What does a post-coal future for India mean?

If an economy is to be decarbonised, planning for it should begin now, but just transition plans in developing countries may look very different from those in the developed world, says a study in India.

Indrajit Bose

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WITH climate change impacting countries globally, there is significant pressure on especially larger developing countries to shift away from a fossil-fuel economy. But before making such a move, a country needs to know what the transition will look like, how the transition can be just, and how the workers and the local communities should not shoulder the burden of such transition. A just transition would also look very different in a developing as compared with a developed country, a study in India has found.

The study, titled ‘Just transition in India: An inquiry into the challenges and opportunities for a post-coal future’ (https://iforest.global/wp-content/uploads/2020/11/Just-Transition-book-preview.pdf), was undertaken to understand what a just transition means in the context of India’s coal-mining areas and what the essential components of a just transition framework should be. It was carried out by the International Forum for Environment, Sustainability and Technology (iFOREST), a Delhi-based organisation.

The study was undertaken in a major coal-mining district called Ramgarh in Jharkhand state in eastern India. According to the study, four key observations relevant for understanding a just transition in the country emerge from Ramgarh. These centre on the informal sector’s dependence on coal mining; there being a co-relation between distance from mines and dependence on mining; how coal mining has not changed people’s lives for the better; and how dependence on coal is ‘constructed’.

The study states that dependence on coal mining for income is significantly high and the dependence is largely informal in nature. ‘In Ramgarh, one in four households derives some sort of earning directly from mining and related activities. But this dependence is largely informal and does not provide a decent income. Two-thirds of households reported an income between USD 85 and USD 140 per month. This group largely includes the “non-inventoried” people of the coal-economy, such as coal gatherers and sellers, casual labourers, and daily wagers. Only 7 per cent of the households had a member with a formal job in coal mining or related industry.’

The study states there is a direct co-relation between distance from the mines and dependence on coal mining. ‘While more than 40 per cent of the households within a radius of 3 km from the mines derive direct income from coal (coal gatherers and sellers, casual labourers, and contractual workers), the proportion sharply declines to less than half for households living beyond 3 km of a mine,’ the study states. Beyond 10 km from coal-mining areas, agriculture is the most significant source of employment.

It is noteworthy that coal mining has not benefitted the region in terms of social and physical infrastructure and the district has poor human development indicators. ‘The district has extremely poor primary healthcare infrastructure, with a nearly 50 per cent deficit in the required number of primary healthcare centres. Moreover, even the existing ones do not meet the necessary Indian Public Health Standards in terms of medical staff, treatment facilities, etc. The same situation is with access to education and clean drinking water,’ the study states. 

The study also states that a focus on coal mining and related industry over decades has stymied the development of other sectors and the diversification of the economy, leading to a ‘constructed dependence’ on coal. ‘In Ramgarh, agriculture, forestry, fisheries, and service sectors have suffered from an undue focus on coal mining,’ according to the study. 

Given the observations, the study states that ‘just transition in India will not be a linear question of substituting a “mono” industry (coal) along with its workforce. Instead, it is an economy-wide transition that provides an opportunity to reverse the “resource curse” in coal mining areas.’

This does not mean that coal mines can be closed quickly. The mines must be closed in a planned manner to avoid social and economic disruption. The study proposes a six-pillar planning architecture for a just transition in Ramgarh:

1. Defining timeframe for a just transition: In the context of Ramgarh, it would be 20-25 years, considering the life of the existing mines, etc.

2. Establishing an inclusive transition planning mechanism: Stakeholder dialogue and local engagement are critical components of planning a transition.

3. Providing alternative employment opportunities for formal and informal workers in the short term: For formal workers, strategies could include retraining and reskilling; early retirement options with severance benefits; ensuring pension payments; and temporary financial assistance. For informal workers, the study states that providing alternative livelihood opportunities and income substitution is a far more complicated process than for formal workers. The study recommends a broad-based approach for securing alternative livelihood opportunities for this category, which could include government-employment generation schemes; employment in building the new social and economic infrastructure; and skill development.

4. Planning economic diversification, including industrial restructuring: Diversify into agriculture and allied activities; forest-based livelihoods; aquaculture; tourism, etc.

5. Improving social and physical infrastructure.

6. Identifying financial resources to support a just transition.

Based on the Ramgarh study, an indicative just transition framework for the country has also been proposed (further details below). The study cautions that the coal face of India is complex and further in-depth work is required to capture the diversity in coal-mining districts and develop various policies, strategies and investment plans.

Why a just transition?

India is the second largest producer and consumer of coal in the world. With an estimated resource of 326.5 billion tonnes, coal is the most abundant fossil fuel in the country – 47% of the country’s primary energy supply and 71% of electricity generation are dependent on coal. Also, nearly 15 million people are dependent on coal directly and indirectly for employment and income.

