Bangladesh’s Leap Towards Green Energy: A Call for Financial Mobilization and Policy Reform

As Bangladesh strides into the fiscal year 2024-25, the spotlight turns towards the nation’s commitment to battling climate change through a significant transition to renewable energy sources. With the globe grappling with environmental crises, the newly elected government faces the monumental task of fostering a sustainable and green energy landscape. In anticipation, the Centre for Policy Dialogue (CPD) has outlined a series of fiscal and budgetary recommendations aimed at galvanizing Bangladesh’s clean energy sector.

Amid concerns over the underfunding of renewable energy projects, the CPD’s proposals highlight the urgent need for enhanced budget allocations and an increase in renewable energy initiatives. Despite ambitious national goals set for 2041, renewable energy projects have received a meager 2.47 percent of the Annual Development Programme (ADP) allocation for FY2023-24, significantly undermining the country’s clean energy aspirations. The CPD calls for the government to prioritize renewable energy in its budget, specifically focusing on solar photovoltaic power plants and coastal transmission system upgrades.

Tax incentives emerge as a critical lever for stimulating green energy investments. The current tax regime disproportionately favors fossil fuel ventures, creating financial barriers to the adoption of renewable technologies. By extending tax holidays for renewable projects and reducing duties on solar power-related accessories, the government can create a fertile ground for sustainable energy solutions.

Addressing the automotive sector, the CPD suggests a strategic revision of duty structures to discourage the import of reconditioned Internal Combustion Engine (ICE) vehicles, favoring instead hybrid and electric vehicles (EVs). This move not only aligns with global trends towards cleaner transportation options but also addresses local concerns over air quality and energy efficiency.

The EV market, in particular, faces challenges from a tax system that inadvertently hampers affordability and widespread adoption. A reassessment of the annual tax structure for EVs and a substantial reduction in the total tax incidence (TTI) for EV imports are recommended to make electric mobility a viable option for the Bangladeshi populace.

In the realm of agriculture, the CPD emphasizes the transformative potential of solar irrigation pumps (SIPs), advocating for a unified tax strategy to reduce the TTI and encourage their adoption. This strategy not only promises to lower operational costs for farmers but also contributes to the national clean energy quota.

Moreover, the textile sector, a cornerstone of Bangladesh’s economy, stands to benefit immensely from the adoption of rooftop solar systems. However, prohibitive import duties and taxes on solar products stifle growth in this area. The CPD urges the government to reassess these duties, thereby unlocking the potential for substantial fiscal savings and contributing to the nation’s energy independence.

As Bangladesh prepares its budget for the upcoming fiscal year, the CPD’s recommendations present a roadmap for accelerating the transition to a green economy. The government’s proactive engagement in clean energy financing and policy reform could indeed mark a new chapter in Bangladesh’s journey towards sustainable development and climate resilience. The eyes of the nation and the world are on the policymakers, waiting to see if they will rise to the challenge and embrace the green future that Bangladesh aspires to.