This piece is part of the essay series, Shaping our green future: Pathways and Policies for a Net-Zero Transformation.
1. Introduction
The global community has limited time to act on climate change mitigation if it wants to avoid the irreversible, catastrophic impacts. Two reports, this year, have raised the “red alert”. First is “Net Zero by 2050: A Roadmap for the Global Energy Sector”, by the International Energy Agency (IEA), which underscores the scale and urgency of action that must be undertaken to ensure that, in the next three decades,
all nations remain on-track to meet the goals of the Paris Agreement of 2015. There is also “Climate Change 2021: The Physical Science Basis, Working Group I, Contribution to the Sixth Assessment Report” of the Intergovernmental Panel on Climate Change,
which warns of the increase in frequency and intensity of extreme weather events that will affect economies and people across the world.
While the country is yet to pledge a net-zero emission target at the time of writing this article, two recent modelling studies on India’s net-zero pathways provide a glimpse of possible trajectories to reduce fossil fuels over the next three to four decades.
For India—heavily reliant on fossil fuels for its energy needs and industrial growth, while also being highly vulnerable to climatic impacts—the next three decades will be critical in every aspect. At present, about 70 percent of India’s primary energy supply relies on two fossil fuels: Coal and oil. Of this, coal has a share of 44 percent, and oil, 25 percent (IEA, 2020). While the country is yet to pledge a net-zero emission target at the time of writing this article, two recent modelling studies on India’s net-zero pathways provide a glimpse of possible trajectories to reduce fossil fuels over the next three to four decades.
According to a study by the IEA, India’s coal demand must be halved by 2040, and reduced by 85 percent by 2050. Another study, by The Energy Resources Institute (TERI) and Shell,
recommends a 60-percent decline in demand for both coal and oil by 2050.
Table 1: Net-Zero Pathway by mid-2060
| Fossil fuel sector |
Sustainable Development Scenario (SDS) |
| 2019 |
2030 |
2040 |
2050* |
| Coal demand (Mtce) |
590 |
454 |
298 |
100 |
| Oil demand (mb/d) |
5.0 |
6.2 |
5.8 |
3.48 |
| Natural gas demand (bcm) |
63 |
144 |
210 |
150 |
Source: IEA, 2021.
Note: IEA provides data only till 2040. For 2050, an extrapolation has been done assuming that coal will reach zero by 2055, oil by 2065, while gas use in 2065 remains similar to 2020. At these consumption levels, India will reach net-zero by 2065.
Table 2: Net-Zero Pathway by 2051
| Primary energy requirement (Mtoe) |
2021 |
2051 |
| Coal |
505 |
216 |
| Oil |
222 |
89 |
| Gas |
53 |
149 |
| Nuclear |
19 |
45 |
| Hydro |
21 |
33 |
| Solar |
93 |
876 |
| Wind |
27 |
548 |
| Bio/Waste/Other |
92 |
204 |
Source: TERI and Shell, 2021.
Phasing down the production and use of coal and oil will have a heavy bearing on the sectors that are reliant on them. In addition to a rapid shift from coal-based thermal power to renewable electricity—a transition underway in India––also necessary is the re-invention of downstream sectors, especially steel, cement, automobile and fertilisers. However, the rapid energy transition and industrial transformation required to address the climate crisis cannot be an isolated technological exercise. The nature of the Indian economy,
where informal workers account for 90 percent of the workforce, requires that the re-invention of energy and economic pathways be a socially responsible exercise. It must take into consideration the distribution of the workforce in various sectors, the livelihood dependence of local communities on these sectors, and the socioeconomic conditions of fossil-fuel-dependent areas and their resilience. The question of a “just transition” therefore becomes extremely important.
<1>
2. A Sector-Wide Outlook for Just Transition
In India, coal dominates the primary energy mix.
<1> However, the consideration for a just transition cannot be only focused on coal. To achieve the net-zero emission targets through transformative changes, over the next three to four decades, just transition should be planned for all sectors that have competitive alternative technologies with significant emission reduction potential.
