Chile’s Coal Exit: Big Lessons for India

Chile’s Coal Exit Model Offers India Vital Lessons

Syllabus:

GS-3:

Conservation ,Environmental Pollution & Degradation

Why in the News ?

India slipped 13 places to rank 23rd in the Climate Change Performance Index (CCPI) 2025, mainly due to insufficient progress in phasing out coal. As coal remains India’s dominant energy source, the editorial evaluates Chile’s clean energy transition and examines how its strategies can guide India’s coal phase-out roadmap.

How Chile’s Coal Exit Can Guide India

India’s Coal Dependence and Energy Transition Gap :

  • High coal share: Coal accounts for over half of India’s total energy use, underscoring deep structural dependence.
  • Clean energy progress: India doubled renewable capacity between 2021–25; renewables now constitute half of installed capacity, though actual generation remains only 20%.
  • Coal dominance in generation: In 2024, coal generated 75% of electricity, reflecting limited progress in shifting operational load to cleaner sources.
  • Production expansion: India continues to increase domestic coal output, contradicting global climate commitments.
  • Transition mismatch: Installed capacity growth has not yet translated into reduced reliance on thermal power for base-load generation.

Important Climate and Energy Frameworks :

●     Climate Change Performance Index (CCPI): Annual ranking system assessing climate policies and emissions performance of major countries.

●     District Mineral Foundation (DMF): Created under the Mines and Minerals (Development and Regulation) Act, 1957 to benefit mining-affected communities.

●     Carbon Tax: A fiscal tool imposing costs on carbon emissions to incentivise cleaner alternatives.

●     Just Transition: A framework ensuring shifts from fossil fuels do not harm workers or vulnerable communities.

●     UNFCCC: Governs global climate agreements like Paris Agreement, under which India pledged net-zero by 2070.

●     TERI: Policy research body providing India’s 2050 coal phase-out modelling.

●     Infant Mortality Link: Increased pollution around coal plants correlates with 14% higher infant mortality per 1 GW added capacity.

●     Coal Geography: Major coalfields lie in Jharkhand, Odisha, Chhattisgarh, West Bengal, creating regional economic concentration.

●     Firm Renewable Power: Combines solar, wind, hydro, biomass, storage to provide stable, dispatchable power.

●     Sendai Framework: Global framework for disaster risk reduction, relevant for climate-induced disruptions.

Chile’s Successful Coal Phase-Out Strategy :

  • Rapid reduction in coal share: Chile cut coal’s generation share from 6% (2016) to 17.5% (2024).
  • Renewables-led transformation: Solar and wind now form over 60% of Chile’s power mix, demonstrating scalable alternatives.
  • Carbon tax initiative: Introduced a $5/tonne carbon tax in 2014, making coal costlier and incentivising clean energy.
  • Stringent emission norms: New coal plant regulations increased compliance and construction costs by 30%, discouraging investment.
  • Aggressive storage expansion: Development of large-scale battery and storage systems ensured reliable grid stability during transition.

Structural Advantages That Supported Chile :

  • Lower coal dependency: Chile’s coal share was inherently smaller, enabling quicker shutdowns.
  • Smaller workforce impact: Fewer workers were reliant on coal mines and associated industries.
  • Market-oriented economy: Swift adoption of privatisation and competitive auctions accelerated renewables.
  • Regulatory clarity: Long-term commitments like coal phase-out by 2040 provided investor certainty.
  • Alternative industries: Early development of renewable manufacturing, services and grid operations absorbed displaced labour.

India’s Unique Coal Transition Challenges :

  • Deep economic dependence: Coal-rich states like Jharkhand, Chhattisgarh, Odisha and West Bengal rely heavily on mining revenues.
  • Large labour force: Millions depend on coal mining, transport, and thermal plants for livelihoods.
  • Limited economic alternatives: These regions lack diversified industrial ecosystems unlike Chile.
  • Infrastructure gaps: Renewable-rich zones require improved evacuation infrastructure and storage facilities.
  • Social vulnerability: Abrupt closures could cause significant social unrest, unemployment, and migration pressures.

