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| India’s coal conundrum versus Chile’s renewable success: a roadmap for clean energy transition. |
Chile’s Lesson for India’s Coal Conundrum: A Roadmap to a Cleaner Future
- Dr.Sanjaykumar pawar
Table of Contents
- Introduction: India’s Coal Dilemma
- Current Economic and Energy Trends in India
- Chile’s Energy Transition: A Case Study
- Comparative Analysis: India vs. Chile
- The Socio-Economic Challenges of Coal Phaseout
- Decarbonisation Strategies for India
- Financial Mechanisms to Support the Transition
- Policy Recommendations and Lessons from Chile
- Visualizing the Transition: Data Insights
- FAQs
- Conclusion: Turning Coal Conundrum into Opportunity
- References
1. Introduction: India’s Coal Dilemma
Despite making significant strides in renewable energy, India experienced a surprising drop in global climate rankings, falling 13 places to 23rd in the Climate Change Performance Index (CCPI) announced at COP30 in Brazil, November 2025. The primary reason? The slow pace of phasing out coal.
Coal remains a double-edged sword for India. On one hand, it provides low-cost electricity and sustains millions of jobs, especially in industrial and energy sectors. On the other hand, its continued reliance intensifies air pollution, accelerates climate change, and negatively impacts public health outcomes. This “coal conundrum” underscores the delicate balance India must strike between economic growth and environmental sustainability. The stakes are immense: unchecked carbon emissions and pollution threaten lives, livelihoods, and GDP growth, making a transition to cleaner energy not just an ecological imperative but an economic one as well.
India’s challenge is not unique. Other coal-dependent nations, such as Chile, have faced similar dilemmas yet successfully navigated a shift toward greener energy solutions. Their experience provides valuable lessons: targeted policy reforms, incentivizing renewable investments, and gradually phasing out coal-based power can create a pathway that supports both economic stability and climate goals.
For India, accelerating the adoption of renewable energy, investing in clean technologies, and implementing just transition policies for coal workers are crucial steps. While the journey is complex, the opportunity to lead in sustainable development and improve global climate rankings is within reach.
In conclusion, India’s fall in the CCPI is a wake-up call. Embracing renewable energy at a faster pace, while carefully managing the coal transition, is essential to safeguard public health, protect the environment, and secure long-term economic growth. The world is watching, and the time to act decisively is now.
2. Current Economic and Energy Trends in India
India’s energy landscape is at a pivotal juncture, balancing rapid economic growth with an urgent need for sustainable energy solutions. The country remains heavily reliant on coal, which continues to dominate both energy consumption and electricity generation. Coal contributes over 50% of total energy consumption, and 75% of electricity generation still comes from coal-fired power plants. Domestic coal production is on the rise, signaling ongoing dependence on fossil fuels despite global calls for cleaner alternatives.
Growth of Renewable Energy Capacity
On the positive side, India has made remarkable strides in clean energy deployment. Between 2021 and 2025, the country successfully doubled its renewable energy capacity, including solar, wind, hydro, and nuclear power. Today, renewable energy represents around 50% of installed power capacity, a significant milestone reflecting India’s commitment to diversify its energy mix and reduce carbon emissions.
However, installed capacity does not always translate to actual electricity generation. In 2024, renewables contributed only 20% of electricity generation. Intermittency challenges, grid infrastructure limitations, and storage constraints mean that clean energy cannot yet fully replace coal on a reliable basis. This generation gap underscores the complexity of transitioning toward a greener energy future while maintaining energy security.
Economic Implications of Energy Dependence
The continued reliance on coal carries both economic and social implications. Coal-fired power plants provide jobs, support industrial growth, and ensure a stable electricity supply—critical for India’s expanding economy. Any abrupt shift away from coal could disrupt energy availability, affect industrial output, and strain employment in coal-dependent regions.
At the same time, expanding renewable energy capacity offers economic opportunities, from solar and wind farm development to technological innovation and foreign investment. Addressing the gap between installed renewable capacity and actual generation is key to unlocking these benefits while reducing the nation’s carbon footprint.
