The energy transition and a just transition

Detail

1. What the energy transition means

• Energy transition: a long-term change in how an economy gets its energy. It moves away from fossil fuels (coal, oil, gas) and towards renewables (solar, wind, hydro), nuclear and green hydrogen.

• It is a structural shift. It changes power plants, factories, transport, jobs and state budgets, not just one fuel.

• Link to sustainable development: the Brundtland Report (1987) defined sustainable development as meeting today's needs without harming the ability of future generations to meet theirs. Burning fossil fuels uses up a finite stock and harms the climate for future generations. So the transition puts this idea into practice.

• SDG link (2015-2030): SDG 7 (affordable and clean energy), SDG 8 (decent work, which connects to the just transition) and SDG 13 (climate action).

2. The energy trilemma

• Energy trilemma: a country must meet three energy goals at the same time:
• Security: steady supply, with little dependence on imports or unstable suppliers.
• Affordability: energy that households and industry can pay for.

• Sustainability: low emissions and low pollution.

• Why it is hard: improving one goal can hurt another.

• Cheap domestic coal → good for security and affordability → bad for sustainability.

• Imported LNG or solar modules → cleaner → but they raise import dependence (a security risk).

• India's policy tries to balance all three. It does not choose only one.

3. Energy intensity and India's climate targets

• Energy intensity = total energy used ÷ GDP. It measures how much energy the economy needs to produce one unit of output.

• Worked example: an economy uses 1,000 units of energy to produce ₹100 lakh crore of GDP. Its energy intensity is 10 units per lakh crore. The next year, energy use rises to 1,050 and GDP rises to ₹110 lakh crore. Intensity falls to about 9.5. The economy grew faster than its energy use, so it became more efficient.

• A falling energy intensity means decoupling: growth needs less energy for each rupee of output.

• India's energy intensity has been falling. Two things helped:
• the Energy Conservation Act 2001

• the Bureau of Energy Efficiency (BEE), created under that Act. BEE runs schemes such as star labelling of appliances and building energy codes.

• Emissions intensity (a related term): CO2 emitted per unit of GDP.

• Updated NDC (August 2022): India will cut the emissions intensity of its GDP by 45% by 2030 from the 2005 level. It will also reach about 50% of installed electric power capacity from non-fossil sources by 2030 [7].
• India's emissions intensity fell by 36% between 2005 and 2020 [9].

• NDC for 2031-2035: the emissions intensity cut is raised to 47% by 2035, and the non-fossil target to 60% of installed capacity by 2035 [9].

• Progress on non-fossil capacity:

• On 31.12.2025, total installed capacity was 5,13,730 MW. Non-fossil sources made up 2,66,788 MW (51.93%) and fossil sources 2,46,942 MW (48.07%) [8].
• In February 2026 the non-fossil share was 52.57%. India reached the 2030 target five years early [9].
• Trap: this figure is installed capacity, not actual generation. Coal still produces most of the electricity, because solar and wind plants run for fewer hours in a day.

4. Coal: phase-down, not phase-out

• At COP26 (Glasgow, 2021), India pushed for the wording "phase-down" of unabated coal in place of "phase-out".
• Unabated coal: coal burned without any technology (such as CCUS) to capture its CO2.

• Phase-down means reducing coal use over time. Phase-out means ending it completely.

• Reason: coal is India's cheapest domestic energy source. It is central to energy security and to the economy of several states.

5. Hydrogen and the hydrogen economy

• Hydrogen by colour, which shows how it is made:

Type	Made from	CO2
Grey hydrogen	natural gas or other fossil fuels	released into the air
Blue hydrogen	natural gas	captured and stored (CCUS)
Green hydrogen	electrolysis (splitting water with electricity) using renewable power	near zero

• India's Green Hydrogen Standard was notified on 19 August 2023. Hydrogen counts as "green" only if total emissions are not more than 2 kg CO2 equivalent per 1 kg of hydrogen [3].
• Green ammonia: ammonia made with green hydrogen. It has three uses:
• feedstock for fertilisers (urea, which today uses grey hydrogen from imported gas)
• fuel for ships

• a hydrogen carrier: hydrogen is hard to store and ship, so it is moved as ammonia and turned back into hydrogen later.

• Hydrogen economy: an economy where hydrogen is a major fuel, an industrial input (for steel, refining and fertiliser) and a way to store energy (for example, surplus solar power stored as hydrogen).

