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Toward Sustainable Energy Development in Bangladesh Sk Noim Uddin and Ros Taplin The Journal of Environment Development 2008; 17; 292 DOI: 10.1177/1070496508323093

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Downloaded from http://jed.sagepub.com at CNTR SCI AND ENVIRONMENT on September 15, 2008 The Journal of Environment & Development Volume 17 Number 3 September 2008 292-315 © 2008 Sage Publications Toward Sustainable Energy 10.1177/1070496508323093 http://jed.sagepub.com Development in Bangladesh hosted at http://online.sagepub.com Sk Noim Uddin Ros Taplin Macquarie University

Bangladesh is one of the most electricity deprived nations in the world. Despite large potential for renewable energy sources in Bangladesh, currently their contribution to the electricity supply remains insignificant. Use of renewable energy is considered an indispensable component of sustainable energy systems, as renewables emit less greenhouse gas emissions compared to fossil fuel energy systems. However, to advance such sustainable energy systems, appropriate strategies and institutional settings need to be put in place for all nations. To address this, this article examines Bangladesh’s current energy strategies and institutional settings and investigates future strategies for the advancement of renewables. This article argues that further significant efforts could be made toward energy sustainability in Bangladesh and the development for a national sustainable energy strategy. Among other future strategies, implementation of the Clean Development Mechanism under the Kyoto Protocol could assist in facilitation of energy sustainability for Bangladesh.

Keywords: Bangladesh; sustainable energy; Clean Development Mechanism

nergy is a prerequisite for economic growth and social development. However, Eenergy security as well as economic stability (annual growth of GDP = 6.2%; World Bank [WB], 2006) in Bangladesh are threatened by spiralling population growth, scarcity of fossil fuel resources, high frequency of climatic events, and decision-making processes that often lack transparency.1 These factors have had significant impacts on the nation’s entire energy infrastructure and its current unprece- dented energy demand. Arguably, there is a huge potential for development of renewable energy sources in Bangladesh that could possibly meet this demand and assist sustainable development.2

Authors’ Note: Sk Noim Uddin gratefully acknowledges the Centre for Energy Environment Resources Development in Thailand for its facilitation of his field research administration, information, and research visits in South and Southeast Asian nations. The authors gratefully acknowledge Dr. Xiaojiang Yu, Hong Kong Baptist University, for his valuable and helpful comments on an earlier draft of the article. Sk Noim Uddin acknowledges Dr. M. Eusuf and Dr. A. Rahman of Bangladesh Centre for Advance Studies and Mr. Wim van Nes of the Netherlands Development Organization for their kind assistance in provision of information to him for this project. Financial support from Macquarie University has allowed the project to go ahead. The usual disclaimer applies.

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Sustainable energy systems typically involve the use of renewables, improvement of energy efficiency, and enhanced energy security (Lund, 2006). Renewables, which are the main focus of this article, emit considerably less emissions compared to fossil energy systems.3 However, to advance such sustainable energy systems, appropriate strategies and institutional settings need to be in place for both industrialized and developing nations such as Bangladesh (Kinrade, 2007; Uddin, Taplin, & Yu, 2006). Among potential strategies, the Clean Development Mechanism (CDM),4 under the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC; United Nations, 2002), appears to be an effective means toward sustainable development (Kim, 2004). CDM is seen as an example of an internationally defined mechanism that provides a platform for the creation of a wide array of partnerships, including potential for the advancement of renewables (Streck, 2004). Although investment in renewable energy and energy efficiency projects was roughly triple the official development assistance support for energy policy and renewable energy projects during 2006 in many developing nations (Clemencon, 2008), Bangladesh significantly lacks mobilizing investments, particularly in the advancement of renewables under the CDM scheme. This article has been developed on the basis of research examining the nation’s current energy strategy and institutional settings and addressing trends in sustainable energy development.

Materials and Method

The energy, economic, environmental, and social statistics quoted in this article are the most recent publicly available data. Data-gathering field trips were carried out in Bangladesh during the first quarters of 2006 and 2007. Unfortunately, in some cases the only data available at the time of the research were from the late 1990s because more recent information had not been publicly released. To ensure authenticity of data, we adopted methods involving desktop assessment of literature and case studies, together with data-gathering field trips involving interaction with key agencies and international organizations active in Bangladesh’s energy sector. A systematic assessment of docu- mentary evidence via a systems approach and key actors approach was performed regarding strategies linked to sustainable energy development in Bangladesh. However, because of a lack of reliable and comparable data, some sustainable energy issues have not been examined in depth. Nevertheless, we believe that the assessment presented is quite representative and provides a general indication of the magnitude of the task fac- ing Bangladesh if a sustainable energy future is to be pursued and achieved.

Goal, Scope, and Framework

To design effective strategies to move toward energy sustainability in Bangladesh, a comprehensive understanding of the nation’s current energy situation and associated

Downloaded from http://jed.sagepub.com at CNTR SCI AND ENVIRONMENT on September 15, 2008 294 The Journal of Environment & Development environmental concerns is important. In this regard, this article first reviews Bangladesh’s current energy situation and analyzes the status of and potential for sustainable energy development and environmental concerns. It then provides overviews of energy strategies and energy institutions that govern the nation’s energy sector. Among other strategic approaches toward energy sustainability in Bangladesh, consideration is given to the advancement of renewable energy projects under the CDM of the Kyoto Protocol. The final part of the article examines issues associated with development and implementation of sustainable energy strategies for Bangladesh. The article concludes with recommendations for sustainable energy development in Bangladesh.

Current Energy Situation in Bangladesh

The critical issues related to current energy situation in Bangladesh include fossil energy reserves, investment and revenue conditions in relation to the electricity sector development, the status of energy or electricity accessibility, the current electricity crisis, and the status of and potential for renewables, which are further discussed below.