Balancing Energy Security and Sustainability
India’s central economic challenge lies in replacing coal reliably without compromising energy security or social stability. Strategic investments in grid modernization, energy storage solutions, and flexible power systems will be critical. Policymakers must balance immediate energy demands with long-term sustainability goals to ensure that India’s energy transition is both feasible and economically beneficial.
By combining robust coal production with a rapidly growing renewable sector, India is navigating a complex path toward a sustainable energy future. While challenges remain, the country’s proactive approach positions it as a global leader in balancing economic growth and clean energy adoption.
3. Chile’s Energy Transition: A Case Study
Chile is emerging as a global example of how coal-dependent countries can achieve rapid decarbonization. Over the past decade, the nation has made remarkable progress in reducing coal reliance while expanding renewable energy, demonstrating that ambitious climate goals are attainable with a clear strategy and strong policy support.
From Coal Dependence to Renewable Leadership
In 2016, coal accounted for 43.6% of Chile’s electricity generation. By 2024, this share had fallen dramatically to 17.5%, highlighting a swift shift toward cleaner energy sources. Today, renewables supply over 60% of the country’s electricity, with solar and wind leading the charge. This transformation underscores Chile’s commitment to a sustainable energy future and provides a blueprint for other nations seeking to reduce their carbon footprint.
Key Drivers of Chile’s Energy Transition
Chile’s success is not accidental—it stems from a comprehensive policy and market approach. Several factors have accelerated the transition:
- Carbon Tax Implementation: Introduced in 2014 at $5 per tonne of CO₂, the carbon tax created a financial incentive to reduce emissions and adopt cleaner technologies.
- Strict Emission Standards for Coal Plants: Regulatory requirements increased compliance costs by around 30%, encouraging operators to phase out coal or invest in cleaner alternatives.
- Competitive Renewable Energy Auctions: These auctions have driven down the cost of solar and wind energy, attracting private investment and rapidly scaling renewable capacity.
- Energy Storage Expansion: To maintain grid stability amid growing variable renewable energy, Chile has invested in battery storage and other flexible solutions, ensuring reliable power supply.
A Vision for a Coal-Free Future
Chile has set its sights on phasing out coal by 2040, signaling a long-term commitment to decarbonization. By integrating regulation, market incentives, and infrastructure development, the country has created a model that balances environmental goals with energy security and economic growth.
Lessons for the World
Chile’s experience offers valuable lessons for coal-dependent nations. Combining financial incentives, strict regulations, and renewable infrastructure can accelerate the energy transition without compromising reliability or economic development. As global pressures to tackle climate change intensify, Chile demonstrates that decisive action and strategic planning can deliver rapid and sustainable results.
4. Comparative Analysis: India vs. Chile
| Factor | India | Chile |
|---|---|---|
| Coal share (electricity generation) | 75% | 17.5% |
| Renewable share | 20% generation | 60% generation |
| Carbon pricing | Minimal | $5/tonne tax |
| Energy storage | Limited | Advanced deployment |
| Political & market environment | Complex, federal | Centralized, market reforms post-privatization |
| Alternative industry pathways | Limited | Strong renewables & workforce planning |
Key takeaway: Chile’s smaller coal footprint and supportive policy environment made the transition more feasible. India faces larger social and economic stakes, especially in coal-reliant states like Jharkhand, Chhattisgarh, Odisha, and West Bengal.
5. The Socio-Economic Challenges of Coal Phaseout
Coal phaseout is increasingly seen as a “no regrets” policy—essential for safeguarding public health and mitigating the long-term impacts of climate change. India, in particular, faces urgent climate risks: by 2100, rising temperatures could reduce the country’s GDP by 3-10% due to heat stress and declining labor productivity. Additionally, coal power has a direct human cost—research shows that each 1 GW increase in coal-fired capacity correlates with a 14% rise in infant mortality in surrounding districts. While the environmental and health rationale for coal phaseout is compelling, the socio-economic challenges are equally significant.
