| Abstract: |
Resource-rich Indian states must decarbonise the very fiscal base that finances them. Between 2010-11 and 202425 India priced coal carbon through a statutory cess that reached Rs 400 per tonne [20], yet only about a third of the Rs 86,440 crore it generated ever entered the ring-fenced clean-energy fund, and on 22 September 2025 the levy was abolished outright. This paper asks whether a redesigned sub-national carbon price, coupled to a legally enforced recycling rule, can convert that fiscal cliff into a just transition. Build a balanced panel of five mining-dependent or coal-intensive states Chhattisgarh, Jharkhand, Odisha, Madhya Pradesh and West Bengal - over twenty-one financial years, and estimate how the recycling coefficient (beta, the share of mineral-linked receipts spent inside producing districts) and the effective carbon price jointly determine a composite Green Transition Difficulty Index. A -0.155 (p = 0.022) elasticity of difficulty to recycling, with a significantly negative interaction with the price term, implies that revenue capture, not price level, is the binding constraint: the price elasticity of difficulty runs from +0.456 at the weakest recycling rate to -0.064 at the strongest. Unmet district financing explains a quarter of the index variance. Simulating four institutional designs to 2035-36 shows that a Rs 1,200-per-tonne sub-national levy with an 85 per cent district earmark recycles Rs 88,498 crore annually, cuts difficulty by 47 per cent and closes two-fifths of the financing gap, whereas a centrally pooled levy raises difficulty by 7.7 per cent. Fiscal architecture, not tax rate, decides the distributional consequences of India's coal exit. |
