelling study was published, which projected that India will require an economy-wide investment of $10.1 trillion to achieve its net zero targets by 2070. But this will have significant gains, as it would boost annual GDP by 4.7% by 2036 and create 15 million new jobs by 2047. The benefits are even greater if India reaches net zero by 2050, says the study. In the words of Jayant Sinha, Member of Parliament, like previous modelling studies, this too predicts that “Net Zero is Net Positive” for India.

These reports are important at one level because they give us a macro picture of what it would entail to achieve the net zero target. They also give us the hope that we can address the climate crisis while growing our economy and creating millions of new green jobs. However, these macro-assessments do not tell us about the regional implications or the political economy of this transition. In other words, these reports have minimal relevance for planning a net zero pathway at the district or state levels.

For instance, the costs that these studies account for mainly include the investments required to build the new green industries and infrastructure—renewable energy, hydrogen, green steel, etc. They do not have the costs of closing the existing fossil-fuel based industries and infrastructure—coal mines, power plants, freight corridors, etc. However, at the district level, closing mines and plants are far more important than building the new industries, especially when there is no guarantee that these will come at the same place. In a nutshell, while macro-economic modelling has its value, today, we need studies to understand the costs, benefits and regional implications of achieving the net zero target so that we can plan and achieve a just energy transition. Let me illustrate this with the case of Angul, Odisha.

Over the last two years, my colleagues and I have been studying the coal districts of India to understand what a Just Energy Transition (JET) means and entails for these districts. We studied Ramgarh in Jharkhand, Korba in Chhattisgarh and, last week, we published our report on Angul.

The study of Ramgarh showed that the district has mostly unprofitable old mines, which will close soon. Ramgarh, therefore, needs to quickly start implementing an economic diversification plan to deal with the repercussions of the economic downturn due to the closure of mines. In Korba, India’s top coal-producing district, the reserves are getting exhausted, and most existing

mines and power plants will close between 2040-2050. So, Korba has a little more time than Ramgarh to implement a JET.

Angul, however, tells a very different story. The district produces about 100 million tonnes (MMT) of coal—about 12% of the country’s production. About 168,000 people are employed by coal mining and coal-dependent industries, and over 61% of the district’s GDP is dependent on coal. But coal production will grow three-fold in the next 10 years and peak at 300 MMT by 2033. Other coal-dependent industries, such as steel and aluminium, are also expanding. This growth is possible because Angul produces some of the cheapest coal in the country.

As per the current plans, there is no way that coal production in Angul can be phased out by 2050. If we try to reach net zero in Angul by 2050, then almost all mines will have to forego 30-60% of their reserves, and industrial assets would have to be shuttered at the peak of their economic life. So, how do we plan a net zero pathway for a district where the coal economy is growing exponentially? How do we close the mines and industries, and who will pay for this? How do we create alternative jobs for coal workers? Who will invest in the green economy? These are the questions that matter, and we need answers to these to develop a realistic just transition plan for real people.

Our study shows that it is possible to achieve net zero by 2050 in Angul, but it would require a JET plan spanning over the next three decades and billions of dollars of compensation and investments. It would require what we call the 5 Rs of Just Transition.

* Restructuring of the economy: Angul’s economy will have to diversify through investments in agriculture, forestry and service sectors. Its industries will have to move from a brown economy to a green economy through investments in renewables, hydrogen-based steel and urea, green aluminium, and a circular economy.

* Repurposing of the existing infrastructure: Repurposing mining land and industrial plants will be crucial for economic diversification. For instance, about 33,000 hectares of land in Angul are under coal mines and power plants. These can be used for solar PV, food parks, the development of fisheries and tourism sectors, etc.

Reskilling and skilling of the workforce: Large-scale skilling and reskilling programmes will have to be implemented to develop a skilled workforce for economic diversification.

* Revenue substitution: Currently, coal mines in Angul contribute over Rs 6,000 crore as royalty and cess to the state and the central government. This is projected to increase to Rs 18,000 crore by 2030. Angul’s economic diversification plan must at least substitute the revenues foregone from the coal economy.

* Responsible environmental and social investments: Angul is an economically-backward district and also a critically polluted area. Massive investments would be required for the closure and remediation of mines. Likewise, the district needs investments in social infrastructure—health, education, water, livelihoods etc., to build a sustainable economy.

Overall, Angul’s study shows that if we want to achieve the net zero target, then we must understand its implications at the district and state levels. Without this, big macro-assessments make no sense.

There is no contradiction between increasing coal consumption in India and implementing a just transition in the coal districts and states.

