In 2015, under the United Nations Framework Convention on Climate Change’s Paris Agreement, governments committed to keeping global temperature increases to 2°C and to pursue efforts towards a more ambitious 1.5°C target. Global decarbonisation efforts may increase the risk of asset stranding – that is, loss of value, revenue or return on investment – in fossil fuel production assets. This is particularly relevant to coal assets, as it is estimated that phasing out inefficient coal power plants alone could contribute to halving power sector emissions globally.
In India, improving access to modern energy services is a key policy objective, and common justification for further coal power development – however this poses a significant challenge under the Paris Agreement.
This paper develops a broad framework for understanding the links between government interventions and the wider drivers of asset stranding and applies this to India’s coal power sector as a first case study. The authors focus on three key questions:
- What are the recent and current government interventions in the coal power value chain?
- What are the wider drivers of coal power asset stranding?
- What are the linkages between the government interventions and the drivers?
Overall, the authors find that government interventions are counteracting the drivers of asset stranding in India’s coal power sector.
Report by the Overseas Development Institute