Pushing businesses towards sustainable energy use
Bangladesh, a nation with a rapidly growing economy and a thriving garment export sector, is facing a critical juncture in its energy policy. Our increasing reliance on imported fossil fuels—petroleum, coal, and liquefied natural gas (LNG)—for electricity production and primary energy consumption is creating significant economic challenges.
These challenges threaten the stability of our finances, placing additional strain on the country's balance of payments and foreign currency reserves, and impact our ability to remain competitive in the global market, particularly in the garment sector, which is a vital contributor to the nation's economy. Importing large volumes of fossil fuels exacerbates these financial pressures, driving up energy costs for consumers and businesses alike.
Fossil fuels are a concern for the export-driven ready-made garment (RMG) sector too because global fashion brands, which source much of their apparel from Bangladesh, are increasingly demanding that their suppliers reduce carbon emissions across the supply chain. If Bangladesh fails to 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 towards energy efficiency and the integration of renewable energy sources. Doing so will not only reduce our reliance on expensive fossil fuel imports but also help lower emissions, improve energy security, and enhance the competitiveness of the RMG sector in an environmentally conscious marketplace.
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 enhancing energy efficiency. Five policy recommendations critical to this transition are discussed below.
One of the key barriers to energy efficiency upgrades is the high equipment cost. To encourage businesses to adopt energy-saving technologies, the government should reduce duties 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. Also, it should be considered whether the current tax rate for solar panels and solar equipment can be reduced to zero.
Bangladesh should shift its focus towards energy efficiency and the integration of renewable energy sources. Doing so will not only reduce our reliance on expensive fossil fuel imports but also help lower emissions, improve energy security, and enhance the competitiveness of the RMG sector in an environmentally conscious marketplace.
Tax breaks for companies that implement energy efficiency projects can further incentivise businesses. This could be achieved through accelerated capital allowances, which would allow businesses to deduct the cost of energy efficiency upgrades 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, facilities within the Bangladesh Export Processing Zones Authority (BEPZA) are currently unable to take advantage of net metering, making it difficult for them to justify investing in renewable energy. Net metering in these zones would help companies also contribute to the country's renewable energy capacity. Additionally, prohibiting the shutdown of solar systems on weekends and holidays would prevent the waste of freely generated electricity.
Access to financing is a major obstacle for businesses seeking to invest in energy efficiency and renewable energy projects. While some financing options exist, they are often difficult to access due to high interest rates and complicated application processes. The government should work with development financial institutions (DFIs) and other partners to create more accessible and affordable financing options. This could include low-interest loans and guarantees for specific risks such as currency fluctuations and credit defaults, which would encourage more businesses to invest in clean energy.
A comprehensive revision of the IEPMP is essential to ensure that Bangladesh can rapidly increase its renewable energy capacity. The government should set ambitious targets for renewable energy integration and develop clear implementation strategies to achieve these goals. One way to fast-track renewable energy adoption is through Corporate Power Purchase Agreements (CPPAs), which would allow businesses to enter into long-term agreements to purchase 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 secure a bright economic future, reduce our carbon footprint, and maintain our competitive edge in the global RMG market. The time to act is now, and the benefits of transitioning 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).
Views expressed in this article are the author's own.
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