Fossil Fuel Reserves Natural gas reserves in Bangladesh have been estimated to be around 424 to 909 Gm3 (Kumaraswamy & Datta, 2006). This resource provides more than two thirds of the nation’s commercial supply of current fossil fuel demand (production of natural gas was 11 Gm3 in 2002) (Energy Information Administration [EIA], 2005). According to recent estimates, electricity production will alone consume 50% of the total gas produced by 2010 (Nexant, 2006). The sector-wise projected gas demand for 2008 to 2010 is given in Table 1. In addition, Bangladesh has more than 2 billion tons of low-sulphur-content coal reserves (Economist Intelligence Unit [EIU], 2005). The economic potential for these reserves is yet to be confirmed. The current status of the coal fields is given in Table 2. Development of only the Phulbari coal field (in the northeastern part of Bangladesh) has been started. Even though Bangladesh has reserves of these coal and hydrocarbon resources, efficient use of these resources is limited because of a lack of exploitation and distribution facilities. Also, although the proven oil reserves are estimated to be 56.9 million barrels, Bangladesh meets more than 90% of its oil demand through imports (Kumaraswamy & Datta, 2006). Out of the 3.6 GW of electricity generated annually, 94% comes from thermal (natural gas and oil fired) and the remainder from large-scale hydropower (EIA, 2005). The 2005 energy balances

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Table 1 Projected Maximum Gas Demand (Million m3 per Day)

Sector 2008 2009 2010

Electricity 25 28 28 Fertilizer 8 8 8 Others 22 25 25 Total 55 61 61

Source: Nexant (2006).

Table 2 Coal Reserves in Bangladesh

Year of Proven Reserves Location of Field Discovery Drilled Wells Depth (m) (Million Tons)

Barapukuria 1985 to 1987 31 118 to 509 390 Khalaspir 1989 to 1990 4 257 to 483 685 Phulbari 1997 1 150 to 240 386 Jamalgonj 1962 10 640 to 1,158 1,053 Dighipara 1994 to 1995 3 328 to 407 —a

Source: Nexant (2006). a. Not yet estimated.

for Bangladesh according to International Energy Agency (IEA) statistics are given in Table 3 (IEA, 2005). The security of the energy supply is threatened in Bangladesh because of a number of reasons, including lack of fossil fuel resources, high dependence on imported transportation fuels, and insufficient energy infrastructure (energy exploitation and distribution, energy institutions). Further discussion is limited to the electricity sector.

Investment in the Electricity Sector and Revenue The energy sector—especially the electricity sector—has been developed through donor funding since the early 1980s. Although a large share of total public investment (on average, 20% of funding—mostly from donor agencies or organizations under bilateral or multilateral cooperation) has been allocated for the development of Bangladesh’s energy sector (R. Islam, Islam, & Beg, 2006), poor progress has been made in the electricity sector. This has been because of a lack of national interest and the gradual shrinking of support from donor agencies, for example, from the

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Table 3 2005 Energy Balances for Bangladesh in Kilotons of Oil Equivalent

Petroleum Combustible Coal Crude Oil Products Gas Hydro Renewables and Wastes

Supply Production 0 98 0 10,806 111 8,296 Imports 350 1,070 3,428 0 0 0 Consumption Electricity plants 0 0 534 4,682 111 0 Petroleum refineries 0 0 1,418 0 0 0 Industry 350 0 234 1,526 0 0 Transport 0 0 1,759 0 0 0 Residential 0 0 758 1,616 0 8,296 Other sectors 0 0 2,199 2,123 0 0

Source: IEA (2005).

WB in the late 1990s (I. Hossain & Tanim, 2005). As a result, the national government has not been able to cope with a sharply growing demand for energy either in quantity of energy provided or in quality of energy services. Although the need for investment in the energy sector, especially the electricity sector, is one great challenge faced by the government, other important issues such as system losses and unpaid-for electricity are also major concerns.5 For example, only about 55% to 60% of the electricity generated was paid for in 2004 (EIU, 2005), and system losses of generated electricity were as high as 30% (EIU, 2005). The reasons that electricity is not paid for include inability or unwillingness of the customers to pay, electricity theft, and mismanagement and petty corruption surrounding electricity markets (S. Alam, Kabir, Rahman, & Chowdhury, 2004; Lovei & McKechnie, 2000).

Status of Electricity Accessibility In 2002, about 26% of the total population of Bangladesh had access to electricity, and electricity consumption was only 96 kWh per capita per annum for all sectors (Global Network on Energy for Sustainable Development [GNESD], 2004). Also, access to the electricity network was limited to only about 30% of total house- holds nationwide (Sarkar, Ehsan, & Islam, 2003). Currently, electricity coverage to low-load areas in rural and remote regions of Bangladesh is poor and, where available, is characterized by high transmission and distribution costs, transmission losses, and heavily subsidized pricing (A. Hossain & Badr, 2006). However, the demand for electricity in urbanized regions has increased at an escalating rate in recent years. This rapid increase in electricity consumption has been because of industrialization and population growth (WB, 2005).

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Current Electricity Crisis in Bangladesh Supply of electricity is frequently interrupted in the urban areas of Bangladesh. The current electricity crisis is because of the low electricity-generation capacity available compared with the high electricity demand and resultant allocation of electricity supply by load shedding (Bhattacharya, 2006).6 The low electricity generation from existing power plants is because of the poor efficiency of aging power plants, a lack of routine maintenance, and unplanned shutdowns because of overloading. Electricity accessibility is also affected from time to time in rural, remote, and coastal areas by extreme climatic events. Thus, reducing losses of existing electricity transmission and distribution as well as extending the electricity network would assist in facilitating electricity accessibility.

Status of and Potential for Sustainable Energy Application This section discusses the current application of, and potential for, renewable energy systems in Bangladesh. Experience and learning from renewable energy applications to date are also highlighted. This section also discusses the status of CDM in Bangladesh.

