The G7 and Indian Just Energy Transition Partnership Roadmap

The G7 countries—Germany, Italy, Canada, France, Japan, the United Kingdom, and the United States—have declared that they will launch a Just Energy Transition Partnership (JTEP) with India, Indonesia, Vietnam and Senegal this year. Such a partnership will seek to help those emerging economies transition their energy systems and economies from coal to lower-emission technologies.

With the 27th UN Climate Change Conference of the Parties ( COP27) just a month away, the G7 countries, including the United States, are looking to build on a partnership similar to the one announced at COP26 with South Africa. That partnership is widely perceived to be a key factor in South Africa’s decision to reduce its dependence on coal—over 90 percent of its electricity comes from coal. The G7 offered South Africa $8.5 billion for reducing its dependence on coal and supporting workers and communities that are coal dependent.

Building on the passage of the Inflation Reduction Act , the United States is keen to reclaim its leadership of the global climate agenda. This week, Secretary of the Treasury Janet L. Yellen announced a $1 billion loan for a U.S. Clean Technology Fund and for future JTEPs with developing countries.

A JTEP with coal-dependent India and Indonesia would be seen as a major step toward achieving that goal and building on the South African model. The JTEP with South Africa was meant to catalyze the closure of coal power plants and help the government move to clean energy sources. Almost a year after the partnership was announced, the funds are yet to materialize. It is still not clear whether financing will be in the form of a loan or a grant.

How can the G7 make JTEPs with major coal dependent economies like India fruitful?

Coal is the most important source of energy in India, providing nearly 70 percent of electricity in the country. The coal sector anchors local economies in over 50 districts in 6 states. Coal mining and coal-based industries are responsible for the livelihoods of up to 20 million Indians . Coal India Limited, India’s state-owned coal company, pays almost $8 billion in taxes and royalties each year to central, state, and local governments. Indian Railways, which transports tens of millions of people a year and employs over 1 million people, relies on overcharging for the transport of coal to subsidize tickets for passengers.

Given the large coal ecosystem and the deep dependencies with the coal economy, the Indian government should plan ahead and negotiate a JTEP deal that works for India and is meaningful in addressing the climate crisis. Beyond climate benefits, such a deal is in the interest of the G7 because it would enable them to form a stronger partnership with a major economy like India, whose market is attractive for Western companies and investors.

Two main steps are required for any meaningful deal.

First, India needs a national policy framework on a just transition away from coal. The concept of a just transition is still largely unknown to Indian policymakers, private sector leaders, and other stakeholders, at both the federal and state levels. A detailed assessment of the amount of money and time that is required for India’s transition away from coal is yet to be carried out. In other words, the Indian government does not know how much money will be required to shut down its coal infrastructure and how much money will be needed to secure the livelihoods of the 20 million people who depend on coal across six relatively poor, coal-dependent states.

To build a national policy framework, the government should create a taskforce to engage with national, state, and local policymakers, coal sector leaders, union heads, and other important stakeholders. A well-designed national plan should be based on these consultations and should be flexible enough to accommodate changing priorities and external shocks, in addition to projecting the amount of money and time required to achieve a just transition.

Most G7 countries such as the United States are at the implementation stage of a just transition, and have much to offer Indian counterparts in terms of sharing processes and experience in creating such a national framework.

Second, India’s national policy framework for a just transition should serve as the basis of negotiations with the G7 countries. This will help Indian policymakers in getting adequate funding for specific projects from the G7 for undertaking the enormous amount of work required to move 20 million people away from the coal sector. Funds will be required to remediate and repurpose coal mines and power plants, and to retrain coal workers. Remediation of coal infrastructure might include repurposing land and associated infrastructure for clean energy projects and for creating new jobs in the clean energy sector. Retraining workers for sectors other than energy is another important aspect of a just transition that will need financial support. India should prioritize projects that are grounded in local realities. A good plan may also serve as a guide for the type of financing that India must secure to facilitate a just transition.

The terms of financing have been a thorny issue between South Africa and donor countries. The latter wants to provide financing mostly in the form of loans , while South Africa much prefers grant financing. A well-designed transition plan can prevent these types of problems and serve as the basis of negotiations with donor countries. This might also give G7 countries confidence that its investments will be properly used.

If the G7 and India want a JTEP that works for climate, then India needs a carefully crafted action plan that will form the basis of negotiation. Otherwise, it runs the risk of creating a “Just Headline-Grabbing Partnership” with no positive outcomes for the climate or for the millions of workers who are dependent on coal.

Sandeep Pai is a senior associate (non-resident) with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

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Sandeep Pai
Senior Associate (Non-resident), Energy Security and Climate Change Program