Bangladesh, a nation with a fast-growing economy and a thriving garment export sector, is facing a critical juncture in its energy policy. Our growing dependence on imported fossil fuels—oil, coal, and liquefied natural gas (LNG)—for electricity production and primary energy consumption creates significant economic challenges.

These challenges threaten the stability of our finances, putting additional pressure on the country’s balance of payments and foreign exchange reserves, and affecting our ability to remain competitive in the global market, particularly in the garment sector, which is a key contributor to the nation’s economy. . Importing large volumes of fossil fuels exacerbates these financial pressures, driving up energy costs for both consumers and businesses.

Fossil fuels are also a concern for the export-oriented ready-made garment (RMG) sector, as global fashion brands, which source much of their garments from Bangladesh, are increasingly demanding that their suppliers reduce emissions of carbon throughout the supply chain. If Bangladesh does not act, we risk losing our competitive edge in the global market, where sustainability is becoming a non-negotiable criterion.

To address these challenges, Bangladesh should shift its focus to energy efficiency and integration of renewable energy sources. Doing so will not only reduce our dependence on costly fossil fuel imports, but also help reduce emissions, improve energy security and increase the competitiveness of the RMG sector in an environmentally conscious market.

Interestingly, speakers at the recent Bangladesh Climate Action Forum 2024 discussed policy interventions that can help address these challenges and ensure a sustainable future by promoting renewable energy and improving energy efficiency. Five key policy recommendations for this transition are discussed below.

One of the key barriers to improving energy efficiency is the high cost of equipment. To encourage companies to adopt energy-saving technologies, the government should reduce taxes on specific equipment such as high-efficiency (IE4 or IE5) fans and motors, steam system accessories and solar system components. Businesses will be more likely to invest in upgrades that reduce their overall energy consumption if the upfront costs of energy-efficient technologies are reduced. Consideration should also be given to whether the current tax rate for solar panels and solar equipment can be reduced to zero.

Bangladesh should shift its focus to energy efficiency and integration of renewable energy sources. Doing so will not only reduce our dependence on costly fossil fuel imports, but also help reduce emissions, improve energy security and increase the competitiveness of the RMG sector in an environmentally conscious market.

Tax breaks for companies implementing energy efficiency projects can further stimulate business. This could be achieved through accelerated capital allowances, which would allow businesses to deduct the cost of energy efficiency improvements more quickly.

Net metering allows businesses that generate their own renewable energy, such as solar power, to sell excess electricity back to the grid. However, Bangladesh Export Processing Zones Authority (BEPZA) facilities cannot currently benefit from net metering, making it difficult for them to justify investment in renewable energy. Net metering in these areas would help companies contribute to the country’s renewable energy capacity as well. In addition, banning the shutdown of solar systems on weekends and holidays would prevent the waste of freely produced electricity.

Access to finance is a major obstacle for businesses looking to invest in energy efficiency and renewable energy projects. Although there are some financing options, they are often difficult to access due to high interest rates and complicated application processes. The government should work with development finance institutions (DFIs) and other partners to create more affordable and accessible financing options. This could include low-interest loans and guarantees for specific risks, such as currency fluctuations and loan defaults, which would encourage more businesses to invest in clean energy.

A comprehensive review of the IEPMP is essential to ensure that Bangladesh can rapidly increase its renewable energy capacity. The government should set ambitious targets for the integration of renewable energy and develop clear implementation strategies to achieve these targets. One way to accelerate the adoption of renewable energy is through Corporate Power Purchase Agreements (CPPA), which would allow businesses to enter into long-term agreements to buy renewable energy directly from producers. This would create a stable market for renewable energy and encourage further investment in the sector.

Bangladesh is at a critical crossroads in its energy policy. By implementing the proposed policy interventions, we can ensure a bright economic future, reduce our carbon footprint and maintain our competitive advantage in the global RMG market. Now is the time to act, and the benefits of the transition to a more sustainable energy system will be felt for generations to come.

Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE).

The opinions expressed in this article are those of the author.

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