Reducing Greenhouse Gas Emission In Bangladesh Economics Essay

Atmosphere is a planetary public good and all states around the Earth shit pollution in the ambiance at nothing cost. As a consequence the concentrations of Greenhouse Gas ( GHG ) have been increasing in the ambiance taking to its market failure. The four major constituents of GHG are C dioxide, methane, azotic oxide and F-gases. In aiming GHG emanation, chief focal point is given to CO2 since it constitutes a big portion of the GHG. The lifting concentrations of GHG in the ambiance are conveying considerable alterations to climate for illustration rise in planetary average temperature by 0.4-0.8A°C and mean one-year rate in sea degree by 1-2 millimeter in the last century.

Reducing GHG emanations in Bangladesh

Bangladesh is one of the most vulnerable states of the menace to climate alteration. IPCC study suggests, a one-metre rise in sea degrees would deluge 29846 sq kilometer ( entire country of Bangladesh is 147570 sq kilometer ) of Bangladesh and make 14.8 million people landless. Most of the land of Bangladesh is less than 20 pess high from the sea degree. Bangladesh ‘s population is 150.5 million in 2011 and per capita nursery emanation is 0.3 in 2008. Bangladesh is presently lending to planetary C emanations by an sum somewhat less than its portion in universe GDP.

CO2 emanations per capita

( Metric tons )

Year

Figure 1: GHGs emanation by Bangladesh, India, China and Pakistan

Beginning:

Although Bangladesh has low GHG emanation, it ‘s paying higher monetary values for the effects of clime alteration associated with higher GHG concentration in the ambiance. The frequence of natural catastrophes has quickly increased. Bangladesh has been ever reasoning in favor of decreased planetary GHG emanation in clime dialogues. Bangladesh ‘s ain GHG emanation is besides demoing an increasing tendency. There is a projection of Bangladesh ‘s nursery gas emanation under different growing scenarios up to 2050:

Beginning:

Figure 2

The exposure of Bangladesh for clime alteration demands intercessions to cut down GHG emanation from her ain terminal. There may be different policy intercession instruments for cut downing nursery gas emanation like creative activity of belongings rights, market based inducements ( a revenue enhancement, emanation trading strategy ) , different signifiers of ordinance, subsidies etc. When taking any policy, it is of import to measure the policy under certain criterions like environmental effectivity, cost effectivity, distributional impacts and institutional feasiblenesss. Two proposed policy intercessions to cut down GHG emanations in Bangladesh are:

Regulation ( puting renewable energy mark to cut down C emanation )

Regulations are most common signifier of intercessions to cut down GHG emanation like renewable energy mark, light bulbs, stipulating production engineering or input to utilize or non to utilize etc.

Market based inducements to cut down pollution ( revenue enhancement on C emanation )

Market based intercessions create a monetary value inducement to internalize the cost of outwardness and rectify the market failure.

Regulation: Renewable energy mark

A revenue enhancement on C emanation

Regulations can be imposed by sing the peculiar fortunes of a house or industry. For illustration, it is possible to put a renewable energy mark for a house devouring more energy after a bound.

A revenue enhancement on C emanation is unvarying in nature. For illustration, two companies – electricity generating and conveyance, have to pay same sum of revenue enhancement on each metric ton of GHG emanation.

The connexion between ordinances and GHG emanation result is more direct. So the result of ordinance on GHG emanation can be predicted with some grade of certainty.

Tax gives confidence about the fringy cost of cut downing pollution but the sum of pollution decrease is unsure under revenue enhancement.

Regulation requires dependable and accurate information because suspension cost will perchance lift when the regulators do non hold accurate information.

Sometimes revenue enhancement is more complex compared to ordinances. In puting the revenue enhancement rate, cognition of all maps, MPC, MEC and MPB, or MB and MC is required.

Regulations require alterations over clip as MC map alterations with alterations in production engineering, input costs, and merchandise demand.

MC curve displacements over clip with alterations in production engineering, input costs, and merchandise demand necessitating alterations in revenue enhancement.

Regulations are improbable to be lowest cost.

Tax allows the manufacturers to happen least cost or cost effectual manner of cut downing pollution.

Regulation does non bring forth authorities gross but creates dealing cost for monitoring and implementing those.

Tax generates authorities gross.

Regulations are appropriate for developing states as they build initial capacity by conveying new engineering e.g. solar energy, wind power etc.

Tax intercessions are appropriate for developed states as they require more institutional feasibleness and sensitive monitoring system

Regulation adds inexplicit excess production cost.

Tax adds expressed excess production cost and frequently politically unpopular and may help rent seeking by anteroom groups.

Regulations are imposed by aiming goods and services which emit more C.

Tax on C gives signal to manufacturers and consumers about which goods and services produce more C and which produce less or none. Therefore, consumers and manufacturers can be after to switch from high-carbon merchandises and engineerings to low-carbon merchandises and engineerings.

Under ordinance, houses do non hold inducements to cut down pollution after run intoing the ordinance mark.