Application status of renewable energy technologies. Application of renewable energy in Bangladesh is not new, but renewable electricity generation has, in most cases, been confined to the demonstration stage. Current renewable energy technologies include, but are not limited to, solar photovoltaics (PV) as solar home systems (SHSs);7 solar cookers, dryers, water heaters, and tunnel dryers for crops; biogas; biomass briquetting machines; and improved cooking stoves.8 The first solar PV and largest installation to date was a 62 kW system in the Narshingdi district. The early experience from this demonstration project indicated potential for further applications. However, the operation of this facility has been unsatisfactory because of inadequate maintenance systems and insufficient enforcement of customer pay- ments (Biswas, Diesendorf, & Bryce, 2004). However, currently 800 kW of solar PV applications and more than 45,000 SHSs are operating in Bangladesh (Infrastructure Development Company Limited [IDCOL], 2005; Sarkar et al., 2003). Other renewable energy applications include 19,500 biogas plants in 2004 (S. Islam, Islam, & Rahman, 2006), 100,000 improved cook stoves (S. Islam et al., 2006), and 60 biomass briquetting machines (S. Islam et al., 2006). Renewable energy applications such as solar cookers, water heaters, and tunnel dryers for crops are still at the research, development, and demonstration stages in Bangladesh.

Potential for advancement of renewables. Bangladesh has considerable potential for using renewable energy sources including biomass, solar PV, wind, and, to a limited extent, small hydropower (S. Islam et al., 2006; Sarkar et al., 2003; Uddin,

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2001).9 Biomass accounted for nearly 50% of the total energy supply in 2004 (I. Hossain & Tanim, 2005) and supplied 98% of total renewable energy (IEA, Organisation for Economic Co-operation and Development, 2004).10 Also, initiatives involving the installation of SHSs are flourishing compared to other renewable energy technologies, such as improved cooking stoves and biomass briquetting (Siddiqui, 2003). This is largely because of the initial initiative of the microcredit program of Grameen Shakti (Timilsina, Lefevre, & Uddin, 2001) and recent initiatives of the IDCOL to promote SHSs under the Rural Electrification and Renewable Energy Development Project (REREDP; IDCOL, 2005).11 IDCOL’s solar energy program is one of the fastest-growing renewable energy programs in the world, as it installed 50,000 SHSs in the period of 2003 to 2005, which was much faster than the expected completion date of 2008. IDCOL expects to finance an additional 200,000 SHSs by 2009 under the same program (IDCOL, 2005). Also, under the National Program of Domestic Biogas, IDCOL expects to install 60,000 domestic size biogas plants from 2006 to 2010 (IDCOL, 2005). These initiatives are expected to change the living standards in remote, rural locations of Bangladesh through providing access to clean energy for cooking and green electricity for lighting purposes (Uddin et al., 2006).

Experience of renewable energy applications to date. Interventions from government institutions, donor organizations, and the private sector have facilitated the dissemination of renewable energy technologies on the ground in Bangladesh since the early 1980s. Beside IDCOL’s initiatives, a number of pilot programs have been initiated to implement solar PV, SHSs, biogas technology, and improved cooking stoves, mostly under government–donor partnerships (IDCOL, 2005; Sarkar et al., 2003; Siddiqui, 2003; Uddin et al., 2006). Unfortunately, most of these initiatives have not continued after the completion of pilot schemes. As such, there has been mixed success with certain projects, which appears to often be because of a lack of local stakeholder interest and effective engagement of such interests when it does exist (Biswas, Bryce, & Diesendorf, 2001).12 However, since the late 1990s some steps have been taken to integrate local communities and other stakeholders in decision-making processes to address this problem. Local business entrepreneurs and members of local communities of both genders have been encouraged to actively participate in these programs. For example, as mentioned earlier, IDCOL’s National Program on Domestic Biogas is focusing on the engagement of multiple stakeholders (Ghimire, 2005), and the manufacturing of battery-operated lamps by rural women has been initiated under the Coastal Electrification and Women’s Development Micro-Enterprise Project (Energy Sector Management Assistance Program, 2004; Khan, 2003). Renewable energy technologies, if effectively used via community engagement in rural areas, could enhance electricity accessibility and hence lift people’s living and social standards.

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Status of CDM projects. Bangladesh has considerable potential for CDM projects under the Kyoto Protocol and, in particular, potential application of sustainable energy projects under the CDM scheme. However, to date, only two projects (in the waste and landfill sector) have been registered as CDM projects (Fenhann, 2006), and two projects (renewable energy) are at the validation stage of the CDM project cycle. Several other potential sustainable energy projects are at the concept stage (Enayetullah, 2006). Table 4 provides an overview of the current status of CDM projects in Bangladesh.

The emissions-reduction potential of CO2 from the least-cost greenhouse gas mitigation projects in the energy sector in Bangladesh has been estimated to be around

50 million tons of CO2 per year (Asian Development Bank [ADB], Global Environment Facility, & United Nations Development Program [UNDP], 1998).13

Thus, mitigation of CO2 emissions (about 2.5 million tons of CO2 per year) from the currently designed CDM projects remains insignificant compared to the estimated

potential reduction of CO2 emissions for Bangladesh. However, the process of developing CDM schemes has been slow for the nation. This is because of a lack of early understanding of CDM processes by personnel from relevant institutions or organizations and project developers in Bangladesh, high transaction costs for CDM activities, and significant uncertainties with regard to the future of CDM and the Kyoto Protocol after the first commitment period of 2008 to 2012 (Muller, 2005).

Environmental and Social Impacts Associated With Energy Use

The environmental and social impacts associated with fossil energy use, impacts from traditional and renewable energy use, and climate change impacts in Bangladesh are discussed in the following sections.

Environmental and Social Impacts From Fossil Fuel Use Although coal-fired electricity-generation systems in Bangladesh are relatively new, there are current community concerns about their impacts. For example, the social acceptance of long-term environmental impacts from a planned 500 MW coal- fired power plant using coal obtained from open-cut mining at Phulbari (in the northeastern part of Bangladesh) is yet to be confirmed. However, this project has already received environmental clearance from the Government of Bangladesh (GOB; Snowy Mountains Engineering Corporation, 2006), notwithstanding air pollution emissions and those of greenhouse gases. It is not surprising that air quality impacts are the community’s immediate concerns. Bangladesh’s current contribution to

global climate change via emissions of CO2 associated with energy and transport systems is insignificant compared with most industrialized nations. This is because of both the nation’s high dependency on natural gas and hydropower for electricity

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Table 4 Current and Potential Clean Development Mechanism Projects in Bangladesh

