Coal India is the largest coal mining company in the world and produces 82% of India’s coal every single year. However due to the declining cost of solar power in India the company has announced that 37 mines are going to close on the grounds that they are “financially unviable”. This round of closures amounts to Coal India closing around 9% of the total number of mines that the company operates, and as a result will significantly reduce the amount of coal being extracted per annum. The important aspect of this development, and the growing commercial trend, is that companies are beginning to notice that fossil fuel extraction is, in many cases, more costly than investing in green technology. This needs to be promoted and celebrated as much as possible.
If we take Coal India’s decision purely from a capitalistic standpoint, we can clearly see that they were correct in making this call. The company has estimated that they will save approximately $124 million from the closure of these 37 mines alone. Given the predilection for commercial entities to want to remain in business for as long as they are solvent, it is highly likely that Coal India will now invest in renewable energy themselves. Indeed a failure to do so would result in the company slowly withering away, and this is the grand irony of the current situation in the solar industry.
If a fossil fuel company wants to remain competitive in the marketplace it needs to invest in the industry that is more profitable, which will result in the further decline of the coal industry. This industrial decline will precipitate a radical change in how the energy needs of developing countries are met and also challenge the idea of policy-makers having to choose between economic growth and tackling climate change.
The inability to transition away from fossil fuels is a consequence of two factors. The first is a lack of political will. In some cases this lack of political will is a somewhat understandable, for instance if a politician represents an area whose primary industry is coal mining, it is unlikely that that politician will come out swinging in favour of closing coal mines.
However the fact is that this hypothetical situation is incredibly rare and that the main reason for the sluggish pace of transition is due to corruption. Governments across the world have been providing subsidies to fossil fuel companies and the inability of countries to end these subsidies is that fossil fuel companies have threatened capital flight and a loss of jobs. This threat no longer has weight behind it because the demand for renewable energy is growing rapidly and as a result jobs are being added on a weekly basis.
For instance according to a 2016 IRENA study, 770,000 people are employed in the renewable energy sector in the US whereas only 50,000 people are employed in coal mining. Although there is some truth in the fact that many of the renewable energy jobs are created in different areas to where coal mines used to be, there is only so long the coal industry can threaten politicians before policy-makers make the most basic of political calculations: more renewable energy equals more jobs and equals more votes.
The trend that is emerging in places like India, China and Europe is that pro-profit companies are no longer backing fossil fuels in the same numbers that they previously did. Renewable energy is proving itself to be much more of a reliable investment and dirty energy sources are routinely being proven to be more costly. Governments need to redouble their efforts to speed out this transition because companies will only act if the commercial situation changes so much that their bottom line is affected.
Introducing a carbon tax, banning offshore drilling and/or providing subsidies for consumers to buy solar panels or wind turbines will undercut these companies’ power and will rapidly increase the speed of the green energy transition. In India companies are beginning to see the light and the same has been the case in other parts of the developing world. It is time that countries in the West turbocharge their climate commitments so that they can prevent the total destruction of our planet.