India Could Save $170 Billion by Closing Coal Power Plants Early

From the Editor’s Desk

January 19, 2026

India could save about $170 billion (14.1 lakh crore rupees) by retiring its coal-fired power plants earlier than scheduled, according to a new study, which adds that cutting emissions can also improve public health and economic efficiency within India’s current energy system.

India currently depends on coal for about 70 percent of its electricity needs. This coal-based power is generated mainly by large public sector undertakings such as NTPC Limited, which is India’s largest energy conglomerate, and by state-run electricity boards. Private firms like Tata Power, Adani Power and JSW Energy also operate significant coal-fired capacity. Together, these entities run a vast network of plants across the country, supplying electricity to homes, industries and transport systems. Most of the coal used is extracted domestically.

However, coal burning releases large amounts of carbon dioxide, the main greenhouse gas causing global warming, and it emits harmful pollutants that damage human health.

The new study, published in the Nature Communications journal, uses advanced economic modelling to assess the impact of shutting down every coal-based electricity plant in India, as reported by earth.com. Researchers compared two possible scenarios: one aiming to limit global warming to 1.5 degrees Celsius and another allowing warming closer to 2 degrees. In both cases, the model showed that early closures would produce net economic gains for the country with savings from reduced healthcare costs, fewer pollution-related deaths and lower operating expenses over time.

The analysis took a plant-by-plant approach. For each coal-fired station, researchers fed in data such as the age of the plant, its energy efficiency, construction cost, fuel use and operating expenses. The model then calculated which plants could be retired early and which could run longer, based on their emissions levels, economic returns and health damage.

The model applied a “social cost of carbon,” which assigns a monetary value to each ton of carbon dioxide released, reflecting the global damage it causes, including climate disasters, health costs and lost productivity. Researchers also factored in co-benefits such as lower medical bills and fewer missed workdays caused by cleaner air.

The results showed that if India follows the more ambitious shutdown timeline designed to limit global warming to 1.5 degrees Celsius, by retiring coal plants earlier and prioritising the closure of the least efficient units, several states would reap large financial benefits. For example, coal plants in Chhattisgarh could yield about $171 billion (14.2 lakh crore rupees) in net gains, and those in Uttar Pradesh about $110 billion (9.1 lakh crore rupees). The total nationwide benefits would be even higher, once the savings from cleaner air and fewer early deaths are included.

The study warns that if coal plants continue to be built without a plan for early retirement, many of them may have to shut down before recovering their investment costs. These unfinished returns create what economists call “stranded assets,” infrastructure that becomes financially unviable due to policy changes, market shifts or environmental limits. Between 133 and 237 gigawatts of India’s coal power capacity could fall into this category if the country waits too long. The plant-level strategy in the study avoids this by closing the most polluting or inefficient stations first, while keeping newer or cleaner ones running temporarily. 

From an environmental economics perspective, the study challenges the common belief that cutting emissions always comes at a financial cost. Instead, it shows how internalising externalities can reveal hidden benefits. An externality is a side effect of an activity that affects others but is not reflected in market prices. In this case, coal burning causes health damage and climate harm that are not paid for by power companies. By assigning these damages a financial value, economists can design better policies and avoid what is known as “market failure,” where market prices do not reflect real costs.

This approach also supports the principle of “polluter pays,” where those who cause environmental damage bear the cost. The model’s findings suggest that India could apply this principle not by punishing polluters, but by gradually retiring polluting infrastructure and shifting investment to cleaner systems.

The health economics case is equally strong. Air pollution from coal causes thousands of premature deaths each year. One study cited in the analysis estimated 112,000 annual deaths from coal-fired power alone in India. In economic terms, this reduces the labour force and increases public spending on healthcare. Avoiding these costs improves productivity, raises quality of life, and reduces the burden on families and public hospitals.

Energy economists have long stressed the importance of evaluating electricity systems not just by price but by full system cost. Coal’s price per unit of energy may appear low, but once pollution, water use and climate risks are counted, its true cost is higher.

From a sustainability standpoint, the research reinforces the idea of “just transition,” a term used to describe the shift away from fossil fuels in ways that protect workers, communities and the larger economy. Planning coal closures plant by plant allows for more flexibility and precision, helping states avoid sudden shocks. It also gives time to build up alternatives, including renewables, battery storage, and transmission networks, which the Indian government has already begun to invest in.

The study offers a reminder of how environmental and economic goals can be aligned.

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