Emission Projects Status Reductiona Financing

Landfill gas extraction Registered (September 80,000 WWR and Tridos and utilization at 17, 2005) Bank, Netherlands Matuail Landfill Site, Dhaka Composting of organic Registered (May 89,259 WWR and Tridos waste in Dhaka (700 18, 2006) Bank, Netherlands tons per day) 30,000 solar home Validation 10,000 Grameen Shakti systems in nongrid areas Promotion of 100,000 Validation 5,000 Energy Pac and compact fluorescent Grameen Shakti lamps in rural areas Bundled co-composting Submitted for DNA 13,000 Asian Development projects in eight approval Bank secondary towns in Bangladesh Landfill gas extraction Submitted for DNA 25,000 WWR and Tridos and utilization at approval Bank, Netherlands Raufabad Landfill Site, Chittagong Composting of organic Submitted for DNA 17,250 WWR and Tridos waste in Chittagong approval Bank, Netherlands (200 tons per day) Cogeneration project at Project Idea Note 8,000 NEDO, Japan Monno Fabrics Bundled efficient brick Project at concept stage kiln project (fuel switching, energy efficiency) Poultry waste Project at concept stage management project (waste sector) Use of solar Project at concept stage photovoltaic pumps for irrigation (fuel switching)

Source: Adapted from Enayetullah (2006) and Fenhann (2006). Note: WWR = World Wide Recycling; DNA = Designated National Authority; NEDO = New Energy and Industrial Technology Development Organisation. a. Tons of CO2e per year.

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generation and low per capita energy consumption, about 96 kWh per person in 2002

(GNESD, 2004). Bangladesh shares less than 0.1% of global emissions of CO2 (Huq, 2001) and emits about 0.19 tons of CO2 per capita per year (IEA, 2000). Nevertheless, emissions of greenhouse gases is still an issue for the nation, as indicated by its ratification of both UNFCCC and the Kyoto Protocol.

Social, Health, and Localized Environmental Impacts From Traditional Energy Use Traditional energy use meets important energy demands by,14 for example, cooking via traditional stoves in rural areas. However, this form of energy use is associated with several social, health, and localized environmental impacts (Bhattacharya, 2006). Combustion of wood, dung, and crop residues results in indoor air pollution and directly causes severe human health impacts to the users, mostly rural women and children (Sarkar et al., 2003). Increased efficiency of traditional cooking stoves could potentially reduce environmental pollution and health risks. Traditional energy use also imposes both personal and social costs to the end user because of the time and labor spent by fuel collectors, the quantity of fuel available, and the distance of fuel sources from their place of use, as collectors often travel by foot (Bhattacharya, 2006; Sarkar et al., 2003). On a national scale, serious energy crises have put exces- sive pressure on forest reserves, which are used as alternative fuel sources during grid-based electricity shortages, with resulting accelerated deforestation. This deforestation then further enhances the frequency of flash floods.

Environmental and Social Impacts Associated With Renewable Energy Use Negative environmental effects (loss of agricultural land and natural habitat) and social impacts (resettlement of people) associated with the large-scale hydropower plants (> 40 MW) have occurred in Bangladesh.15 For example, construction of the Kaptai Dam to generate 230 MW of electricity flooded an area of some 655 km2, which included about 22,000 ha cultivable land, and displaced more than 100,000 people (Parveen & Faisal, 2002). Thus, impacts associated with enhancement of hydropower capacity and the flat landscape of the nation have restricted further extension of large-scale hydropower projects in Bangladesh. A negative environmental impact from the widely used SHSs has been the improper disposal of lead acid batteries (Kaufman, 2000). A recent act, the Safe Disposal of Used Lead Acid Battery 2006, issued by the Ministry of Environment and Forest (MOEF) in Bangladesh, has addressed this issue and mandates environmentally friendly collection, disposal, and recycling of such batteries (GOB, 2006). Under this act, it is a legal requirement for battery users to return their used batteries to authorized dealers or

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retailers. This should assist in the prevention of human health and environmental impacts of uncontrolled battery dumping because of lead. Notwithstanding these negative impacts, improving the overall energy supply situation in Bangladesh and, in particular, increasing access to clean electricity and facilitating more sustainable use of traditional energies are important in addressing energy-related social impacts and the environmental situation for the nation.

Climate Change Impacts Bangladesh is likely to intensely suffer from anthropogenic climate change because of the nation’s significant vulnerability to climate impacts and its geophysical setting (Huq, 2001; Taplin, 2004). The Intergovernmental Panel on Climate Change (2001) projects a high frequency of extreme climatic events (sea level rise, droughts, floods, and cyclones) for Bangladesh, exacerbated by rapid population growth. In fact, unlike industrialized nations with high adaptive capacities, developing nations including Bangladesh have low adaptive capacities and are therefore identified as being the most vulnerable to the adverse effects of future climate change (Olsen, 2006). The security of energy services is indirectly affected by frequent floods and prolonged and wide- spread drought (MOEF, 2005). The many anticipated adverse impacts of climate change include primary impacts on human lives from high sea level rises, sea surge from severe storms, consecutive floods, drought, and heavy rainfalls (Huq, 2001; Taplin, 2004) as well as secondary impacts from resource constraints and the redirec- tion of development assistance toward rebuilding basic infrastructures. This will in fact reinforce existing stresses on the energy and environmental sectors that already pose a serious impediment to the nation’s development agenda (M. Alam, 2004). Strategically, Bangladesh urgently needs a national-level policy and planning approach to comprehensively address climate-related risks.

Current Energy Strategies

For many years, the poor status of the energy sector in Bangladesh has been a major constraint to continued development of the nation. To address this, development of the energy sector in Bangladesh has been prioritized via Five-Year Development Plans.16 Three designated areas—energy (electricity); oil, gas, and mineral resources; and renewables—were focused on for the first time in the Fifth Five-Year Development Plan (1997 to 2002; GOB, 1998; Siddiqui, 2003; Uddin, 2001). This plan also facilitated investment in the energy sector via encouraging private sector participation and accelerated institutional reform. The following sections discuss Bangladesh’s current energy policy, fiscal measures and regulatory mechanisms, and environmental policies and frameworks directed toward the advancement of renewables.

