THIS is concerning that Bangladesh’s transition to renewable energy is being obstructed by not only a lack of investment and policy support but also a fiscal regime that actively favours fossil fuels. A recent Centre for Policy Dialogue study says that the transition to renewable energy faces ‘fiscal discrimination’. The study, unveiled on June 7, finds that fossil fuel-based power projects have received more than 95 per cent of annual development budget allocations in the sector over the years, leaving less than 5 per cent for renewable energy projects. At the same time, liquefied natural gas imports enjoy a total tax incidence of only 9.5 per cent because of generous tax exemptions, while crucial technologies required for a low-carbon energy system face tax burdens ranging from 61 per cent to more than 93 per cent. Such disparities have made renewable energy less competitive and discouraged much-needed private investment. The study also says that the National Board of Revenue is foregoing substantial revenue through preferential treatment for LNG businesses, while fossil fuel-based electricity generation continues to benefit from hefty subsidies and capacity payments. Renewable energy developers, meanwhile, receive no comparable support.
Such policy contradiction questions and undermines the country’s stated commitment to sustainability and renewable energy and perpetuates dependence on imported fossil fuels at a time when energy security and affordability have become pressing concerns. The consequences of this discriminatory fiscal framework are already evident. Bangladesh remains far behind its renewable energy targets despite repeated commitments. The country once pledged to generate 5 per cent of its electricity from renewable sources by 2015 and 10 per cent by 2020. Yet renewable energy currently contributes less than 3 per cent of electricity generation. The share of solar and wind power has, in fact, declined over the years. A recent report by the Institute for Energy Economics and Financial Analysis further revealed that Bangladesh failed to attract any significant renewable energy investment. This should be a matter of serious concern for a country that has pledged, under the Climate Vulnerable Forum and the Paris Agreement, to move towards 100 per cent renewable electricity by 2050. The widening investment gap makes that ambition increasingly difficult to achieve. Equally troubling is the failure to exploit the country’s vast rooftop solar potential. Without fundamental policy reform inclined towards renewable energy, the country will continue exposing itself to greater economic and environmental vulnerabilities.
The government must, therefore, act decisively to remove fiscal discrimination against renewable energy in the upcoming national budget and beyond. The sooner the government aligns its fiscal policies with its renewable energy ambitions, the better positioned the country will be to secure a cleaner, more affordable and more sustainable energy future.
