Over the past five decades, the expansion of conventional power generation capacity has enabled India to secure significant energy independence and has provided millions of Indians in the remotest corners of the country access to electricity. Coal currently accounts for 55% of India’s energy demand. The domestic availability of this natural resource has led to the creation of a power generation infrastructure, largely primed to utilise this resource.

In India, extraction and mining of this valuable resource are concentrated in a few mineral-rich states. About 85% of the country’s coal production is concentrated in the five eastern states of Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, and West Bengal. These are also amongst the most economically impoverished states, with limited additional economic drivers. As a result, the economies of these states rely heavily on this solid fossil fuel-based economy for generating revenue, ensuring employment, and financing social programs.

Going forward, India has committed itself to a net zero target by 2070, which will require India’s energy mix to substantially shift from fossil fuels to greener energy sources. This transition will put these states, which are at the forefront of India’s solid fossil fuel production, in a potentially vulnerable position.

While the transition is contingent upon multiple issues being taken care of, such as creation of adequate non-fossil generation capacity for energy security, effective yet acceptable financing options, and generation of alternate economic drivers, the transition seems inevitable and is likely to have a major impact on India’s future. In the face of transition, the nature and viability of many economic activities revolving around coal mining and consumption in these states will be fundamentally altered. Some activities may shrink or disappear altogether; others may flourish.

While the transition is expected to bring net positive impact in the long run, in the short-to-medium term the transition could also cause significant economic disruption, dislocation of dependent population, and other costs and losses to individuals, businesses, communities, and states. If these impacts are left unaddressed, a low-carbon world may be achieved but it would not necessarily mean a more just world, despite its environmental and economic benefits, especially for states that will have stronger socioeconomic ramifications compared to other states. Therefore, securing a just transition is critical to minimize the impacts on all stakeholders associated with the domestic production and consumption of these solid fossil fuel resources.
This brief is the first part of CPI’s initiative on “Facilitating Finance for Just Transition.” The initiative will analyze the relative impact of energy transition on various states. This brief helps rank states based on their vulnerability to an energy transition.

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