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Energy Policy and Regulation The Bangladesh National Energy Policy (GOB, 2004), which was first introduced in 1996, only marginally emphasized environmentally sound energy development including renewables (Doraswami, 1996). The current legal and policy frameworks in Bangladesh that encompass the development of renewable energy include the National Policy Statement on Power Sector Reform 2000; the Private Sector Power Generation Policy 1996, which encouraged private sector participation in the electricity generation; the Remote Area Power Supply Systems Policy; Policy Guidelines for Small Power Plants in Private Sector 2001, which encouraged small- scale (< 10 MW) electricity generation; and the Energy Regulatory Commission Act 2003 (IDCOL, 2005; United Nations Economic and Social Commission for Asia and the Pacific [UNESCAP], 2005). Also, in acknowledgment of the rising national electricity demand and the need for further investment, GOB amended the 1991 Industrial Policy (GOB, 1991) in 1992 to facilitate private sector investment in installing new electricity-generation units on a build–own–operate basis (Siddiqui, 2003). Notwithstanding these policies to date, private sector investment has also been fragile, and more concrete regulations and mechanisms for prioritizing such investments are yet to be formulated. One major obstacle to sustainable energy development is that Bangladesh still lacks a dedicated renewable energy policy. A draft Renewable Energy Policy was released in 2002 (Ministry of Power, Energy and Mineral Resources [MEMR], 2002). This draft policy provided modalities and procedures for financing arrangements, tar- iff regulations, fiscal and other incentives for implementation of renewables, and guidelines for the establishment of an independent renewable energy institution, the Renewable Energy Development Authority (MEMR, 2002; UNESCAP, 2005). This draft renewable energy policy has not been finalized or implemented to date. The need for an independent renewable energy institution is further discussed below.

Fiscal Measures and Regulatory Mechanism To date, there have been few supporting fiscal measures and regulatory policies for greenhouse gas mitigation in the nation’s energy and emission-intensive sectors. A tax holiday for electricity-generation plants for up to 15 years was recommended as a fiscal measure to increase interest by the private sector in further participation in these sectors (Amin, 2005). Another decision in line with the energy planning and fiscal incentives, implemented by the Ministry of Finance, has been to exempt solar PV modules and wind turbines from import duties and value-added taxes (Sarkar et al., 2003). Financial measures in the form of subsidies play an important role in Bangladesh in promoting renewable energy technologies. For example, currently, under the

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National Program of Domestic Biogas in Bangladesh (van Nes, Boers, & Islam, 2005), the government is providing a US$120 subsidy for installing family-sized biogas plants with an average capacity of 2.8 m3 of daily gas production (van Nes et al., 2005), which can be used for cooking and lighting (IDCOL, 2005).17 Although the gradual phasing out of energy subsidies has been recommended as an energy policy option in both developing and industrialized settings,18 for example, in the Pacific islands (Yu & Taplin, 1997)19 and Australia (Riedy, 2003),20 the situation in Bangladesh is somewhat different, and it is arguable that long-term energy sustainability will require appropriate subsidy measures. This is because, first, the nation’s utilities inefficiently operate, with transmission and distribution losses and poor collection–billing ratios, and, second, prices charged to consumers are too low to recover the utilities’ costs, even assuming efficient operations (Temple, 2002). Although it is clear that subsidies to the electricity sector in Bangladesh have had negative economic and environmental impacts to date, they can be redesigned to be cost-effective, efficient, and well targeted (ADB, 2002).21 Such subsidies may need to be substantial initially (UNDP & IEA, 2002). Also, subsidies that promote the use of renewables may help in reducing greenhouse gas emissions.

Environmental Policy and Framework Bangladesh has closely followed global agendas in environmental policy making since the early 1970s, and its intentions to protect the environment are manifest in policy documents, adopted programs, and legislation. Nationally, since the Fourth Five-Year Plan (1990 to 1995; GOB, 1990), environmental issues have been incor- porated in development planning. The Fifth Five-Year Plan (1997 to 2002; GOB, 1998) delineates 12 areas of major environmental concern, including the crisis regarding dependency on, and overexploitation of, traditional energy sources and their pollution impacts (ADB et al., 1998). The Bangladeshi environmental policy framework that specifically refers to the advancement of renewables is the National Environmental Policy, which was approved in 1992 (MOEF, 1992). Although this policy does not have a stand-alone section on the development of renewables, policy guidelines concerning renewables are specified under Conservation of Natural Reserves and Renewables and under Reduction of Use of Wood and Agricultural Wastes as Fuel and Enhanced Use of Alternative Sources of Energy (MOEF, 1992). The implementation program for the National Environmental Policy 1992 recommended increasing rural energy supply through the application of renewable energy projects (MOEF, 1992). The National Environment Management Action Plan 1995 (MOEF, 1995) also stressed the impor- tance of renewables in rural areas and further emphasized the exploitation of renewables for a cleaner environment. As previously mentioned, at the international level, in response to global climate change concerns, Bangladesh has ratified the UNFCCC and acceded to the Kyoto

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Protocol in 2001. It is thereby qualified to participate in greenhouse gas mitigation projects in particular renewable energy projects under the CDM.

