India’s CO2 emissions growth slows to 20-year low

India’s carbon dioxide (CO2) emissions grew in 2025 at the slowest rate in more than two decades, according to an analysis by the Centre for Research on Energy and Clean Air (CREA).

The analysis also pointed out that emissions in the power sector fell by 3.8 pc as record clean-energy growth combined with weak electricity demand. Also, consumption of imported coal at power plants fell by 20 per cent in 2025. “India’s carbon dioxide (CO2) emissions grew by 0.5 per cent in the second half of 2025 and by just 0.7 per cent in the year as a whole, the slowest rate in more than two decades.

“This is a sharp slowdown from the growth of 4-11 per cent in the preceding four years and marks the lowest rate of increase since 2001, excluding the impact of Covid in 2020,” said the analysis on India’s CO2 emissions from fossil fuels and cement, based on official data for fuel use, industrial production and power output.

“This is the second in a new series of half-yearly analysis on India’s CO2 emissions from fossil fuels and cement, based on official data for fuel use, industrial production and power output,” it added.

According to Lauri Myllyvirta, lead analyst at CREA, the analysis shows that India’s power sector is poised for a potential inflection point, where clean-energy additions can meet or exceed the growth in electricity demand.

If clean energy matches expectations, allowing this inflection point to take place, then coal-fired power output and the associated CO2 emissions would see sustained falls.

“In addition, oil demand is falling in the petrochemical industry and is expected to slow down in the steel and cement sectors. Despite these trends, which could signal a lasting slowdown in emissions, India is planning major expansions in its capacity for coal power, petrochemicals and coal-based steel.

“The path of India’s CO2 emissions over the coming years depends on how it resolves these apparent contradictions regarding its future demand for fossil fuels,” it said.

The report noted that while India’s carbon emissions have been growing rapidly for decades, with annual increases averaging 4.9 pc per year since 1990 and 4-11 per cent during 2021-24, the 0.7 per cent rise in 2025 was the slowest since 2001, excluding the impact of COVID in 2020.

The fall in power-sector emissions is particularly notable, given it was the largest driver of emissions increases in 2021-2023, responsible for half of the total growth.

Across the sectors, the reductions and weak growth in fossil-fuel consumption eased India’s vulnerability to the recent price and supply disruptions taking place in the wake of the attacks on Iran by the US and Israel, as well as Iran’s subsequent retaliation.

Notably, India’s fossil-fuel imports were disproportionately affected by falling demand overall. Consumption of imported coal at power plants fell by 20 pc in 2025. There were two key reasons why emissions fell in India’s power sector in 2025.

First, the country added 47 gigawatts (GW) of solar, 6.3GW of wind, 4.0GW of hydropower and 0.6GW of nuclear power in 2025.

“The annual electricity generation from this new capacity, calculated based on the average capacity utilisation of each technology, amounts to 90 terawatt hours (TWh). This is twice as much as the clean generation added in 2024, which in itself was a record,” it said.

The largest reductions in coal-fired power generation took place in Gujarat, Tamil Nadu and Rajasthan, the three States that also led the buildout of new solar and wind power.

“Power demand is expected to pick up again, with Indian credit-rating agency ICRA projecting growth of 5.0-5.5 per cent in the financial year starting in April 2026. These capacity additions would deliver additional annual generation of more than 100TWh, enough to cover demand growth of up to 5.8 per cent.

“This means that India’s power sector could reach an inflection point this year, where clean-energy growth matches the expected average rise in demand,” it said.

For oil demand, which slowed from 3.9 per cent growth in 2024 to 0.4 per cent in 2025, the key drivers came in the petrochemical and cement industry, where demand fell.

“Specifically, demand fell for naphtha, petcoke and other oil products. Naphtha is used as chemical industry feedstock, while petcoke is used mainly in cement production. Part of the fall in demand was due to an increase in India’s imports of plastics and precursors, which rose by 7 per cent in volume terms, while exports fell.

“The increase in imports came almost entirely from China, where the petrochemical industry is expanding, leading to complaints in India of price dumping. Mirroring the shift of plastics production to China, India began exporting large volumes of naphtha to the country,” it added.