To reduce dependence on fossil fuels and steer Bangladesh toward environmentally friendly energy solutions, experts argue that government policies must undergo significant reform.
Key recommendations include abolishing high tariffs on renewable energy equipment, introducing efficiency-based subsidies, and offering financial incentives to encourage private sector investment in energy efficiency.
These insights were shared at a national-level dialogue titled "Exploring a Sustainable Pathway for Bangladesh's Energy Transformation Towards Green and Clean Energy", organised by the South Asian Network on Economic Modeling (SANEM) at the BRAC Center in Dhaka on Saturday, November 23.
The event presented findings from three in-depth studies that highlighted critical policy shifts needed to foster a sustainable energy future for Bangladesh.
Macro impact of fossil fuel price fluctuations
The first study, "Macroeconomic Impact of Fuel Price Fluctuations: Bangladesh Context," explored how global fossil fuel price changes affect Bangladesh’s economy. It found that fluctuations in coal and LNG prices significantly impact the Consumer Price Index (CPI), with both driving inflation. The study also identified the volatility of energy prices as a key factor influencing macroeconomic instability during crises, such as the 2008 financial crash, the 2020 COVID-19 pandemic, and the ongoing Russia-Ukraine war.
The findings stressed the need for long-term policy adjustments, including transitioning to renewable energy sources, to mitigate these fluctuations and ensure economic stability.
Barriers to renewable energy in Bangladesh
The second study, "Evaluation of the Institutional Quality and Political Economy Dynamics of the Power and Energy Sector in the Context of Renewable Energy Transformation in Bangladesh," examined the institutional challenges hindering the country's renewable energy shift. The report revealed that weak coordination among government agencies and a lack of policy coherence have stymied effective long-term planning. The Sustainable and Renewable Energy Development Authority (SREDA) holds limited authority, while state-run entities like the Bangladesh Power Development Board (BPDB) dominate decision-making processes, restricting private sector involvement.
The study also pointed out that substantial subsidies—predominantly benefiting fossil fuel sectors—further complicate the transition. In 2025, 80% of the energy sector subsidy (approximately Tk 32,000 crore) is expected to be allocated to capacity charges, entrenching vested interests in coal, gas, and nuclear power technologies.
Survey data revealed that 38.2% of participants felt Bangladesh’s current renewable energy policies were ineffective. Despite this, many expressed optimism about the sector’s potential to create jobs, especially through solar-powered irrigation in rural areas. However, concerns about infrastructure and private investment barriers remained significant.
Investment strategies for a green future
The third study, "Assessment of Investment Needs for the Transition to Renewable Energy in Bangladesh by 2041," outlined the significant financial investments required to meet Bangladesh’s renewable energy goals. With current renewable capacity at just 4.16% of total electricity generation, the country needs to ramp up efforts to meet future targets.
Public-private partnerships, green bonds, and financing from international bodies like the World Bank and Asian Development Bank are essential to mobilise the required capital. Additionally, a specialized renewable energy fund combining grants, loans, and equity could support small and medium-sized projects, while tax incentives and risk guarantees would attract further private investment.
The path forward
To build a sustainable energy future, experts emphasized the importance of strategic investments, policy reforms, and the elimination of barriers to private sector involvement. Achieving Bangladesh’s 2041 renewable energy target will require overcoming challenges such as land scarcity and infrastructure readiness. However, with the right policy environment and financial backing, Bangladesh can unlock a green and prosperous future, combining economic growth with environmental sustainability.