Energy Institutions and Governance

MEMR of Bangladesh is the sole authority administering all activities related to the nation’s energy sector, including the fossil fuel and renewable energy sectors and the provision of rural energy. Although, as mentioned earlier, institutionalization of a Renewable Energy Development Authority was proposed in 2002 under the draft Renewable Energy Policy, by the end of 2005 GOB decided to establish an alternative independent unit, the Sustainable Energy Development Authority (SEDA), for expediting the use of renewable energies and alternative sources of energy for power generation (A. Islam, 2005). Power Cell, an energy planning and research unit, established in 1995 under MEMR, was given the responsibility to form SEDA with immediate effect; however, implementation has not been as rapid as was anticipated (A. Islam, 2005). Currently, the director of Power Cell heads SEDA, but the full organizational structure and mandate are yet to be established by Power Cell (A. Islam, 2005). Notwithstanding this, the decision to establish SEDA was an important step in acknowledging the need for sustainable energy development in Bangladesh. A number of other organizations are currently involved in renewables. Government- controlled electricity utilities, namely the Bangladesh Power Development Board and the semiautonomous government utility the Rural Electrification Board, run programs on renewables for electricity generation. Other organizations that are involved in the research, development, and deployment of renewables include the Bangladesh Centre for Scientific and Industrial Research, the Local Government Engineering Department, universities, NGOs, and, to a limited extent, organizations in the private sector. Renewable energy industry investment is at a very early development stage in Bangladesh. A few companies are involved as importers and systems integrators of renewable technologies. However, because their engagement is limited to only promoting renewable energy technologies, their participation has not been sought in policy formulation and decision making. In addition, IDCOL, a state-owned non- banking financial institution that was established in 1997, administers the financing for REREDP in association with 10 participating national NGOs and also administers the newly initiated National Program on Domestic Biogas in Bangladesh (IDCOL, 2005). Another important step by GOB was the institutionalization of CDM. The Department of Environment (DOE) under MOEF, which serves as Bangladesh’s focal point to UNFCCC, acts as the secretariat of the Designated National Authority

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Figure 1 Institutional Chart for Key Sustainable Energy–Related Organizations in Bangladesh

Ministry of Power, Energy and Mineral Resources (MEMR)

Infrastructure Development Power Cell Bangladesh Power and Company Ltd. (IDCOL) Development Board (PDB) Renewable Energy Development Authority(REDA) Rural Electrification Board Research Institutions: (REB) Universities, Bangladesh Atomic Energy Commission (BAEC), Bangladesh Centre Sustainable Energy Others: Local Government for Scientific and Industrial Development Engineering Department Research (BCSIR) Authority(SEDA) (LGED),NGOs

Department of Environment (DOE) as Designated National Authority (DNA) for CDM, Ministry of Environment and Forest (MOEF)

(DNA). The DNA is responsible for approval of greenhouse gas emission–reduction projects, including renewable energy projects under CDM (United Nations, 2002). The DNA is a two-tier authority: the National CDM Board and the National CDM Committee. The principal secretary to the prime minister serves as the chairman of the National CDM Board. This board is composed of members from MOEF, the Planning Commission, and other relevant ministries. The director-general of the DOE serves as a member-secretary. The National CDM Committee is chaired by the secretary of the MOEF and includes representatives from relevant ministries and government organizations and members of NGOs. An institutional chart with key sustainable energy–related organizations is shown in Figure 1.

Discussion of Sustainable Energy Strategy Issues

In previous sections, applications of sustainable energy technologies with an emphasis on CDM status in Bangladesh were discussed. Also, an analysis of the national energy policy, environmental planning and framework, and energy governance and institutional settings in Bangladesh was given. The above discussion and

Downloaded from http://jed.sagepub.com at CNTR SCI AND ENVIRONMENT on September 15, 2008 Uddin, Taplin / Sustainable Energy Development in Bangladesh 307 analysis reveal that sustainable energy development in Bangladesh could be fostered via strategic policy approaches and orientation of institutional settings that support renewables. Issues that are relevant to the need for a sustainable energy future in Bangladesh include features of policy, planning, and institutional settings; diffusion of new technologies; impediments to be overcome; the role of CDM in the context of sustainable energy development; the realization of positive externalities of sustainable energy; and information, knowledge networking, and know-how. These issues are further discussed below.

Features of Policy, Planning, and Institutional Settings Despite not having explicit renewable energy policies and approaches, Bangladesh’s existing energy and environmental policy frameworks advocate advancement of renewables to some extent. To date, most of the policy initiatives for advancement of renewables have been supported via development assistance from industrialized nations and/or international organizations rather than being fully dri- ven by the Bangladesh government. As a consequence, they have seldom involved all stakeholders including end users in the community (Timilsina et al., 2001). Thus, the advancement of renewables has lacked local stakeholders’ engagement in policy development and decision-making processes. Stakeholders’ engagement with a target-oriented renewable energy policy approach would reinforce the current trends of renewable energy application in Bangladesh. Other immediate policy approaches could involve financial incentives, for example, investment subsidies for renewable energy installation and short-term loans for community-based renewable electricity generation. Also, a cost-sharing approach by consumers and producers for grid- connected renewable electricity could facilitate government renewable energy scheme implementation and pave the way to reduce the amount of electricity that is not paid for. Some institutional reforms have taken place in the energy sector, including renewables, directed toward a more market-oriented regime in Bangladesh. Creation of SEDA was an important step by the national government. However, the immediate and effective operation of SEDA is crucial. This and other reforms have failed to bring desired improvements in electricity accessibility and energy supply security (S. Alam et al., 2004). This has been because of slow progress in reform. The result has been that donors have stopped financing the electricity sector, and funds from the national government have also dried up, resulting in underdevelopment of the sector and deterioration of energy services in the past decade (Bhattacharya, 2007). This has had negative effects on the advancement of renewable energy development. Also, although Bangladesh’s DNA is responsible for facilitation of sustainable energy projects under CDM, it is important to enhance cooperation with other relevant government agencies and organizations to maximize the benefits of CDM.

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Diffusion of Renewable Energy Technologies—Challenges The challenges for Bangladesh associated with introducing sustainable energy technologies in the absence of appropriate mechanisms (both market and legislative) have been acknowledged. This has occurred, for example, with the introduction of solar PV technologies in Bangladesh (Siddiqui, 2003). The major challenge is to cre- ate and enable a market situation for appropriate sustainable energy technologies without imposing additional burdens in terms of high investment costs, operation and maintenance costs, and costs to end users. However, the ultimate challenge is how such initiatives can be introduced without heavily relying on external donors’ assistance, especially as trends in development assistance change over time.22 Renewable energy technologies, inevitably being sociotechnological systems when implemented, necessitate a paradigm shift from technology-oriented strategies to market- and on-the-ground-oriented strategies. A bottom-up strategy for diffusion of appropriate technologies should assist in facilitating the process. Such a strategy would include scaling up capacity (vertically), replicating (horizontally), and mainstreaming micro-level sustainable energy initiatives and would foster further advancement of such technologies. A successful example is from Nepal, where its rural energy development program operates at three different levels: the community level (planning, implementation, operation, and maintenance of the community- based energy systems), the local government level (institutionalization of rural energy systems by building capacities to plan, manage, and monitor rural energy development process), and the national, centralized level (policy support and coordination based on the lessons learned from decentralized level operations) (UNDP, 2006). This provides a useful example for Bangladesh. Diffusion of appropriate sustainable technologies would pave the way to increase electricity accessibility in electricity-deprived locations of Bangladesh. This would also help in reducing the intermittent electricity crisis that Bangladesh is currently experiencing. Another additional benefit would be reducing social, health, and localized environmental impacts via the use of renewable electricity. However, issues related to reducing potential impacts from renewable energy applications, such as the safe disposal of lead acid batteries and environmental and social impacts from hydropower development, should be addressed when designing Bangladesh’s sustainable energy strategy.

