The limits of King Coal’s reign in South Asia

Despite global pressure in the run-up to the Paris climate summit, no South Asian government is willing to give up on coal use, but future investments in coal are far from assured

Female coal workers of the Rajapur Mining Project in Jharia coal mine. Jharia is one of the most important coal mines in India and one of the largest in Asia. Before coal was unearthed in this area, Jharia was a belt of dense forests inhabited by tribes. Thousands of poor, mostly unskilled, migrants from neighboring states have settled in Jharia over the years. Most of them collect coal illegally to pay for their two meals a day.

Female coal workers at Jharia coal mine in India’s Jharkhand state. Jharia is one of the most important coal mines in India and one of the largest in Asia.

As the world prepares for a seminal climate summit in Paris this year, South Asia remains a region where coal reigns as the policymakers’ preferred option to produce power, despite its greenhouse gas (GHG) emissions.

As scientists and activists seek quick phase-out of the dirty fuel, Indian planners are repeatedly complaining that money to set up new thermal power plants is drying up. But India, with 300 million people unconnected to the electricity grid, has no other option, they hold.

By all current indications, India’s GHG emission control offer before the Paris summit will be unapologetic about coal use.

At the international scale, GHG emissions from coal use matters mostly due to India’s plans to increase consumption. The amount used by other South Asian countries is relatively insignificant, but India is one of the world’s top coal consumers.

In early July, the Organization for Economic Cooperation and Development (OECD) released troubling new figures about coal.

Current trends suggest that coal-fired power generation will cause more than 500 billion tonnes of carbon dioxide to be released into the atmosphere by 2050—roughly half of the global “carbon budget,” which is the amount of GHG that can safely be injected into the atmosphere for this half century if we are to stay within the 2 degrees Celsius limit that is widely agreed as the threshold for dangerous climate change.

These figures are cause for alarm, given how aggressively the notoriously dirty fuel is produced worldwide—and especially in the developing world.

These revelations have particularly dangerous implications for South Asia—home to one of the world’s top coal consumers, and to several countries heavily courting foreign investors to help exploit untapped reserves.

China will be joined by India and other countries in Asia as the main drivers of future growth in coal consumption, offsetting declines in Europe and the US.

Reality check

In fact, such concern about South Asia may be misplaced. Most countries in the region consume coal in relatively low quantities. Many have very modest indigenous coal reserves, and the few countries with large reserves tend to lack the capacities and infrastructure to exploit them. Additionally, the amount of coal that South Asian countries—including India—import represents a relatively small share of total coal availability worldwide.

Relative to elsewhere in Asia, consumption rates of South Asian states—with the clear exception of India—are quite modest, according to EIA data. Afghanistan consumes much less than Taiwan. All South Asian states (with the exception of India, which consumes more than any country in Asia other than China) consume less than most nations in Southeast Asia.

Even Pakistan and Bangladesh—two South Asian countries trying to aggressively ramp up coal production—are modest consumers. Hong Kong, in fact, consumes more than both the countries combined.

Furthermore, coal projects in Pakistan and Bangladesh both face major investment challenges.

Coal complications in Pakistan

Since coming to power in 2013, the Pakistani government has fervently championed cheap coal. In the words of Musadik Malik, until recently the prime minister’s energy advisor, “We are a poor country, and we have to create a[n] [energy] portfolio that is affordable.” Of particularly interest to Islamabad are the 175 billion tonnes of untapped reserves in the Thar desert. However, little has been done to exploit them—thanks to a lack of technology, roads, transmission lines, rail cars, and, above all, money, as explained in a new Wilson Center report on Pakistan’s energy crisis.

Fortunately for Pakistan, the Chinese are coming. Beijing has pledged to build several coal-fired power plants as part of its much-ballyhooed China-Pakistan Economic Corridor (CPEC), which involves nearly US$35 billion worth of energy investments meant to eventually produce 17,000 MW of power.

Still, despite the hype, these coal investments are far from guaranteed. China often promises more than it delivers, and—as reported by earlier this year—it quietly withdrew its support for several Pakistani coal projects some months ago. The fact that many of the Chinese CPEC investments will be in insurgency-riven Baluchistan—where Chinese labourers have been attacked in the past —suggests additional risks.

Coal investors pull out of Bangladesh

The government in Bangladesh also has big plans for coal, with a goal of producing 20,000 MW of coal-fired power by 2021. The cornerstone of its coal policy is the new Rampal facility, a 1,320 MW thermal power plant that intends to import nearly 5 million tonnes of coal annually. However, in recent months, foreign investors from Norway and France have refused to support the plant, citing major environmental concerns. The Rampal plant, which is being built by an Indian state-owned company, is less than 10 miles from Bangladesh’s famed Sundarbans mangrove forest. Bangladesh’s own Planning Commission has even rejected the project, for not complying with the country’s existing policy and because funding and ownership of the plant are not clear.

The Indian exception

India is undoubtedly South Asia’s ground zero for coal concern. It has the fifth largest reserves in the world, and is the world’s third highest consumer. Consumption is expected to double between 2008 and 2035. In recent years, its coal imports have increased up to 56% over a single year.

India’s coal is also as dirty as it gets and communities in prime coal-producing  regions suffer major health problems. Reports frequently emerge of fires burning for decades in areas of heavy coal extraction.

But even India may not become the coal juggernaut that many analysts predict it will.

India’s government launched a plan in 2012 to increase coal production through the efforts of the state-owned Coal India Limited and private coal miners. However, the increases did not materialize, according to a Wilson Center study on India’s energy situation produced by Raymond Vickery last year.

India has consistently failed to reach the government’s production targets, experiencing only modest 4% growth in its coal production since 2007.

Overall, several factors inhibit coal production in India: a highly inefficient and often corrupt coal sector that is largely state controlled; the same infrastructure deficits that afflict Pakistan; and an anti-state Maoist insurgency in the areas where India’s coal reserves are located (the insurgency, in fact, is fuelled in part by local grievances tied to predatory coal exploitation).

Furthermore, the coal investment climate for overseas financiers—many of whom are clamouring to take advantage of India’s vast reserves—is not particularly favourable. In addition to heavy state influence and regulation, inefficiencies, and corruption within India’s coal sector, there is the issue of pricing. Indian coal is typically priced at an estimated 30 to 40% below market rates.

The uptake? We should certainly worry about coal in South Asian countries, and especially in India. But there are other culprit countries too. Many nations outside of South Asia will be responsible for releasing those 500 billion tonnes of carbon dioxide into the atmosphere. They merit concern as well.

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