For example, an assessment of greenhouse gas (GHG) emission reduction potential and the availability of alternative technologies suggests that the sectors that need to be prioritised for a just transition include coal mining, thermal power plants, road transportation, other industries, and agriculture soil (urea use). These sectors collectively emit 64 percent of India’s GHG, and 90 percent of the technologies required for their transition will be commercially available within the next five years (See Figure 1). This makes the next 10 years crucial for planning a just transition. In other coal-dependent sectors such as steel and cement, just transition will be viable only in the 2030s. The remaining industries and agriculture soil are likely to see a progressive transition.
<2>
Figure 1: Emissions versus Technological Readiness
Source: C. Bhushan and S. Banerjee, “Five R’s: A cross-sectoral landscape of Just Transition in India,” 2021.
3. Potential Impacts and Priorities
The transition to clean energy in India will have a huge impact on fossil-fuel communities and economies across the country. Three parameters—spatial impact, workforce impact, and revenue impact—provide an understanding of what a clean energy transition will look like and what it will entail.
3.i Spatial Impact: Out of the 718 districts in India, 120 have a significant proportion of fossil fuel or fossil-fuel-dependent industries—coal mining, oil and gas production, thermal power plants, refineries, steel, cement, fertiliser (urea), and automobile. These districts together have a population of approximately 330 million, i.e. 25 percent of the country’s total population. During the next two to three decades, energy transition will affect all 120 districts to varying degrees,
<3> but over the next decade, just transition planning should be prioritised for the 60 that account for 95 percent of coal and lignite production, 60 percent of thermal power capacity, and 90 percent of automobile and automobile component manufacturing. About one-third of these districts are concentrated in the coal belt of Jharkhand, Chhattisgarh, Odisha, and West Bengal (See Figure 2).
Figure 2: Priority Regions for Just Transition in Current Decade
Source: C. Bhushan and S. Banerjee, “Five R’s: A cross-sectoral landscape of Just Transition in India,” 2021.
To be sure, the states and districts that will face the most difficult challenges in clean energy transition in this decade are also
those that are extremely vulnerable to climate change impacts (See Figure 3).
This is due to the districts’ high proportion of below poverty line population, compounded by the poor state of healthcare, education and living standards.
<4>
Figure 3: Most Vulnerable States to Climate Change
Source: Department of Science and Technology, Government of India, 2020.
3.ii Workforce Impact: A clean energy transition in the coming decades (See Table 3) will impact the approximately 21.5 million people who work in fossil-fuel and fossil-fuel-dependent sectors in India.
The impact will be worst for the informal workforce, which is nearly four times the formal workforce. The informality is particularly high in sectors such as coal mining, steel, cement, and fuel retail, and the majority of such workers are low-skilled, have poor education, and earn low incomes.
An energy transition will have three primary types of impact on the workforce, which must be addressed through appropriate transition planning.
- Job loss due to declining production and eventually closing down of operations;
- Increased retraining and reskilling requirements for the existing workers due to changes in production processes or repurposing of facilities; and,
- Skilling of the new workforce to meet the requirements of new low-carbon industries.
Table 3: Estimated Workforce (in Million)
| Sectors |
Informal Employment |
Formal Employment |
Total Employment |
| Coal mining |
1.8 |
0.8 |
2.6 |
| Coal-based thermal power |
0.05 |
0.13 |
0.18 |
| Iron and steel |
2.6 |
0.3 |
2.9 |
| Cement |
1.2 |
0.2 |
1.4 |
| Oil and gas excluding refineries |
NA |
0.12 |
0.12 |
| Refineries |
0.08 |
0.04 |
0.12 |
| Fuel retail |
0.96 |
0.14 |
1.10 |
| LPG distribution |
0.01 |
0.09 |
0.10 |
| Fertiliser |
0.2 |
0.02 |
0.22 |
| Automobile |
NA |
NA |
12.8 |
| Total |
6.9 |
1.8 |
21.5 |
Source: C. Bhushan and S. Banerjee, Five R’s: A Cross-sectoral landscape of Just Transition in India, 2021.