Impediments for Advancement of Renewables The lack of adequate policy frameworks, institutional settings, markets, financing, technological development, and human resources and the slow diffusion rates of new technologies are among many of the underlying issues and barriers that have constrained deployment of renewable energy technologies in developing nations

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(Painuly, 2001; Yu, 2003). In the context of industrialized nations, for example, in the situation of remote regions of Australia, malicious damage has been recognized as a new impediment for adoption of renewable electricity systems (McKenzie & Howes, 2006).23 Externality costs also act as market barriers for the advancement of renewable energy technologies (Owen, 2006).24 Many of these impediments are also applicable in the context of Bangladesh. Another barrier, lack of effective community engagement in the adoption of renewable energy technologies, is evident in rural Bangladesh. A best-practice example of how to overcome such barriers is a user-led innovation and participation process that has been successfully implemented for the introduction of sustainable energy technologies in Germany (Ornetzeder & Rohracher, 2006). In fact, the successful application of sustainable energy technologies necessi- tates a learning process among various actors involved in the development and innovation, distribution, and use of such technologies.

The Role of CDM in the Context of Sustainable Energy Development Although Bangladesh has shown early interest in the CDM scheme, only a tiny portion of total greenhouse gas reduction projects have been identified as CDM projects. This is because of a lack of knowledge and understanding about the CDM scheme among project developers, personnel from government institutions, and other stakeholders. There are other several factors that may impede CDM schemes involving renewables in Bangladesh, including high transactional costs for small- scale renewable energy projects especially because of low energy demand in remote or isolated and off-grid locations, a lack of favorable policy guidelines, a lack of an investment culture that includes a willingness to take business risks, a dependence on external assistance with CDM activities, and the dissemination of information about successful CDM implementation. Strategies to overcome such impediments are yet to be designed by GOB. Realizing the potential for CDM projects could assist Bangladesh in achieving energy sustainability and thus pave the way to attract investment from industrialized nations in the energy sector. Although the implementation of CDM project activities is getting more mature, Bangladesh could benefit from an invigorated CDM program of activities and methodologies approved by the CDM executive board and from modalities and procedures put in place. Though obtaining certified emission reduction (CER) from CDM projects may not be enough to make renewable energy projects for electricity attractive in developing nations including Bangladesh, CER, as a source of revenue, may have to be supple- mented by additional funds provided by investor nations (Rio, 2006).

Realization of Positive Externalities of Sustainable Energy Giving access to electricity in rural communities in Bangladesh, especially in remote or isolated and off-grid locations, would reap direct benefits such as catalyzing

Downloaded from http://jed.sagepub.com at CNTR SCI AND ENVIRONMENT on September 15, 2008 310 The Journal of Environment & Development economic growth and increasing living standards. Electricity access would also reap several positive externalities in rural Bangladesh in terms of indirect benefits such as access to information and communication systems including education on birth control, agriculture, and health issues; health services; leisure via mass media; and home-based micro industries. Such potential social benefits should be assessed and taken into account when designing Bangladesh’s sustainable energy strategy. Implementation of CDM projects could facilitate such positive externalities. However, a concerted action plan is thus required to monetize such positive externalities.

Information, Knowledge Networking, and Know-How Information, knowledge, and know-how are important aspects in designing a nation’s sustainable energy strategy. In particular, a lack of comprehensive and reliable data is a serious constraint for analysis of the effectiveness of past policy. Although a lack of comprehensive and reliable data is significant for an industrialized nation such as Australia (Kinrade, 2007), this is particularly crucial for developing nations such as Bangladesh. Effective knowledge networking and coordination among governments, donors, and local communities could also greatly assist the promotion of sustainable energy development programs. A knowledge-management system focusing on technological know- how, for example, including installation, maintenance, and operation instructions for sustainable energy technologies, should be put in place for users. This could be extended with information on existing grid systems, examples of decentralized systems, and success stories of CDM application. This could have multiplier effects, for example, in identifying baseline energy use information for CDM project developers.

Concluding Remarks

In Bangladesh, diffusion of sustainable energy systems has gained momentum in recent years via the evolution of relevant policies, institutional facilitation, and learning- by-doing experience. However, current policy measures and institutional structures that have been put in place should be considered as only initial steps toward further development of sustainable energy. The issues of huge systems losses (technical and nontechnical) and subsidies in the electricity sector appear to be linked to negative perceptions in donors’ and investors’ attitudes, with the result of withheld or frozen aid to and/or investment in the energy sector in Bangladesh. This trend has a dampening effect on mobilizing investment opportunities under the CDM. A well-formulated and implemented national energy strategy directed toward sustainability with effective institutional settings is thus necessary to attract and realize benefits from external financing via aid or soft-loan schemes and CDM investments.