On March 28, 2022, an extremely important and unstarred question was asked by Priyanka Chaturvedi, member, Rajya Sabha, which was replied to by Pralhad Joshi, Union minister of coal. It is at the heart of the energy transition debate in India. The question is whether India should start planning and implementing a just energy transition now or wait until coal consumption starts declining? It is a fundamental question, and I will quote it verbatim:

Priyanka Chaturvedi: Will the Minister of Coal be pleased to state:

(a) whether Government has prepared any roadmap for districts having a coal-centric economy such as Korba, etc. in light of country’s commitment towards energy transition?

(b) whether in such districts (coal-centric economy) closure of mines and industries will have severe socio-economic consequences, major being unemployment for the unskilled workers?

(c) whether Government has initiated any scalable steps to reduce the dependency of other economic sectors such as agriculture, forestry, manufacturing and service for their growth in these districts? and (d) if so, the details thereof?

Pralhad Joshi: (a) & (b): In India, energy transition away from coal is not happening in foreseeable future. Although there will be push for renewable/non-fossil-based energy, but share of coal in the energy basket is going to remain significant in years ahead. Coal demand in the country is yet to peak. The draft Economic Survey 2021-22 projects coal demand in the range of 1.3-1.5 billion tonnes by 2030, an increase of 63 per cent from the current demand. Thus, as of now there is no scenario of energy transition away from coal affecting any stakeholders involved in coal mining. (c) & (d): Does not arise in view of above. 

The minister’s reply was correct that India’s coal demand is growing, and will continue to grow, at least in this decade. But his response that the energy transition in the country is not affecting any stakeholders involved in coal mining needs further examination.

There should be no doubt that an energy transition, propelled mainly by the Centre’s ambitious renewable energy targets, is underway in the country. These targets have real implications for coal consumption. For example, if the latest targets—installing 500 GW of non-fossil energy capacity and meeting 50% of the country’s electricity requirement from renewables—materialises, then coal consumption in the power sector will peak by 2030 and significantly decline over the next two decades. Modelling studies show that India’s electricity sector can be coal-free by 2050, with little impact on growth or jobs.

But it is important to understand that the need to develop a just transition roadmap for coal-dependent districts and states is tied not just to the national coal demand scenario. It is, in fact, more related to the sub-national situation, as the reality of coal mining in states and districts differs from the national picture. In other words, while coal will continue to meet a significant, but declining, proportion of India’s energy demand in the next two-three decades, in many districts of the country, most coal mines will close much earlier, leading to socio-economic disruptions. This will happen due to two reasons. First, a majority of coal mines in the country are loss-making and on the verge of closure. While these loss-making mines are spread across India, most of them are concentrated in Jharkhand, Chhattisgarh and West Bengal. In Jharkhand, for example, of the 146 mines run by the Central Coalfields Limited (CCL) and Bharat Coking Coal Limited (BCCL), 103 mines are loss-making.

Overall, 75% of Coal India Limited’s (CIL) production and almost all profits come from just 35 large mines; the remaining mines are low-producing and largely unprofitable. These loss-making mines collectively produce less than 10% coal, employ 40-45% of the workforce, and incurred an aggregated loss of Rs 16,000 crores in 2018-19—about the same as the company’s annual net profit. Going ahead, CIL plans to reach 1 billion tonnes of coal production primarily from “50-odd high-yielding mining projects” and close unprofitable mines. This potentially means shutting down 300-odd mines. But all these mines need to be closed with proper closure and socio-economic transition plans. In other words, just transition plans need to be developed urgently for all these loss-making mines and regions to ensure that hundreds of thousands of formal and informal workers and millions of people dependent on these mines are provided timely alternatives.

Second, coal reserves are also getting exhausted in big coal-producing districts. Take the case of Korba, India’s largest coal-producing district. Nearly 95% of Korba’s coal comes from just three large open cast mines, which will exhaust its resources by 2040-45. The rest of the mines are already on the verge of closure. So, in the next 20 years, Korba, which is entirely dependent on coal for jobs and growth, will have to look for alternatives. But Korba is not unique; similar situations exist in many other coal districts. These mining districts will need a just transition plan to avoid sudden economic disruption and social upheaval.

So, there is no contradiction between increasing coal consumption till 2030 and implementing a just transition plan in the coal districts and states. In fact, we are already late in the process. Experiences around the world show that a planned energy transition takes time. For example, Germany’s Ruhr valley started implementing transition in the 1960s and closed its last coal mine in 2018. So, it took six decades for Ruhr to implement a just transition, but the result is for everyone to see. Today, Ruhr is a hub of green industries and service sector jobs.

We must also start planning and implementing a just transition in many Ruhrs in India and not wait for coal consumption to decline. Early planning will help these districts and states to invest in infrastructure and attract businesses, create alternative jobs, prepare the future workforce, and simultaneously substitute and diversify their source of revenue. The choice is in our hands – either we can start planning for this transition and secure a just outcome for everyone, or we can wait and watch till disruptions and chaos start.