• National Green Hydrogen Mission (NGHM), launched January 2023:
• Target: 5 MMT (million metric tonnes) per year of green hydrogen production by 2030.
• Initial outlay: ₹19,744 crore up to FY 2029-30 [2]. It is split as:
  • ₹17,490 crore for SIGHT (Strategic Interventions for Green Hydrogen Transition). SIGHT gives incentives for making electrolysers in India and for producing green hydrogen [2].
  • ₹1,466 crore for pilot projects, ₹400 crore for R&D and ₹388 crore for other components [2].
• Expected gains by 2030: about ₹1 lakh crore less fossil fuel imports and nearly 50 MMT per year less CO2 [4].

6. The green premium

• Green premium: the extra cost of the clean option compared with the fossil option.
• Formula: Green premium = Cost of clean option − Cost of fossil option (often shown as a % of the fossil cost).

• Worked example: grey hydrogen costs ₹200/kg and green hydrogen costs ₹350/kg. The green premium is ₹150/kg, which is 75% of the grey price. Industry will not switch until the gap closes. That is why SIGHT pays incentives: to cut the premium.

• The green premium is the main barrier to the transition, especially in steel, cement, fertiliser and shipping.

• It falls when technology gets cheaper (solar is now cheaper than new coal in many places), when production grows larger, and when carbon pricing makes the fossil option costlier.

7. Carbon capture, utilisation and storage (CCUS)

• CCUS: catching CO2 at a factory or power plant, then either using it (in chemicals, building materials or enhanced oil recovery) or storing it deep underground.
• It matters most for hard-to-abate sectors: sectors such as cement, steel and chemicals whose emissions are hard to cut with renewables alone.
• Reference: NITI Aayog report on CCUS (2022).
• It is needed for blue hydrogen and for turning "unabated" coal into "abated" coal.

8. Critical minerals and resource nationalism

• Critical minerals: minerals that are essential for clean energy, electronics and defence, and whose supply is at risk. Supply is risky because a few countries mine or refine most of them.
• India's list: a committee set up by the Ministry of Mines in November 2022 identified 30 critical minerals. The list was released in 2023 and includes lithium, cobalt and rare earths. Of these, 24 are placed in Part D of Schedule I of the MMDR Act, 1957 [5].
• Supporting steps:
• MMDR Amendment 2023: lets the Centre auction blocks of critical minerals.
• KABIL (Khanij Bidesh India Ltd): a joint venture of PSUs that buys mineral assets abroad (for example, lithium in Argentina).
• National Critical Mineral Mission (NCMM), approved by the Cabinet in 2025. Total outlay is ₹34,300 crore over seven years: ₹16,300 crore from the government and ₹18,000 crore expected investment from PSUs and others [5]. It covers:
  • more exploration on land and offshore, and faster regulatory approvals [5]
  • recovering minerals from overburden and tailings (mine waste) [5]
  • buying assets abroad, building a stockpile, setting up mineral processing parks, recycling and research [5]

• Minerals Security Partnership (MSP): a US-led group of countries working to secure mineral supply chains. India joined in 2023.

• Resource nationalism: governments tighten control over their natural resources through export bans, higher royalties or state ownership. Examples:

• China: export controls on gallium, germanium and rare earths
• Indonesia: ban on exporting nickel ore, which pushes companies to refine it inside Indonesia
• Effect: prices become volatile and importers such as India face supply risk. This is why India needs its own mining, recycling and partnerships.

9. Stranded assets

• Stranded assets: assets that lose value before the end of their expected life. In the energy sector these are coal plants, coal mines and coal reserves that become uneconomic because of climate policy or cheaper renewables.
• Why India faces a particular risk:
• India's coal fleet is young. Many plants were built after 2010 and were expected to run for 25 years or more.
• If they close early, their loans may not be repaid.

• The loss falls on banks and PSUs (public sector power and coal companies, and public sector banks).

• This links to climate-related financial risk (Section 9), where climate change or climate policy hurts bank balance sheets.

