In public, the Indian government regularly makes the case for building more coal-fired power plants. And it is true that India will probably need to build some more coal plants in the next 5 years in order to meet its energy requirements, simply because at this point an “all of the above” strategy is most feasible. However, it should be ready to shift gear and drop coal in the medium term.

This is not so easy, because unfortunately, the coal question has become entangled in global climate justice discussions, which make new coal plants almost a fetish of national pride and of standing up to the developed world. That is silly. While it is true that building an Indian future on coal would probably derail the global climate, this is not the only point. Coal will first and foremost pollute India’s own air, water, and soil with severe effects on the health and quality of life of Indians. Also, it will not be a sound economic choice. Here, a look at market trends is instructive.

Global investment is rapidly moving away from coal and towards renewables. In 2014, more money went into solar or into wind than into coal. In total, renewables received investments of $ 265 bn in 2014 (up 17%). China alone invested $ 83 bn. At the same time, according to the think-tank Coalswarm, two-thirds of the coal-fired power plants proposed since 2010 have been stalled or canceled.

Investors see increasingly unmanageable risks with coal-fired power plants: will health and environmental externalities be priced into coal in the future (in the form of e.g. a tax or stricter regulations)? Will carbon emissions be priced? Will the required auxiliary infrastructure be built? Will there be social unrest and how will politicians respond to that? Perhaps most importantly: will people still want to buy coal power in 10 years time, when renewables will be much, much cheaper? In addition, a US originated divestment campaign that shames investors in polluting industries is gathering pace, making it more difficult to raise funds for coal-fired plants.

India is in a much better position than China was 20 years ago. It has a real choice between coal and renewables. It would be sheer folly to walk down the Chinese path and make the same mistakes. India can build a cleaner and cheaper energy future.

For more blog posts on this topic, see BRIDGE TO INDIA.