Job Losses in Coal-Dependent Communities
One of the most immediate challenges of phasing out coal is employment disruption. Millions of people in India rely directly or indirectly on coal mining and coal-based industries for their livelihoods. Abrupt closure of mines or power plants can leave entire communities without stable income sources. This not only threatens household welfare but also risks social unrest in regions heavily dependent on coal for employment. Policymakers must therefore prioritize reskilling programs and alternative job opportunities to ensure a just transition for workers.
Ensuring Energy Security
Coal remains a cornerstone of India’s energy system, providing low-cost, firm power that supports both households and industries. Transitioning away from coal without adequate renewable energy infrastructure or storage solutions could compromise energy reliability, leading to blackouts or higher electricity costs. Investments in renewable energy capacity, grid modernization, and storage technologies are essential to maintain energy security while reducing coal dependency.
Addressing Regional Inequalities
Coal-dependent districts often have limited economic diversification, making them particularly vulnerable to the socio-economic shocks of coal phaseout. Without targeted interventions, these regions risk falling behind in development, exacerbating existing regional inequalities. Policies that attract alternative industries, promote sustainable livelihoods, and incentivize local entrepreneurship are critical to ensure that coal phaseout does not leave certain areas marginalized.
Balancing Climate Goals with Social Realities
The path to a coal-free future is not just an environmental imperative—it is a complex socio-economic challenge. Effective transition strategies must balance climate objectives with the immediate needs of workers, communities, and the national energy system. By investing in just transition measures, India can reduce the human and economic costs of coal, paving the way for a cleaner, healthier, and more equitable energy future.
6. Decarbonisation Strategies for India
Transitioning away from coal is one of India’s most urgent climate and energy priorities. Achieving this shift requires a multi-pronged strategy that balances environmental goals, economic growth, and social equity. By adopting targeted policies across energy infrastructure, market design, and community support, India can accelerate its path to a low-carbon future.
6.1 Retire and Replace Coal Plants
Phasing out India’s oldest and most polluting coal plants is a critical first step. Many of these facilities operate below efficiency standards and contribute disproportionately to air pollution and carbon emissions. Simultaneously, the government must halt approvals for new coal plants to prevent locking in high-carbon infrastructure. The energy gap left by retiring coal can be effectively filled with renewables backed by storage, such as solar and wind projects paired with battery or pumped hydro storage. This approach ensures reliable electricity supply while significantly reducing the carbon footprint. Gradually replacing coal with clean energy not only lowers emissions but also positions India as a global leader in renewable energy deployment.
6.2 Market Reforms
Structural market reforms are essential to make clean energy financially competitive. Introducing carbon pricing provides a clear economic signal to discourage emissions-intensive generation. Removing coal subsidies levels the playing field, allowing renewables to compete fairly in the energy market. Implementing clean dispatch rules ensures that grid operators prioritize low-carbon electricity, further incentivizing renewable adoption. Additionally, encouraging power purchase agreements (PPAs) for clean energy projects can secure long-term revenue for renewable developers, attracting private investment and accelerating India’s energy transition.
6.3 Worker and Community Support
A just transition must accompany India’s shift from coal. Reskilling programs for displaced coal workers are critical to help them find opportunities in the growing renewable energy sector. Developing alternative livelihood pathways in coal-dependent regions can stabilize local economies and reduce social disruption. Establishing dedicated funds, such as the Green Energy Transition India Fund, can provide financial support for infrastructure development, training programs, and community initiatives. By combining social support with environmental action, India can ensure that its decarbonisation strategy is both effective and equitable.
By focusing on retiring coal plants, reforming energy markets, and supporting affected communities, India can achieve a sustainable, low-carbon energy future. These integrated strategies not only curb emissions but also create economic opportunities and strengthen energy security, making India’s transition to clean energy both practical and resilient.
