1. 25/10/2016 Why Investors Should Think Twice before Investing in Coal in India – Part 1 | Inter Press Service
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Indian coal workers. India announced in November last year that it plans to double coal production to a whopping 1 billion tonnes per annum before the end of this decade, a feat that is
going to be highly improbable to pull off. Photo credit: Jaipal Singh/EPA
“[Indian] Prime Minister Modi has
made it clear that he does not intend
to give into … pressure [to take
further action on climate change and
rethink its energy options] from any
nation but he also cannot afford the
ignominy of being singled out as a
country that is blocking progressive
climate action in Paris”
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Investment | Analysis
Why Investors Should Think Twice before Investing in Coal in India – Part 1
By Chaitanya Kumar
This is the first of a twopart article analysing India’s plans to double coal production by the end of this decade. The article, by Chaitanya Kumar, South Asia Team Leader of 350.org,
which is building a global climate movement through online campaigns, grassroots organising and mass public actions, offers four reasons why investors and the Indian government
should be really wary of investing in coal for the long run. This part of the article deals with the first two reasons. The second part will be published on Mar. 19.
NEW DELHI, Mar 18 2015 (IPS) India’s Government under Narendra Modi is in overdrive mode to please businesses and investments in the country. The much aggrandised ‘Make in
India’ campaign launched in September 2014 is a clarion call for spurring investments into manufacturing and services in India and all eyes have turned to the power sector which is
expected to undergo dramatic shifts.
Piyush Goyal, India’s power minister, announced in November last year that he plans to double coal production in India to a whopping 1 billion tonnes per annum before the end of this
decade, a feat that is going to be highly improbable to pull off.
In an effort to enhance production, the Indian government has started a process of auctioning coal blocks, which were deallocated by the country’s Supreme Court as a result of the coal
scam that hit the country in 2012 (and resulted in notional losses of 30 billion dollars to India’s exchequer).
With domestic miners already having shown an aggressive interest in bidding at the first auction last month, a total of 204 coal blocks are set to be auctioned over the next 12 months. The
first 32 auctioned blocks have yielded more than 35 billion dollars, exceeding the nominal losses from the coal scam.
Coupled with the auctions is the disinvestment of Coal India Limited (CIL), the world’s largest coal mining company. A
10 percent stake sale in early February resulted in a mixed bag response. Another state owned firm, LIC India,
lapped up 50 percent of the stocks alongside a couple of international investment funds and a few Indian firms. The
move generated 3.6 billion dollars in revenues for the government.
The auctions and the disinvestment of CIL can provide shortterm reprieve to India’s energy and fiscal deficit woes,
but there are four reasons why investors and the government should be really wary of investing in coal for the long
run (1015 years). The following are the first two.
Unburnable carbon
The reality that a large proportion of coal and other fossil fuels should be left in the ground is rapidly becoming clear
to big business and governments around the world. By signing on to a global agreement that pledges to limit the rise
in the earth’s surface temperature to 2 degrees Celsius, India along with other major carbon emitters have effectively
signalled the imminent decline in the use of fossil fuels in order to avoid the worst impacts of global warming.
To achieve this much needed and agreed upon limit on temperature rise, 82 percent of known global coal reserves
should remain unextracted. This roughly translates into 66 percent of known coal reserves in India and China that
should be left in the ground, according to a study published in the reputed journal Nature.
These stranded assets, or unburnable carbon, is what the Intergovernmental Panel on Climate Change (IPCC), the scientific body that informs climate policy around the world, also
highlighted in its recent report on climate change mitigation.
This new reality is unravelling quicker than expected and gaining credence from the most unlikely of places. Even the International Energy Agency (IEA), which has faced consistent
criticism in underplaying the role of renewable energy in favour of nuclear and fossil fuels, stated recently that “no more than onethird of proven reserves of fossil fuels can be consumed
prior to 2050 if the world is to achieve the 2 degrees C goal”.
IEA’s Chief Economist Fatih Birol warned that “we need to change our way of consuming energy within the next three or four years,” because, otherwise, “in 2017, all of the emissions that
allow us to stay under 2°C will be locked in.”
Coal is fast losing the rug under its feet. Nick Nuttall, the spokesman for the UN Framework Convention on Climate Change (UNFCCC) said of divestment: “We support divestment as it
sends a signal to companies, especially coal companies, that the age of ‘burn what you like, when you like’ cannot continue.
This proposition will be contested fiercely by the Indian government as much as by any fossil fuel company, but as nations – under pressure – prepare to deliver a strong global climate
agreement at the U.N. Climate Change Conference in Paris in December, longterm investments in coal in this rapidly growing economy will stand on very thin ice.
Even U.S. President Barack Obama’s statements during his recent visit to India suggest diplomatic pressure on India to take further action on climate change and rethink its energy
options for the immediate future.
Prime Minister Modi has made it clear that he does not intend to give into such pressure from any nation but he also cannot afford the ignominy of being singled out as a country that is
blocking progressive climate action in Paris.
Thermal coal reaches retirement age – it’s time for renewable energy
INTER PRESS SERVICE
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