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Bangladesh’s national energy policy should have explicit targets for renewable energy as well as provision of an institutional platform for administering these measures. Such a strategy could broadly encompass appropriate incentives for the advancement of sustainable energy development at the initial stage and should con- tain provision for gradually phasing out such measures. The implementation of sustainable energy projects under CDM may assist in overcoming many barriers and challenges. Because Bangladesh is at the initial stage of CDM development, it is too early to draw any definitive conclusions regarding its achievements to date. On-the-ground experience with CDM projects, the formulation of nation-specific policies for CDM, and further institutional development should help Bangladesh in advancing toward a sustainable energy future. As an essential tool, monitoring of the progress of these strategies and policies—as well as the provision of knowledge about best-practice examples of successful schemes— should be in place for future policy adaptation, modification, and reorientation. To conclude, Bangladesh is currently gaining experience with several renewable energy projects and CDM schemes. Although these sustainability initiatives are at the initial stages of implementation, the potential success of these initiatives is high with regard to abatement of greenhouse gases and their contribution to sustainable development. These viable approaches need to be amplified to a broader context with the formulation and implementation of a national sustainable energy strategy. Also, the formation of a national sustainable energy institution needs to be realized through a firm sustainable energy development agenda. The mobilization of finance, the realization of niche markets for renewable energy, the research and development of new and innovative financing mechanisms (e.g., CDM), and the strengthening of human capacity are further important avenues toward a sustainable energy future for Bangladesh.

Notes

1. Social and economic data are as follows: population = 141.8 million (2005); per capita gross national income = US$470 (2005); population below national poverty level = 50% (2005) (World Bank, 2006). 2. In this article, the focus is on electricity from renewable energy sources. 3. Renewable energy systems interchangeably refers to sustainable energy systems, unless defined otherwise. 4. CDM is a flexible mechanism under the Kyoto Protocol (Article 12), which entered into force on February 16, 2005 after nearly 8 years of negotiations. CDM gives industrialized nations the opportunity to finance greenhouse gases mitigation projects (for example renewable energy projects) in developing nations with the aim of contributing to sustainable development while also helping industrialized nations meeting their greenhouse gases emission reduction commitments. 5. Electricity system losses include both technical (transmission and distribution) and nontechnical system losses.

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6. Load shedding is the deliberate switching off of electricity supply to a service area as part of a planned rotation. 7. Solar home systems (SHSs) consist of a photovoltaic panel that catches sun rays as directly as possible, converts solar energy to electricity, and charges a storage battery. 8. Compared to traditional ones, the increase design of cooking stoves reduces emissions and increases combustion efficiency. 9. Small hydropower capacity is less than 10 MW. Limited potential for small hydropower is related to the flat terrain of the nation. 10. This biomass is categorized as renewable energy. Although there are links with biomass usage and deforestation in some nations, there is a lack of evidence that use of biomass for fuel is resulting in deforestation in Bangladesh. 11. The microcredit mechanism has three different payment options for renewable energy installation. Option 1 is that the customers pay up front a small (15%) portion of the system cost, and the remaining 85% is paid in monthly installments over a period of 3 years with a 12% service charge. Option 2 is that the customers pay 25% up front, and the remaining 75% is paid over 2 years with an 8% service charge. Option 3 is that the customers can buy a system paying the total cost up front with a 4% discount on the system cost (Siddiqui, 2003). Grameen Shakti is a sister organization of the Grameen Bank (literally “rural bank”). 12. Local stakeholder interest groups include end users, local service groups, and maintenance providers and entrepreneurs. 13. This is the only comprehensive study on Bangladesh under the Asia Least-Cost Greenhouse Gas Abetment project, which covers 11 Asian nations. 14. Traditional energy means fuel wood and fuel from noncommercial, traditional biomass, including trees (wood fuel), field crops (agricultural residue), and livestock (dung). For example, SHSs provide electricity to only a limited extent (e.g., lighting) and are not designed to meet other energy needs such as cooking and irrigation. 15. The only 230 MW hydroelectric power plant (composing two 40 MW units and three 50 MW units) in Bangladesh is located on the Karnaphuli River at Kaptai (A. Hossain & Badr, 2006). 16. After the expiry of the Fourth Five-Year Plan (1990 to 1995), no medium-term development plan was formulated during 1995 to 1997. The Fifth Five-Year Plan launched in 1997. Since the expiry of the Fifth Five-Year Plan in 2002, the nation has been undergoing a 3-year rolling plan (2004 to 2007; Siddiqui, 2003). 17. This assumes a biogas production of 47 L per kg of dung, which is a rather optimistic size (van Nes, Boers, & Islam, 2005). 18. Subsidies meant to encourage the development of an activity often outlive their usefulness and eventually begin to cause problems to society. 19. This policy option was recommended as part of the future national energy policies. Yu and Taplin (1997) recommended that they should include clear statements about renewable energy and explicit energy targets as well as short-, medium-, and long-term tasks and practical measures. The phasing out of subsidies for conventional energy consumption should be done in a way that takes care of the situation of low-income people, who now benefit from these subsidies. 20. According to Riedy (2003), if Australia is serious about greenhouse gases abatement, removal of fossil fuel subsidies offers an attractive “no regrets” abatement option. It also provides a possible source of funding for more costly greenhouse gases abatement options, which may be required if deep cuts in greenhouse gas emissions are contemplated in the future. 21. Subsidies that encourage the use of fossil fuels inevitably harm the environment through higher emissions of pollutants and greenhouse gases. 22. For example, Australian development assistance has shifted from Pacific Island nations to developing Asian nations and from renewables to other sectors in the past two decades (Yu & Taplin, 1997).

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23. Negative impacts have often come from deliberate sabotage. 24. External costs include environmental and health damage because of pollution from the combustion of fossil fuels. Costs born by governments, including direct subsidies, tax concessions, indirect energy industry subsidies (e.g., the cost of fuel supply securities), and support of research and development costs, are not externalities. They do, however, distort markets toward negative externalities, leading to increased consumption and hence environmental degradation (Owen, 2006).

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Sk Noim Uddin, MSc in Sustainable Energy, is a PhD candidate at the Graduate School of Environment, Macquarie University, Sydney, Australia. His research interest include sustainable energy strategy and technology, the Kyoto Protocol mechanisms, and climate risk management.

Ros Taplin, PhD, is a Senior Lecturer and Director of the Environmental Management Program at the Graduate School of the Environment, Macquarie University, Sydney, Australia. Her current research focuses on international policy on climate change, climate change impacts and adaptation, and climate change mitigation. She has authored and coauthored more than 25 book chapters and more than 50 peer-reviewed journal articles and is currently leading several funded research projects.

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