The Coal Paradox: Declining Output vs. Expanding Capacity in China and India

The global energy transition has long been framed as a zero-sum game: renewables rise, coal falls. Yet in China and India, two of the world's largest economies, a paradox is unfolding. While coal output has stabilized or even declined in recent years, new coal-fired power capacity continues to surge. In the first half of 2025 alone, these two nations accounted for 87% of global coal-power additions, with China approving nearly 100 GW of new coal plants in 2024 and India adding 15 GW. This divergence between output and capacity raises critical questions for investors navigating the intersection of energy security, infrastructure development, and climate goals.

Energy Demand and the Dual-Track Strategy

China and India's coal paradox stems from their dual-track energy strategy, where coal remains a cornerstone of economic growth while renewables are positioned as a long-term complement. For China, coal still supplied 54% of electricity generation in 2024, despite a surge in clean energy investments totaling $625 billion that year- far outpacing Europe, North America, and the rest of the Asia-Pacific combined. Similarly, India added 28 GW of wind and solar capacity in 2025, a 50% increase from the prior year, yet coal remains central to its energy mix.

This duality reflects a pragmatic calculus: coal provides reliable baseload power and energy security, while renewables address climate commitments and long-term cost efficiency. China's rapid expansion of lithium-ion battery storage-now surpassing pumped hydro as its largest storage source-illustrates how the country is hedging its bets, integrating renewables while maintaining coal's dominance. India's 2025 target of 200 GW of new renewable capacity, already exceeded by H1 2025, underscores a similar trajectory.

Infrastructure Investments: Bridging the Gap

Infrastructure spending is the linchpin of this paradox. China's Belt and Road Initiative (BRI) exemplifies this duality. In H1 2025, BRI energy investments hit $42 billion, with $30 billion allocated to oil and gas projects and $9.7 billion to renewables. While coal-related infrastructure still receives support, the BRI's shift toward renewables-such as 11.9 GW of green energy projects in 2025-signals a strategic pivot. For investors, this highlights the importance of infrastructure as a bridge between fossil fuels and renewables, with grid modernization and storage technologies playing pivotal roles.

India's infrastructure push is equally significant. By 2025, the country had streamlined permitting for pumped-storage hydropower and set record auction capacities for solar and wind. These developments align with global trends: the International Energy Agency (IEA) notes that electricity system investments, including grid upgrades and storage, are critical for integrating variable renewables.

Implications for Investors

For infrastructure and energy transition investors, the coal paradox presents both risks and opportunities. On one hand, coal-dependent economies face stranded asset risks as global markets decarbonize. On the other, the scale of China and India's investments-$625 billion in clean energy for China alone in 2024-offers vast opportunities in solar PV, wind, and energy storage.

The BRI's evolving focus on renewables also signals a shift in global capital flows. Private-sector entities like Longi Green Energy and Xinfa Group are now leading BRI investments, with Africa and Central Asia as key recipients. Investors must weigh short-term reliance on coal against long-term bets on renewables, particularly in markets where policy frameworks explicitly support both tracks.

Conclusion

The coal paradox in China and India is not a contradiction but a reflection of their unique developmental priorities. While global climate goals demand a phaseout of coal, these nations are prioritizing energy security and economic growth, using renewables as a supplement rather than a replacement. For investors, the path forward lies in strategic infrastructure investments that align with both immediate energy needs and long-term decarbonization. As the IEA notes, "The energy transition is not just about replacing fuels-it's about reimagining systems." In China and India, that reimagination is already underway.