3.iii Revenue impact: Fossil-fuel transition will have a significant impact on public revenue at the Centre and state levels. Coal, oil, and gas collectively contribute 18.8 percent of the total revenue receipts of the Central government and about 8.3 percent of the total revenue receipts of the state governments. Approximately 91 percent of revenue contribution is from the oil and gas sector;
coal contributes only 9 percent. Therefore, from a just transition perspective, oil and gas sector transition will have a far significant impact on public revenue as compared to the coal sector.
The informality is particularly high in sectors such as coal mining, steel, cement, and fuel retail, and the majority of such workers are low-skilled, have poor education, and earn low incomes.
The revenue loss from coal mining, however, will affect the state governments, particularly in states where coal mining is concentrated. For states, the main source of coal-based revenue is royalty and contributions from the District Mineral Foundation (DMF). In most top coal states, such as Jharkhand and Chhattisgarh, the share of direct revenue from coal mining (considering the PSUs, which are the major operators) is about 5 to 6 percent of the total state revenue.
<5> Furthermore, many states and Union Territories earn a significant amount of revenue through sales taxes on petrol and diesel. Collectively, the sales taxes from petrol and diesel in some of these states, such as Odisha and Madhya Pradesh, are much higher than the coal mining revenue (See Table 4). Consequently, automobile transition due to electrification of vehicles,
which is already significant for two-wheelers that consume 60 percent of petrol, will cause considerable revenue loss for states.
Table 4: Sales Taxes from Petrol and Diesel, and Direct Revenue from Coal Mining
| State/UT |
Sales Tax/VAT from CPSEs
(INR Billion) |
Coal Mining Taxes and Revenues of PSUs (INR Billion) |
| |
Petrol |
Diesel |
|
| Chhattisgarh |
12.67 |
24.84 |
32.21 |
| Jharkhand |
8.97 |
20.19 |
39.92 |
| Madhya Pradesh |
28.71 |
38.75 |
34.10 |
| Odisha |
15.79 |
38.39 |
29.10 |
Source: C. Bhushan and S. Banerjee, “Five R’s: A Cross-sectoral landscape of Just Transition in India,” 2021.
4. What Will Just Transition Entail?
‘Just transition’ in India will necessitate a development intervention to minimise negative impacts of an energy and industrial transition on the fossil-fuel dependent states, districts, workers, and the local community. To this end, the following five factors (5Rs) will be crucial:
- Restructuring of the economy and industries;
- Repurposing of the land and infrastructure;
- Reskilling existing and skilling new workforce;
- Revenue substitution and investments in just transition; and,
- Responsible social and environmental practices.
4.i Restructuring of the Economy and Industries: The fossil-fuel districts will require a restructuring of economic and industrial activities to diversify the economy. Currently, most of the coal districts in India are mono-industry districts, which undermines the potential of other sectors. For example, in the Korba district of Chhattisgarh, which accounts for about 20 percent of India’s coal production, mining contributes to nearly 50 percent of the district’s GDP. Even in districts such as Ramgarh of Jharkhand, where 50 percent of the mines are considered unprofitable, coal and coal-based industries contributes over 40 percent of the district’s GDP.
A well-designed industrial restructuring plan, supported by appropriate fiscal instruments, can facilitate a transition with minimum disruption. This will involve formulating appropriate industrial policies by the concerned state governments as well as district development plans in consultation with local institutions. Furthermore, economic and industrial restructuring should harness the potential of local resources. In many fossil-fuel districts, there is substantial scope for boosting the local economy and creating sustainable industries based on agricultural and forest products, aquaculture, dairy, and sustainable tourism. For instance, India’s top coal mining districts have over 31 percent forest cover on average, which is 10 percent higher than India’s total average.