7. Financial Mechanisms to Support the Transition
Transitioning away from coal is not just an environmental imperative—it is an economic challenge that requires smart, well-structured financial mechanisms. The success of this shift depends on leveraging a combination of public, private, and community-based financing to ensure a just and sustainable transition.
Blended Financing Models: The Key to a Smooth Transition
A blended financing approach combines public capital, private investment, and localized funding mechanisms to address both the social and economic dimensions of the coal transition. By strategically aligning these resources, governments and stakeholders can accelerate renewable energy adoption while minimizing social disruption.
Public Capital for Social Resilience
Public funding plays a critical role in cushioning the impact on coal-dependent communities. Welfare programs, workforce reskilling initiatives, and community support schemes ensure that affected workers and families are not left behind. For instance, investing in retraining programs for coal miners to work in renewable energy sectors can create a skilled workforce ready for the new energy economy.
Private Investment for Green Infrastructure
While public funds support social stability, private investment drives technological and infrastructure development. Capital from private companies is essential for building renewable energy plants, modernizing grids, and deploying energy storage solutions. These investments not only generate financial returns but also accelerate the shift to cleaner, more resilient energy systems.
District Mineral Foundation (DMF) for Local Economic Diversification
Community-focused mechanisms like the District Mineral Foundation (DMF) can leverage local mining funds to finance economic diversification. By investing in small businesses, local entrepreneurship, and sustainable industries, DMFs help regions historically dependent on coal to develop alternative sources of income and employment.
Lessons from Global Examples
Countries like Chile have demonstrated the effectiveness of combining public policy incentives with private market-led renewable deployment. By offering tax incentives, subsidies, and streamlined permitting for private developers, Chile achieved rapid decarbonization while protecting local employment. This model illustrates how blended finance can simultaneously advance climate goals and support economic stability.
Moving Forward
Implementing a coal transition without robust financial mechanisms risks social and economic backlash. By carefully integrating public, private, and community-based funding, policymakers can ensure a smoother transition, stimulate investment in clean energy, and create resilient local economies. Blended financing is not just a funding strategy—it is the backbone of a just and sustainable energy future.
8. Policy Recommendations and Lessons from Chile
India’s energy transition journey is complex, given its dependence on coal for electricity and the social implications of moving away from it. However, international examples, particularly Chile’s successful shift toward cleaner energy, offer valuable lessons. By understanding and adapting these strategies, India can design a practical and socially responsible coal exit roadmap while accelerating its renewable energy ambitions.
1. Policy Certainty and Market Reforms Drive Clean Energy Adoption
One of the key takeaways from Chile’s experience is the importance of policy certainty. Stable and predictable regulations encourage private investment in clean energy technologies. In Chile, consistent government policies coupled with market reforms created an environment conducive to large-scale renewable deployment.
For India, this translates into clear and long-term signals about the country’s commitment to decarbonization. Investors and developers require clarity on energy policies, including renewable energy targets, incentives, and grid integration measures. By ensuring policy stability, India can significantly accelerate the adoption of solar, wind, and other clean energy sources.
2. Carbon Pricing and Emission Standards Disincentivize Coal
Chile has successfully used carbon pricing and strict emission standards to reduce reliance on coal-fired power plants. By assigning a cost to carbon emissions, coal becomes less economically attractive, creating a market-driven incentive to switch to cleaner alternatives.
India can adopt similar measures to gradually phase out coal use. Introducing a structured carbon pricing mechanism and tightening emission norms will not only curb pollution but also nudge industries and power producers toward low-carbon solutions. Such measures make the transition economically rational rather than purely regulatory.
3. Competitive Auctions Make Renewables Cost-Effective
Chile leveraged competitive renewable energy auctions to bring down costs while ensuring project viability. These auctions create a transparent and competitive market, encouraging innovation and cost efficiency among developers.
India already has experience with renewable energy auctions, but learning from Chile’s model can further optimize the process. Competitive bidding ensures that renewable projects are not only technically feasible but also financially sustainable, which is critical for large-scale deployment.
