India presses ahead with coal as China cuts permits ahead of COP29

China began 2024 by cutting permits for coal-fired generators for the first time. India, on the other hand, is doubling up on the fuel.

Until two years back, it was the reverse: India was pushing renewables and freezing new coal projects while China was pressing the pedal on coal.

As world leaders prepare their dossiers on climate targets to present at the United Nations Climate Change Conference (COP29) in Baku, Azerbaijan, next month, India, a leading global voice for emissions control, may need to reassess its commitments made at COP26 in Glasgow in 2021. The world’s fastest growing major economy embarked on a drive for coal-fired generators to make up for slowing growth in renewable installations.

Unintended consequences

India’s move towards new coal-fired plants, an affordable and dependable source of energy, and incessant delays in reducing sulphur emissions from the existing units, have had unintended consequences. Some of India’s COP26 targets were diluted in 2022, according to an oil ministry report.

For instance, India dropped the target on reduction of cumulative emissions by 1 billion tonnes by 2030, an offshoot of the slow progress in renewable installations, averaging 13 to 15 gigawatts annually, less than 3 per cent of global annual renewable capacity additions in 2023, according to Renewables 2024, an October report by the International Energy Agency. Global additions increased by 60 per cent last year from a year earlier, led by China, while India’s growth needle hardly budged.

“China’s rapid expansion of renewables has driven down emissions for the first time in Q2 since the COVID-19 pandemic and has led to improved air quality throughout the country,’’ says Belinda Schaepe, China Policy Analyst, Centre for Research on Energy and Clean Air, a Finnish think tank. “In addition, clean energy industries have become the key driver for economic growth in China. This should be an important lesson for India that shifting from coal to renewables can tackle three problems in one: Climate change, air pollution, and fostering future economic growth sectors.”

The current growth rate of clean energy, if maintained, is sufficient to cover all forecasted additional electricity demand in China. China’s total installed capacity of solar and wind power exceeded 1,200 GW by end-July, nearly thrice of India’s total electricity capacity, driven by low module prices, while Indian developers face issues over land, grid and weak state utilities.

India may see a rebound this year, with renewable installations expected to double, according to industry experts and analysts, but the climate benefits accruing from the expansion will be negated by the biggest jump in coal-fired generators in the last six years. Newer ones have been permitted, which may lead to India opposing measures by the European Union and the United States to phase out coal at COP29, industry officials say.

Displace or replace?

“In a country like India, where 70 per cent of our electricity requirement still comes from coal, I think it is not a question about getting out of coal; the question should be getting into renewables,’’ says Sunita Narain, Director General, Centre for Science & Environment. “The question today is not to replace coal but to displace coal.”

India needs to up the ante on climate change policies because it ranks seventh on the list of countries expected to be the most affected by global warming. Most of India’s districts — home to 638 million people, or 1.4 times the population of the EU are categorised as hotspots for extreme climate events.  

Around a third of India’s emissions come from the power sector, with coal accounting for more than 70 per cent of the generation. Total CO2 emissions are expected to grow five times to about 13.6 Gton per year if emissions continue to grow at the historical rate of 5 per cent, according to an oil ministry report.

“We are not on track yet to displace coal. Our renewable energy generation is about 13 per cent now of the total electricity mix, but we need to be at 25 per cent by 2030 if you really want to completely displace coal, which was the plan, to bring coal from 70 to 50 per cent, and to replace it with renewables. That is a tall order,’’ Narain said at the FT Energy Transition Event in New Delhi.

The lack of momentum in renewables has led to new coal-fired capacity. India needs 283 GW to meet base load needs in 2032, as against 214 GW currently, a government statement in February said. It proposes to set up an additional minimum 80GW coal-based capacity by 2031-32, of which 26.4 GW is under construction, 12GW has been bid out, and 19GW is under clearance. This year’s capacity increase of around 13GW may be more than four times the annual average in the last five years. 

China’s clean-up

The clean energy business is lucrative. The sector contributed a record $1.6 trillion to China's economy in 2023, accounting for 9 per cent of its gross domestic product and 40 per cent of economic growth.

China’s turn towards environmentally friendly policies came after the Third Plenum of the Chinese Communist Party, held this July, mentioned “carbon reduction” for the first time in its communique. That was followed by a detailed energy transition blueprint in August, something that India needs to deliver, by the Central Committee of the Communist Party of China and the State Council, outlining key low-carbon ambitions of the world’s second-largest economy to 2030.

A critical aspect of China’s new energy transition policy is the controlled reduction of coal consumption. During the 14th Five-Year Plan period (2021-25), China will regulate the growth of coal consumption and begin a gradual reduction in the subsequent five years, with simultaneous upgrades to existing coal-fired power plants.

With new renewable energy installations now capable of meeting all incremental power demand in China, the need for new coal is waning, says Schaepe.

In the first half of 2024, China reduced coal power permits by 83 per cent compared to the first half of 2023, permitting only 9 GW, following the surge in coal power permits exceeding 100 GW annually in 2022 and 2023, according to the Centre for Research in Energy and Clean Air. The current decline in coal power activity is further reflected in the reduction of new and revived coal power proposals, totalling 37 GW in early 2024, down from 60 GW in early 2023.

Since 2023, China has added over 400 GW of new solar and wind power, driving down China’s coal power generation by 7 per cent from June 2023 to June 2024. In the first seven months of 2024, newly installed solar and wind power capacity reached 124 GW and 30 GW respectively, an increase of about 28 per cent and 6 per cent compared to 2023, nearly 10 times that of India during the period.

China’s energy transition document has plans to introduce new emission reduction technologies to make 200 GW of new coal power plants approved in 2022 and 2023 more environmentally friendly.

“We need to clean coal, something that public sector coal companies have been much ahead of than the private sector,” says Narain. But the government has repeatedly postponed a deadline to clean sulphur emissions at thermal generators to 2026 from 2017.

Only 39 units covering 19.4GW of coal-fired capacity have installed flue gas desulfurisations (FGDs), with 185GW capacity in varying stages of planning, according to a Press Information Bureau statement in August. It cited vendors’ capacity for FGD installation at 16-20 GW (33 to 39 units) in the country and the time taken for installation at 44 to 48 months. 

India’s oil ministry prepared a comprehensive report in February 2023 on low carbon transition by the Energy Transition Advisory Committee headed by Tarun Kapoor, an energy advisor to the Prime Minister’s Office. 20 months ahead, the government is yet to accept the report.