Critical Challenges in Realising the Energy Transition: An Overview of Indian States

Abstract:

This paper studies three of the many challenges that state governments will face as India transitions away from a fossil fuel–driven economy. We estimate that the current dependence on fossil fuel is by way of state government revenues from fossil fuels, ownership of thermal (coal) power units, and employment in coal mining. We also assess the expected time path of the various transition processes in each of these three areas. While the transitions will present challenges for each state, some will require greater efforts in managing the process smoothly. Budgetary revenues are likely to take a significant “hit” as fossil fuels currently account for a significant share of state government revenues, though there are significant state-level differences. Many states have significant ownership of coal power capacity, replacing which will impose an additional burden on the states. However, we find that direct employment in coal mining is limited or insignificant in most but a handful of states, and, therefore, the necessary protection and support required for the labour transition will present a high expenditure burden in only a handful of states.