4. Investment in Energy Storage Ensures Grid Reliability
A major challenge in integrating renewables is grid reliability, given the intermittent nature of solar and wind power. Chile invested in energy storage solutions, including battery systems, to balance supply and demand.
For India, scaling up energy storage infrastructure is essential to maintain grid stability while phasing out coal. Strategic investment in batteries, pumped hydro, and other storage technologies can prevent power disruptions and support a resilient energy system.
5. Social Support Systems Smooth the Transition
Transitioning away from coal is not only a technical challenge but also a social one. Chile implemented support mechanisms for workers affected by coal plant closures, including retraining programs and financial assistance.
India must prioritize social protection measures in its coal exit strategy. Ensuring that coal workers and communities dependent on mining or power plants receive retraining, job placement, and financial support will make the transition more equitable and politically viable.
6. Long-Term Coal Exit Targets Provide Clarity
Finally, Chile’s experience highlights the importance of long-term coal exit targets. Clear timelines give investors and policymakers the confidence to plan ahead, encouraging renewable investments and technological innovation.
India can benefit from a similar approach by establishing a detailed coal exit roadmap. This roadmap should include:
- Timeline for plant retirement, prioritizing the oldest and most polluting units.
- Social protection mechanisms for affected workers and communities.
- Market and regulatory reforms to facilitate renewable energy integration.
- Learning from international examples, including auction mechanisms, storage solutions, and carbon pricing.
India stands at a pivotal moment in its energy transition. By drawing lessons from Chile, the country can craft a coal exit strategy that balances environmental responsibility with economic and social considerations. Policy certainty, carbon pricing, competitive auctions, energy storage, social support, and clear long-term targets are essential elements of a successful transition. Implementing these measures can help India achieve a sustainable, low-carbon future while safeguarding its energy security and workforce.
9. Visualizing the Transition: Data Insights
Suggested visuals:
- Chart: India vs. Chile – Coal vs. Renewable Share (2010-2025)
- Map: Coal-dependent districts in India at risk of transition impacts
- Graph: CO₂ emissions avoided with projected coal phaseout
- Infographic: Steps for coal phaseout – retire, replace, reform, reskill
Example interpretation: A bar chart could show India’s coal share (75%) vs. Chile (17.5%), highlighting the scale of India’s challenge. A line graph can depict renewable generation growth, emphasizing the potential for acceleration.
10. FAQs
Q1: Can India realistically phase out coal by 2050?
Yes. Incremental scaling down of coal, retiring old plants, investing in firm renewables and storage, and policy reforms make it achievable.
Q2: What role can renewables play in India’s energy security?
Combined with storage and grid modernization, renewables can reliably replace coal while reducing pollution and climate risks.
Q3: How can coal workers be supported?
Through reskilling programs, alternative livelihood pathways, social safety nets, and dedicated transition funds.
Q4: What lessons from Chile are most applicable to India?
Carbon pricing, emission standards, competitive renewable auctions, energy storage, and social support systems.
11. Conclusion: Turning Coal Conundrum into Opportunity
India’s coal dependence is a major economic and environmental challenge, but not an insurmountable one. Chile’s experience proves that even coal-reliant economies can transition rapidly with strong policy, market reforms, financial backing, and social safeguards.
India must now:
- Accelerate renewable energy deployment
- Plan a phased coal exit
- Ensure workforce reskilling and community support
- Reform markets and introduce carbon pricing
The coal conundrum is not just a policy question—it is an opportunity to create a healthier, wealthier, and more sustainable India.
12. References
- Climate Change Performance Index, 2025 – COP30 Report.
- TERI (The Energy and Resources Institute), “Pathways for Coal Phaseout in India,” 2024.
- International Energy Agency (IEA), Global Energy Review, 2025.
- Ministry of Power, Government of India – Electricity Generation Statistics, 2024.
- Chile Ministry of Energy, “Renewable Energy Development and Coal Phaseout,” 2024.
- World Bank, “Economic Impacts of Climate Change in India,” 2023.
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