Centrality of Decarbonisation for India :

  • No-regrets policy: Coal phase-out prevents massive climate and health costs—heat stress, labour productivity loss, and infant mortality increases near plants.
  • Planned retirements: Systematic removal of oldest and polluting plants is essential.
  • Cancel new coal: New thermal plant approvals should be halted entirely.
  • Firm renewable power: Integrate solar, wind, hydro, storage and green hydrogen to replace coal in base-load.
  • Net-zero alignment: TERI suggests India can phase out coal by 2050 to meet climate commitments.

 Three Key Pillars for India’s Coal Exit :

  • (1) Strengthening renewables: Addressing intermittency through battery storage, pumped hydro, and grid upgrades enables coal displacement.
  • (2) Market reforms: Implement carbon pricing, remove coal subsidies, and enforce clean dispatch rules prioritising renewables.
  • (3) Worker support: Provide reskilling, compensation, and livelihood diversification via a dedicated Green Energy Transition India Fund.

Financing India’s Just Transition :

  • Blended finance model: Combine public funding for social protection with private investment in clean energy infrastructure.
  • DMF utilisation: Use District Mineral Foundation funds for entrepreneurship, MSMEs and local economic diversification.
  • Private sector role: Attract investment in storage, green hydrogen, transmission corridors, and RE parks.
  • International cooperation: Explore lines of credit, climate finance and technology transfer under UNFCCC
  • Political priority: Without high-level political commitment, transition strategies remain ineffective and fragmented.

Challenges in India’s Coal Phase-Out :

  • Economic concentration: Coal economies in eastern India suffer from monoculture, with mining as their primary revenue source, making transitions economically disruptive.
  • Employment risks: A large labour force—formal, informal, contract-based—is directly dependent on mines, transport chains, and thermal plants. Sudden closures could trigger mass unemployment.
  • State revenue losses: Royalty-dependent States face steep revenue decline without viable substitutes, affecting welfare spending.
  • Insufficient renewable output: Even with high installed capacity, renewables generate only one-fifth of electricity, highlighting issues with capacity utilisation and intermittency.
  • Storage deficits: Lack of large-scale battery and pumped hydro systems constrains the grid’s ability to handle variable energy.
  • Regulatory bottlenecks: Power purchase agreements and must-run clauses for coal limit flexibility.
  • Land acquisition issues: Renewable expansion faces hurdles related to land availability, local opposition, and environmental clearances.
  • Financial constraints: Thermal plant owners face heavy stranded asset risks, reducing willingness to retire units early.
  • Social resistance: Communities fear disruption without clear social protection frameworks.
  • Policy inconsistencies: Simultaneous coal expansion and RE promotion create contradictory signals for investors.

Way Forward for India’s Coal Transition :

  • Prepare a phased retirement plan: Clearly outline timelines for oldest plants, including flexible retirement mechanisms and cessation of new coal approvals.
  • Scale up storage systems: Invest massively in battery storage, pumped hydro, and grid-scale balancing solutions.
  • Reform markets: Introduce carbon pricing, shift subsidies from coal to renewables, and implement green dispatch protocols.
  • Strengthen transmission infrastructure: Build high-capacity Green Energy Corridors connecting renewable-rich zones to demand hubs.
  • Workforce reskilling: Implement district-level programmes for skill development, green jobs, MSMEs, and alternative livelihoods.
  • Use DMF effectively: Employ District Mineral Foundation funds for local development, entrepreneurship, and climate-resilient livelihoods.
  • Support coal states fiscally: Provide transitional fiscal transfers to compensate for revenue losses.
  • Private sector mobilisation: Incentivise investments in green hydrogen, storage manufacturing, and distributed renewables.
  • Community inclusion: Ensure affected people participate in sectoral planning through just transition councils.
  • Learn from global models: Chile, Germany, and South Africa offer actionable lessons on policy design, worker support, and market reforms.

Conclusion :

India’s coal phase-out is vital for climate stability, public health, and long-term economic security. Chile’s experience proves transitions are possible with strong policies, market reforms, and social protection. For India, a structured, equitable, and well-financed roadmap is essential to align growth with sustainability and net-zero commitments.

Source : HT

Mains Practice Question :

“India’s coal dependence complicates its path to achieving net-zero. Using Chile as a comparative case, critically evaluate the policy, economic, and social interventions necessary for India to execute a just and effective coal phase-out. Suggest actionable reforms for markets, labour transition, and renewable integration.”