Energy Policy, Governance and Pricing to Combat Global Warming

Mowshumi Sharmin

19th April, 2019 11:18:51 printer

Energy Policy, Governance and Pricing to Combat Global Warming

Recent abrupt natural disaster spurred from global warming is a universal phenomenon. Since the last few decades there has been growing concern regarding economic growth encouraged by energy consumption and its multifaceted consequences. The International Energy Agency postulates that for doubling the world GDP by 2040 we would need only a small rise in energy demand provided everyone espouse rigid standards for vehicle-fuel efficiency similar to Japan.

As Bangladesh is one of the world’s most densely populated countries inhabited by a population of around 162 million, undergoing rapid urbanisation, it should be cautious in pursuing stipulated energy standard. Rapid urbanisation due to continuous economic development put pressures on substantial demand of energy as it plays a pivotal role in poverty eradication, economic growth, sustainable infrastructure development and security of any country. Bangladesh is no exception to that.

There are numerous alternatives for energy policy reform for sustainable energy usage. It is imperative to comprehend the vast human and economic potential of this country with a more balanced concern of political and economic criteria as most of the eye-catching energy options are the cause of higher carbon emissions. Hence, the composition of energy usage and technological innovation should be carefully chosen for preservation of environment where energy policy, governance and pricing play deciding role.

A published study conducted by Bangladesh Institute of Governance and Management (BIGM) on “Econometric Analysis of the Effect of Economic Globalisation, Energy Intensity, Urbanisation, Industrialisation and Growth on CO2 Emissions of Bangladesh” employing techniques of Johansen co-integration, Vector Error-Correction Models (VECM), VEC Granger Causality/Block Exogeneity Wald Tests and variance decomposition (VDC) found growth stimulate energy consumption and consequently causes CO2 emissions. VDC result postulates that in the long-run, energy intensity, urbanisation, industrialisation and growth contribute more than 60 per cent of the CO2 emission in Bangladesh. Effect of economic globalisation becomes stronger in the long-run but in explaining fluctuations in CO2 emissions it contributes only 9 per cent.

Energy from natural sources is subject to depletion. It is apprehended that higher energy efficiency means less fossil fuel burning. For sustainable, clean and affordable energy as a part of the SDGs, the country might consider viable energy options that will contribute not only to its macroeconomic indicators but also establish harmony with the ecosystem reducing CO2 emissions which consequently lead to global warming.

Emerging economies like Bangladesh are on the trajectory of increasing growth with maximum power demand which has always been growing over the past couple of years. The quality of electricity generation cannot be optimised due to plethora of disparities i.e. the shortage of production, unsatisfactory capability and low quality of transmission and supply, rendering towards a system loss.

On an average around 77.9 per cent of the population have access to electricity which is the most extensively used form of energy consumption. Total capacity of electricity was around 15,351 megawatts (MW) in 2017 and 20,000 megawatts in 2018 where public financing was 46 per cent and government financing was 56 per cent as of in 2018. The country will need an estimated 34,000 MW of power by 2030 to sustain its economic growth of over 7 per cent.

For uninterrupted supply of any energy apposite pricing is indispensable. Nevertheless, the higher the energy price the greater the living cost, which is also imperative to keep in mind in a country context like Bangladesh. To trim down the loss of BPDB’s electricity production cost, the electricity tariff rate has recently been increased from BDT 2.50 in 2007 to BDT 3.8 in 2015.

In order to support the poor, government endows with subvention in the energy sector. Government provides two types of electricity subsidies: one is for the fuel to reduce electricity generation cost and the other is through giving electricity tariffs that are lower than production costs. BPDB’s initiative to establish new power plants and to procure electricity from autonomous power manufacturer to meet the growing demand of electricity is the cause of increase in the cost of electricity production.

Furthermore, Bangladesh is one of the lowest per capita energy consumption economies in the world and producing more with less energy consumption compared to other higher income countries foretelling the country’s potential to be energy efficient. In this respect energy policies of the country indeed play a vital role.

The key policies in the energy sector are: Fuel Diversification, Private Sector Participation, Harnessing Renewable Energy Resources, Energy Efficiency & Conservation (EE&C), Tariff Rationalisation and Regional Co-operation on Cross Border Power Trade etc. Ministry of Power, Energy and Mineral Resource and Bangladesh Power Development Board are responsible for policy setting.

 The GoB has also initiated slabs in energy pricing to reduce the subsidies for the high end customers. Occasionally, the social, environmental and physical cost is eluded from the existing systems. To recapitulate, the country is trying to follow ‘Private Sector Power Generation Policy’ to catch the attention of private venture for cinching competitive price for energy production projects. For greener Bangladesh an all-inclusive energy strategy is intended for exploiting renewable energy keeping the cost of solar projects to a minimum. At the advent of recent climate change experience, a cautious step for proper governance in production, transmission and supply of energy with suitable training of the present manpower, considering the current and upcoming need of the economy is expected.


The writer is an Assistant Director (Research), Bangladesh Institute of Governance and Management (BIGM), Dhaka.

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