Coal Demand Rises In India, IEA Says Net Zero Should Have Stronger Implications

The IEA’s Coal 2021 report shares worrying insights for India. The global power generation from coal is expected to take a leap by 9% in 2021, after consecutively falling in the previous two years. An all-time high of 10,350 terawatt-hours is the demand so far. 

India is the second-largest producer, consumer and importer has received a special attention in the IEA Coal report. The report says that the bounce back happened because of rapid economic growth and a push up in the electricity demand much faster than the low-carbon supplies could keep up. The steep rise in natural gas prices has also increased demand for coal power by making it more cost-competitive, states the IEA report.   

Keisuke Sadamori, Director of Energy Markets and Security, IEA says, “The pledges to reach net zero emissions made by many countries, including China and India, should have very strong implications for coal – but these are not yet visible in our near-term forecast, reflecting a major gap between ambitions and action”. 

“Coal is the single largest source of global carbon emissions, and this year’s historically high level of coal power generation is a worrying sign of how far off track the world is in its efforts to put emissions into decline towards net zero,” says IEA Executive Director Fatih Birol. “Without strong and immediate actions by governments to tackle coal emissions – in a way that is fair, affordable and secure for those affected – we will have little chance, if any at all, of limiting global warming to 1.5 °C.”

Coal is important to India, not only because it accounts for more than 70% of India’s energy production, but the coal industry employs as many as four million people, directly and indirectly in India as per a recent report from the Brookings Institution.  

However, at the same time, coal-fired power plants contribute 40% of India’s fossil fuel emissions and 13% of the ambient PM 2.5. As per data, each year, they cause an estimated 112,000 deaths and generate around 200 MT of ash, which leads to severe health disorders if not properly disposed of or managed. 

Coal also accounts for 44 % of Indian Railways freight revenues and has an even higher share in its profits. Coal carriage compensates for the losses Railways make on passengers underpaying. There are many issues that reflect a gap in the government’s words and actions. Of this, underutilization of coal cess to fund renewables is also an important story.

The coal cess, which the Government had introduced in 2010, transfers the money to the National Clean Energy Fund (NCEF) for funding of the renewable projects. From 2016, the government had raised the tax to Rs.400 per tonne to show its commitment to a cleaner economy. In 2017 this cess had become the GST state compensation fund. 

In a response to a question in the parliament, government clarified that the coal cess collected from 2010-11 to 2017-18 amounted to about Rs. 86,440.21 crores. Out of this, only Rs. 29.654.29 crores has been transferred to the NCEF and Rs. 15,911crores has been utilized. During the years 2018-19 and 2019-20 the coal cess would be approximately Rs. 38,500 crores and Rs. 39,100 crores respectively. 

India and China together dominate the global coal market, accounting for two-thirds of overall demand. IEA says that these two economies – dependent on coal and with a combined population of almost three billion people – hold the key to future coal demand. 

Overall coal demand worldwide – including uses beyond power generation, such as cement and steel production – is forecast to grow by 6% in 2021. That increase will not take it above the record levels it reached in 2013 and 2014. But, depending on weather patterns and economic growth, overall coal demand could reach new all-time highs as soon as 2022 and remain at that level for the following two years, underscoring the need for fast and strong policy action.   

But will phasing out coal be easy for India? It is sure to be an uphill task given the important role it plays not only in the whole economy but also as a provider for the livelihoods of communities in coal-rich areas. For words to match actions, targeted measures and approach needs to be taken, starting with a slow and steady de-funding of coal projects and a greater push to industry to spur growth powered by renewables.