India’s energy transition: Managing redistribution

India’s energy transition discourse is often portrayed as a singular shift away from a fossil-centric energy regime towards a low-carbon energy system. In reality, it is a far more complex transformation, dynamically unfolding across resources, technologies, industries, markets and regulations. Coal is being gradually replaced (and often supplemented) by solar and wind; internal combustion engines are giving way to electric mobility; centralised electricity systems are evolving towards distributed, decentralised energy systems; industries are adopting cleaner and more efficient production processes; and governance is shifting from state-led planning towards competitive markets, private finance and carbon-based investment mechanisms.

Policy instruments for renewable energy have also undergone a profound transformation, from historical incentive structures such as accelerated depreciation (AD) and generation-based incentives (GBI) to feed-in tariffs and, more recently, market-determined reverse auctions. However, these transition pathways are disruptive in nature, often dismantling existing fossil-based supply-chain architectures and forging new supply-chain linkages. For instance, India’s existing energy regime is slowly and systematically becoming disconnected from fossil-heavy energy pathways, shifting towards low-carbon options such as moving from coal to renewables, from traditional cooking fuels to modern cooking options, and from diesel-based irrigation facilities to solar PV-based irrigation systems. At the same time, new linkages are being established in many distinct ways, such as through the electrification of transport systems using electric vehicles (EVs), sourcing critical minerals for batteries, and forging new resource linkages for green hydrogen systems.

Each of these transition pathways, while generating new opportunities for economic growth and climate action, also disrupts socio-economic structures and functions by redistributing costs, risks and benefits across workers, communities, firms and regions. These effects appear in the form of both first-order and second-order impacts, often conceptualised as implementation risks and consequential risks.

Effects of the transition

The first-order effects of India’s energy transition are relatively visible, direct and immediate. They arise directly from changes in resources, technologies, policies and markets. When coal production declines, miners, contract workers, transporters, coal-bearing districts and state governments dependent on mining royalties face immediate socio-economic losses. Around 13 million workers are tied to the coal value chain in India and are expected to bear the brunt eventually. In the same vein, such a shift in resources from fuels to metals could generate stranded assets. Estimates suggest that close to 10 per cent of new coal units in India will remain unused by 2030. Conversely, renewable energy developers, equipment manufacturers, financial institutions, technology providers and regions endowed with high solar and wind potential become the primary beneficiaries of new investment flows. The more consequential risks often emerge as second-order effects that unfold over time. The loss of coal-based livelihoods can weaken local economies, reduce public revenues and trigger migration, potentially disturbing existing local economic structures. Meanwhile, renewable investments may generate jobs in different regions and require entirely different skill sets, potentially widening regional inequalities. Battery energy storage systems require adequate supplies of scarce critical minerals, which are largely imported by India. This could aggravate supply-security risks for a country like India. The production of green hydrogen is contingent upon a continuous supply of green energy, adequate supplies of pure water and other associated resources, which are again either inadequate or scarce. Competing demands for such resources could generate negative spillover effects for India if not managed well.

Managing the redistribution

As the energy transition is fundamentally a redistribution of economic value, policy must focus beyond carbon accounting towards distributional governance. The redistribution is not limited to income; it encompasses employment, investment, public revenues, assets, economic opportunities and transition risks. These are likely to shift across sectors, regions and communities. A robust institutional framework is therefore required to assess not only the aggregate impacts of the transition, but also their magnitude, distribution and incidence. Given that coal still accounts for around 70 per cent of India’s electricity generation, it is also important to mainstream distributional impact assessments into energy policymaking, ensuring that the economic winners and losers of major energy reforms are identified before implementation. Coal also makes significant contributions to the government’s exchequer. In 2024-25, coal mining generated around Rs 1.10 lakh crore in royalties, DMF, NMET, GST, coal cess and other payments. A transition benefit-sharing framework needs to be developed that channels a part of clean-energy dividends into coal-dependent regions through investments in economic diversification, skills, social protection and local infrastructure.

Equally important is investing in people rather than just projects by supporting reskilling, local enterprises and regional supply chains so that transition benefits remain embedded within affected communities.

History reminds us that no great economic transformation has ever been neutral. When factories replaced farms during the Industrial Revolution, prosperity grew, but so did inequalities. When India liberalised its economy in 1991, new industries flourished, cities expanded and millions found opportunities, while others struggled to adapt to a rapidly changing marketplace. India’s clean-energy transition is writing the next chapter of that story. It promises cleaner air, energy security and new economic opportunities. Its success will ultimately be measured not only in gigawatts installed or tonnes of carbon avoided, but also by whether the prosperity it creates is as widely shared as the climate benefits it delivers.

Jay Ganesh Pandey is Research Associate, TERI and Gopal Krishna Sarangi is Associate Professor, Department of Policy and Management Studies, TERI School of Advanced Studies; Views presented are personal.