India’s Power Sector Nears a Turning Point in Energy Transition

India’s carbon dioxide (CO2) emissions grew by 0.5% in the second half of 2025 and by just 0.7% 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% in the preceding four years and marks the lowest rate of increase since 2001, excluding the impact of Covid in 2020. This is the second in a new series of half-yearly analysis on India’s CO2 emissions from fossil fuels and cement done by CREA (Centre for Research on Energy and Clean Air) for Carbon Brief . The analysis is based on official data for fuel use, industrial production and power output.

Other key findings for 2025 as a whole include:

• Emissions in the power sector fell by 3.8% as record clean-energy growth combined with weak electricity demand.
• New clean-energy capacity in 2025 will add a record 90 terawatt hours (TWh) of electricity output each year, double the previous record set in 2024.
• The largest reductions in coal power were in the states leading on wind and solar.
• Oil demand grew by 0.4% and gas fell by 4%, far behind recent growth rates.
• Steel production surged by 8% and cement by 10%.
• In total, CO2 emissions went up slightly year-on-year, as increases from steel and cement outweighed the falls in gas demand and coal power.
• Consumption of imported coal at power plants fell by 20%, while gas imports fell by 6% and net oil imports were flat year-on-year, reducing India’s vulnerability to the impacts of the Iran war.

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 country’s Paris Agreement targets for 2035, which were published yesterday, did not reflect the potential for slower emissions increases or continued clean-energy growth.

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.

Slowest growth since 2001

India’s CO2 emissions have been growing rapidly for decades, with annual increases averaging 4.9% per year since 1990 and 4-11% during 2021-24.

However, the recent pace of growth has been slowing down, as shown in the figure below. The 0.7% rise in 2025 was the slowest since 2001, excluding the impact of Covid in 2020.

Beneath the overall rise of just 0.7% in 2025, there were divergent trends in India’s key emitting sectors, with some seeing rapid rises in CO2 and others in historic decline.

This is shown in the figure below, which compares year-on-year changes in emissions during the first and second half of 2025 with the average for 2021-23.

Specifically, emissions fell by 3.8% year-on-year in the power sector, after the first drop in coal-power generation – outside Covid – since 1973. Oil products were more or less flat.

The small increase in 2025 overall was the result of strong growth from steel and cement.

Over the next five years, ICRA forecasts annual average demand growth of 6.0 to 6.5%

Yet, India is also targeting 500GW non-fossil power generation capacity by the financial year 2029-2030. If achieved, this target would increase non-fossil power generation by enough to cover electricity demand growth of 6.6%, without needing to increase fossil-fuel generation, based on the Central Electricity Authority’s projected power generation.

If the actual growth rate for power demand is lower than this and if the non-fossil capacity target is still reached, then fossil-power generation – and the associated CO2 emissions – would fall in absolute terms from 2025 to financial year 2029-2030.

Battery energy storage is also increasingly affordable and will reduce the need for thermal power capacity in the system.

Oil slows on falling industrial demand

For oil demand, which slowed from 3.9% growth in 2024 to 0.4% 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% in volume terms, while exports fell.

The writer of this article is Dr. Seema Javed, an environmentalist & a communications professional in the field of climate and energy