10. Just transition

• Just transition: moving to a low-carbon economy in a fair way. Workers, districts and states that depend on fossil fuels must be protected, not left behind.
• Most exposed states: Jharkhand, Chhattisgarh and Odisha, which are coal-rich, have large tribal populations and lower incomes.
• Money at stake if coal declines:
• coal royalties: payments companies make to state governments for mining coal
• District Mineral Foundation (DMF) funds: money from miners that is spent on welfare in mining-affected districts
• railways' coal-freight revenue: coal is the largest freight item for Indian Railways, and its earnings help keep passenger fares low

• jobs, both direct (mines, plants) and informal (transport, local trade)

• Frameworks:

• ILO Guidelines for a just transition (2015)

• Just Transition Work Programme (JTWP): set up at COP27, Sharm el-Sheikh (November 2022) under the Sharm el-Sheikh Implementation Plan [6]. After COP28 it became the UAE Just Transition Work Programme [6].

  • It says a just transition covers energy, socio-economic and workforce dimensions. These must be based on nationally defined development priorities and must include social protection [6].
  • It holds an annual high-level ministerial round table, which began at COP28 [6].

• JETPs (Just Energy Transition Partnerships): deals in which rich countries give finance, mostly loans, to help a developing country retire coal early.

• South Africa (2021), Indonesia (2022), Vietnam (2022).

11. India's equity position

• Low per capita emissions: India's emissions per person are far below the world average and much lower than those of developed countries.
• Development space: India still needs energy to end poverty and to industrialise. This follows the principle of CBDR-RC (Common But Differentiated Responsibilities and Respective Capabilities): rich countries caused most past emissions, so they should do more.
• Wariness of JETP-style conditions: India does not want foreign finance tied to rules on its coal policy. It prefers "nationally defined" pathways, which is the same language the JTWP uses [6].

Prelims Hooks

• Green hydrogen (India's standard, notified 19 August 2023): not more than 2 kg CO2e per kg H2 [3]. Blue hydrogen comes from natural gas with CCUS. Grey hydrogen comes from natural gas without CCUS.
• NGHM (January 2023): 5 MMT/yr by 2030. Outlay ₹19,744 crore, of which SIGHT gets ₹17,490 crore [2].
• Energy intensity = Energy consumed ÷ GDP. BEE is a statutory body under the Energy Conservation Act 2001.
• COP26 (Glasgow): "phase-down" of unabated coal, not "phase-out".
• NDC (2022): 45% cut in emissions intensity by 2030 (base year 2005). NDC 2031-35: 47% cut and 60% non-fossil capacity by 2035 [7][9].
• The 50% non-fossil installed capacity target was met by 2025, five years early. At 31.12.2025 the share was 51.93% [8]. Trap: this is capacity, not generation.
• 30 critical minerals are identified. 24 are in Part D of Schedule I, MMDR Act 1957. NCMM has an outlay of ₹34,300 crore over 7 years [5].
• Just Transition Work Programme: created at COP27 (Sharm el-Sheikh, 2022), not COP26 or COP28 [6]. The ILO just transition guidelines date from 2015.
• JETP order: South Africa (2021) → Indonesia and Vietnam (2022). India has no JETP.
• KABIL buys mineral assets overseas. China's gallium and germanium controls and Indonesia's nickel ore ban are examples of resource nationalism.

Mains Points

• Energy trilemma in India: coal gives security and low cost, while renewables give sustainability. India's answer is to add capacity fast (51.93% non-fossil capacity by December 2025 [8]) and phase down coal gradually rather than exit abruptly. Use this to argue for balanced, sequenced policy in GS-III answers on infrastructure and energy.
• Just transition as federal and fiscal justice: Jharkhand, Chhattisgarh and Odisha depend on coal royalties, DMF funds and jobs, and Indian Railways relies on coal-freight revenue to support passenger fares. Suggested answers: reskilling, diversifying local economies, repurposing mine land (for example, solar parks on old mines) and Finance Commission support for states that lose revenue.
• Green premium and industrial policy: SIGHT (₹17,490 crore [2]) and NCMM (₹34,300 crore [5]) are public money used to close the cost gap and reduce supply risk. Link them to Atmanirbhar Bharat, to import savings (about ₹1 lakh crore in fossil imports by 2030 [4]) and to resource nationalism abroad.
• Equity and climate finance (GS-II/III): India's low per capita emissions, CBDR-RC and its wariness of JETP conditions support a "nationally defined" transition [6]. The counter-point is stranded-asset risk to PSU balance sheets and public sector banks if India delays and new coal plants are later closed early.