4.ii. Repurposing of the Land and Infrastructure: One of the biggest challenges to developing new industries is the availability of land and its acquisition. This can be addressed by repurposing land and infrastructure from existing fossil fuel industries. An estimated 0.45 million hectares (ha) of land is available with coal mining and major coal allied industries, including coal-based power, iron and steel, and cement. Indeed, coal mines and power plants alone hold about 0.3 million ha of land.
<6>
Land reclamation also creates both immediate and long-term economic opportunities. In the short term, land reclamation and redevelopment will require the engagement of large numbers of skilled and unskilled workers, creating direct employment. In the long term,
well-planned infrastructure projects with complementary investments can have far-reaching benefits for the local economy.
4.iii. Reskilling existing and skilling new workforce: To offset the impact of job losses from a fossil-fuel transition and to aid the workforce impacted by the restructuring of industries and repurposing of facilities, a progressive skilling plan will be necessary. Sectors that will experience the highest number of job losses include coal mining, coal-based power, automobile ancillary industries and refineries, given their progressive phasing down of operations in the coming decades. Alternative job opportunities must therefore be created for these sectors on priority. In the other sectors, a well-planned reskilling and skilling programme will avoid job losses. Additionally, timely intervention through reskilling and retraining can help informal workers to get readily absorbed in alternative income opportunities.
In the long term, well-planned infrastructure projects with complementary investments can have far-reaching benefits for the local economy.
4.iv. Revenue Substitution and Investments in Just Transition: The Central government must plan for the substitution of public revenue from fossil fuels, with the state governments playing a role in just transition financing through public revenue. In this context, both DMF funds and GST compensation tax is crucial. The most significant tax on coal is the GST compensation cess (originally instituted as the coal cess to fund green energy transition), levied at INR 400 per tonne on the dispatch of coal and lignite; in 2019–20, it amounted to an estimated INR 400 billion. However, this cess will lapse in 2022, providing an opportunity to reverse this to coal cess and use it for just transition in coal-mining areas. Similarly, DMF funds available for place-based investments must be aligned to just transition investments,
which currently have a cumulative accrual of about INR 185 billion in the coal-mining districts.
4.v. Responsible Social and Environmental Practices: Just transition must include responsible social and environmental practices, capitalising on the opportunity to reverse the resource curse and form a new environmental and social contract between the people, the government, and the private sector.
Over the years, resource extraction has led to pollution, ecological destruction, and large-scale displacement and deprivation of local communities in India—rendering many fossil-fuel (particularly, coal) regions poor and underdeveloped. Moreover, local communities have been alienated and often excluded from decision-making processes. The “new contract” should address these issues—ensuring inclusive decision-making, poverty alleviation, fairer income distribution, and investments in human development and social infrastructure at the social level, and ecological protection and restoration of the environment. This will, in turn, enhance sustainable livelihoods and income opportunities.
For the next three to four decades, just transition must be planned as a strategic development intervention. Such a transition cannot be executed hastily, and a long-term road map must be developed that will consider both the emission reduction targets and the opportunities in hand. This would usher in a transformative change that is inclusive, just, and viable.
Download the PDF of the report here
<1> Renewable energy-based sources are rapidly catching up.
<1> E. Morena, D. Krause and D. Stevis (eds.),
Just Transitions: Social Justice in the Shift Towards a Low-Carbon World (London: Pluto Press, 2019).
<2> C. Bhushan and S. Banerjee, “Five R’s: A Cross-sectoral landscape of Just Transition in India,”
International Forum for Environment, Sustainability and Technology (iFOREST), New Delhi, 2021.
<3> C. Bhushan and S. Banerjee, “Five R’s: A Cross-sectoral landscape of Just Transition in India.”
<4> C. Bhushan and S. Banerjee, “Five R’s: A Cross-sectoral landscape of Just Transition in India.”
<5> C. Bhushan and S. Banerjee, “Five R’s: A Cross-sectoral landscape of Just Transition in India.”
<6> C. Bhushan and S. Banerjee, “Five R’s: A Cross-sectoral landscape of Just Transition in India.”
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
