Chile’s Lesson for India’s Coal Conundrum

India’s Coal Conundrum vs Chile’s Success: A Policy Crossroads

In November 2025, India slipped 13 ranks to 23rd in the Climate Change Performance Index, released during COP30 in Brazil. One stark reason for this decline: India’s persistent struggle with phasing out coal, its energy backbone which contributes to over 75% of national electricity production. The paradox is glaring — just as coal anchors affordable power and sustains livelihoods in its resource-heavy districts, it also shackles the nation to escalating pollution, health hazards, and its global warming obligations.

Chile, on the other hand, presents a striking contrast. Between 2016 and 2024, it reduced coal’s share in electricity generation from 43.6% to a mere 17.5%. Over 60% of its power mix now comes from renewables, a transformation supported by deliberate policy shifts that forced the energy transition while managing grid stability. India is watching — and debating. Can Chile’s approach be applied to a far more complex energy landscape?

The Policy at the Core

India’s climate commitments, formalised under its 2022 updated Nationally Determined Contributions (NDC) to the UNFCCC, are significant but tightly framed. Achieving 50% of electricity capacity from non-fossil fuel sources by 2030, and a 45% reduction in emissions intensity relative to 2005 levels — these are legally binding pledges. By 2025, non-fossil fuel capacity had indeed crossed 256 GW, making up 51% of India’s 500.89 GW installed electricity capacity. Yet these numbers obscure the deeper dependency on coal: it not only still provides almost half of the actual capacity, but it dominates electricity generation, covering 75% of current production.

The National Electricity Plan (NEP) envisions greater growth for renewables by 2032, particularly in solar, which already accounts for 127.33 GW. But coal refuses to retreat outright. Instead, the FY 2025-26 figures reveal 5.1 GW of new fossil-fuel capacity added, compared to 28 GW of new renewables. Crucially, India lacks a formal, actionable coal phaseout roadmap akin to Chile’s 2040 target for zero coal dependence.

Why Chile Succeeded

Chile’s transformation is underpinned by three pillars that India has yet to fully adopt. First, it imposed stringent emissions standards on coal plants, raising compliance costs by 30%, disincentivising investment in fossil fuels. Second, Chile opened up the market to competitive auctions for renewable energy, which dramatically lowered costs, particularly for wind and solar. Today, renewables are not only cleaner but also cheaper than coal in Chile. Third, simultaneous public investment in energy storage technology stabilised its grid, addressing a perennial issue with renewables’ intermittency. These efforts were framed within a clear target of retiring all coal assets by 2040 — a political decision that anchored industrial reform and offered visibility to stakeholders.

Would such an approach work in India? A single state like Jharkhand, dominated by coal mining, provides a partial answer. The sheer size of India’s coal economy gives its energy transition a complexity that Chile never faced. Chile’s smaller economy and largely privatised utilities allowed for agile policy shifts, while its coal workforce is minimal compared to the millions dependent on India’s mines for survival. This disparity complicates direct replication of Chile’s policies.

The Skeptic’s Argument

The notion that India can “simply follow Chile” belies local realities. For starters, Chile’s timeline coincided with a global boom in affordable renewable technologies, making solar and wind an easier sell both politically and economically. India’s coal plays a different role — it is not just an energy source but a socio-economic foundation for states like Chhattisgarh, Odisha, and Jharkhand. The risks of abrupt coal phaseout — economic stagnation, forced migrations, and spike in power costs — are stark and political ramifications harsher in a federal democracy like India.

The gap between India’s ambition and its policy tools further widens the challenge. Suggestions like carbon pricing or removal of coal subsidies, while theoretically sound, lack political traction amid populist pressures. Similarly, power sector reforms, including clean dispatch rules and renewable-preferential procurement contracts, remain entangled in bureaucratic inertia and state-level resistance. Of little surprise, then, is TERI’s suggestion for a phased, incremental coal exit by 2050 instead of a Chilean-style sharp timeline.

Lessons from Elsewhere: Practical, Not Symbolic

Interestingly, Germany offers a middle-ground model. Balancing its coal phaseout deadline — initially extended to 2038 — with a generous €40 billion funding package for coal-dependent regions reflects a dual framework: decarbonising steadily without economic devastation. This contrasts sharply with Chile’s swift, market-driven reforms. Germany’s example underscores a necessary lesson for India: neither ecological urgency nor economic dependency can be treated in silos. Regional just transition funds, backed by robust social protection and reskilling mechanisms, matter more in large, complex federal nations.

Where Do We Go from Here?

The path forward for India sits uneasily between Chile’s ambition and Germany’s balance. The policy risk isn’t just that coal lingers longer than expected, but that the transition remains chaotic, leaving workers and regions stranded without alternatives. A national roadmap needs clarity not just on when coal will exit, but how transition pain will be offset.

Despite policy rhetoric, India’s climate goals are contingent on better handling practical constraints like viable reskilling of coal workers, scaling energy storage, and aligning state-level energy strategies. Political will must go beyond headline pledges. A dedicated Green Energy Transition Fund, as suggested by an inter-ministerial expert committee, should be operationalised urgently, with implementation timelines set for at least the next 15 years. In these efforts, incrementalism must not turn into inertia. If Chile’s coal exit proves anything, it is that political clarity drives market transformation.

Practice Questions for UPSC

Prelims Practice Questions

Frequently Asked Questions