Reaching Paris Agreement goals of limiting global warming well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase even further to 1.5°C necessitates a massive reduction in the use of coal, as it accounts for nearly 44% of global carbon dioxide emissions, the study states. The Intergovernmental Panel on Climate Change (IPCC) too has recommended phasing out coal-based power plants by 2050 and adopting a ‘system transition’ in electricity generation, largely relying on renewable energy sources.

India is also the fifth most vulnerable country to climate change impacts, as per the Global Climate Change Risk Index 2020. Studies suggest that the country risks losing 2.5-3% of its gross domestic product (GDP) due to the climate crisis by 2050 under a business-as-usual scenario. It is in India’s interest therefore that global emissions are reduced significantly and a serious effort is made globally to meet the 1.5°C goal, according to the study.

Coal-based electricity has already started to face headwinds globally – a mix of environmental and energy policies and competition from cost-efficient renewables is steadily squeezing it out of the global electricity mix. ‘For instance, the contribution of coal to global electricity generation has reduced from 40% in 2010 to 36.4% in 2019,’ the study states.

In India, the dominance of coal in the power sector appears to be declining due to competition from renewable energy. Projections by India’s Central Electricity Authority (CEA) show that renewable energy will have an increasingly dominant role in the power sector. The CEA has projected a significant reduction in coal-based power installation and generation capacity over the next 10 years – the percentage share of renewables in the total installed capacity will be nearly twice that of coal and lignite-based sources.

Also, while coal mining is overall still a profitable industry in the country, almost 70% of mines of Coal India Limited, India’s largest coal producer, are running into losses, raising questions about the future of the coal industry, according to the study, and are closing down. The closing of unprofitable and exhausted mines has huge socioeconomic implications for districts and sub-districts (blocks) where these mines are located. ‘In fact, there are districts where the majority of mines have already closed down, and the remaining are likely to close in the next 10-20 years. These districts suffered due to coal mining and are now suffering because of its unplanned closure,’ the study states.

It is critical to reverse the resource curse in coal-mining areas, where the coal-mining districts are economically backward and local people have been facing displacement and deprivation due to resource extraction. ‘Considering the various environmental, social, and economic factors and the imperative to avoid unplanned closure of coal mines, it is time we begin planning a transition away from a coal-based economy in a deliberate and phased manner. However, such a shift will not be a simple one. It will be a complex and long-term process involving all stakeholders and governments at all levels,’ the study states.

The basic idea of a just transition then is to ensure decent work opportunities and social support systems for the people whose livelihood is likely to be affected by the transition.

Just transition in the Global North

The study also provides some examples of just transition processes and approaches in the Global North, and says that while a timely and well-planned just transition could lead to overall positive economic, social and environmental outcomes, the experience of closing down coal mines in the Global North has been largely triggered by unprofitability of the coal industry.

Also, unlike say in India where there is a huge dependence among informal workers on the sector, a just transition in the Global North is ‘primarily about restructuring the formal economy and creating alternatives for formal coal mining workers’. The study looks at the experience of closure of mines in the Netherlands, Wales in the UK and in Germany, and underscores the need for long-term planning, given that a just transition process has a significantly long gestation period. ‘National government’s engagement in developing policies (on just transition) early on is crucial for facilitating a well-planned transition. At the same time, they also underscore the vital role of the regional and local governments to successfully implement policies and transition measures. And finally, the workers and local communities must be engaged in the process so that the measures are inclusive and tailored to the local context,’ the study states.

It is also important to note that since the socioeconomic situation in developed countries is very different from that in developing countries, ‘a just transition framework for socioeconomically backward regions of a developing country with profitable as well as unprofitable coal mines will have to be conceptualised differently, keeping in mind the developed countries’ learnings’.

Indicative just transition framework for India

The study proposes an ‘indicative just transition framework’ structured around seven pillars:

1. Strong national and state government policy and financial support, accompanied with a coherent policy architecture, where provisions of just transition are integrated in plans and policies of national, state and local governments.

2. Diverse coalition among various actors and stakeholders, including joint just transition proposal and engagement with local communities.

3. Effective communication strategy to reach out to all stakeholders, from national to local levels, to clearly convey the objective, need and timeframe for a just transition.

4. Develop an economic diversification plan taking into consideration local resources, manpower etc, besides planning for social security for the people.

5. Coal sector transition: This would involve enabling restructuring of Coal India Limited and its subsidiaries (for diversification into solar, wind, energy storage) and creating a special ‘Workforce Transition Fund’ to provide relief measures for displaced workers.

6. Social and physical infrastructure development – investment in education, healthcare, clean water, energy, connectivity and urban amenities to improve social capital, and to attract businesses and investors.

7. Public and private investments for transition: Identify local, national and international funding sources and create a dedicated public fund; use public funds to attract private investments.

‘If the decarbonisation of the economy must happen, planning for it should start now. Any hastened or abrupt decision will lead to more chaos than resolution,’ the study concludes.               

*Third World Resurgence No. 347, 2021, pp 27-29