Under revenue enhancement, house have inducements.

Renewable energy mark

The current possible demand of energy in Bangladesh is 5569 MW where supply is less than 4000 MW. The economic system of Bangladesh has been turning at a rate of 6-7 per centum from last few old ages. These are doing rise in energy demand which in bend additions GHG emanation. Bangladesh ‘s GHG emanation from energy sector is comparatively low as most of the power is generated from natural gas which causes low C emanation. The current part of renewable energy is 0.5 per centum. The authorities is be aftering to increase the portion of renewable beginnings in entire power coevals by 5 % in 2015 and 10 % in 2020.

Beginning:

Figure 3: Power Generation Fuel Mix of Bangladesh in 2009

But as the modesty of natural gas has been consuming really rapidly and the demand of energy is increasing, dependence on fossil fuel and coal based energy is increasing. As a consequence it is expected that the GHG emanation will lift. Natural gas contributed 64 per centum of CO2 emanation and crude oil merchandises contributed 36 percent emanation of Bangladesh during 2008-2009.

Efficiency of ordinance

There will be an efficiency addition for ordinance if the ordinance is implemented in cost effectual manner.

Price ( $ ) KW electricity

S’= S + Regulatory Cost

S= MPC Regulatory Cost

Megahertz

Megabit

Welfare Gain

0 = mutton quad

Decrease of pollution

Figure 4: Market effects of ordinance

Measure of coal and fuel produced electricity

P ‘

Phosphorus

Q

e*

Q ‘

D=MPB=MSB

Monetary value and cost per unit pollution

As the authorities is seeking to increase the portion of renewable energy in entire energy, its enforcing some regulative costs on coal and fuel produced electricity. In figure 4, MPC=S curve displacements to S ‘ due to the regulative cost. The sum of electricity produced by coal and fuel has decreased from Q to Q ‘ piece monetary value has increased from P to P ‘ . In the 2nd portion, ab initio at the market solution, decrease of pollution is 0. Due to the ordinance, the sum of pollution decrease additions from 0 to e* . Optimal degree of pollution decrease will be at the intersection of MB and MC curve. From 0 to e* degree of pollution decrease MB & gt ; MC and the sum of public assistance addition is the bluish trigon.

The correlativity between production of coal and fuel based electricity and GHG emanation is really high. So the ordinances imposed on those will straight act upon the sum of GHG emanation. Regulations are improbable to be lowest cost. For illustration, the cost of bring forthing electricity by solar panel is higher compared to the cost of bring forthing electricity by coal.

Table 1

Beginning:

But the monetary value of coal and gas is besides increasing which is take downing the spread of the costs. A renewable energy works like solar panel can reliably function for decennaries without breathing GHG at lowest care cost. Under ordinance, one time houses meet the ordinance mark Q* , no inducement for farther decrease.

Decrease of pollution

Cost per unit

Q*

Figure 5: Regulation and pollution decrease

$ If ordinances are non met

Distributional effects

Firms bring forthing energy by utilizing coal and fuel will lose their portion in the market as their measure decreases which will besides cut down the sum of GHGs emanation. The monetary value of coal and fuel produced electricity will lift. The monetary values of merchandises which use electricity a batch will besides increase and act upon the purchasers of those goods.

To increase the supply of renewable energy, more renewable energy workss will be built. It will increase the demand for renewable energy accoutrements like solar panel, wind turbine etc. So the providers of those inputs will derive. Initially at the market solution, sum of pollution decrease is zero. When the ordinances are imposed the sum of pollution decrease additions to e* . The people who are polluted ab initio are deriving as the sum of pollution is diminishing.

A revenue enhancement on C emanation

A revenue enhancement on the emitter of GHG can besides be proposed to cut down GHG emanation in Bangladesh. The revenue enhancement will put an expressed extra cost on per unit emanation. Before the revenue enhancement, defilers emit GHG at zero fringy costs. The consequence is extra supply of GHG gas in the ambiance taking towards its market failure. In presence of the revenue enhancement, defilers emit GHG at a cost equal to revenue enhancement instead than nothing. This revenue enhancement sets a monetary value of GHG emanation in the market where the market chooses the measure of emanation.

Efficiency of C revenue enhancement

Price ( $ ) KW electricity

Measure of electricity

MSC= MPC + MEC

S= MPC Regulatory Cost

Megahertz

Megabit

Welfare Gain

0 = mutton quad

Decrease of Pollution

MEC

Govt. Gross

Figure 6: Market effects of revenue enhancement

e*

Platinum

Phosphorus

Qt

Qm

MPB

Autopsy

Monetary value and cost per unit pollution

In figure 6, the production of electricity generates GHG emanation by merchandise and MEC curve shows this negative outwardness. Market equilibrium is at the intersection of MPC and MPB curve and the market monetary value is Pm and measure is Qm. But the societal optimum is at the intersection of MSC and MPB curve. To achieve the efficient degree of Q, if a revenue enhancement is imposed on Q by the sum of MEC so the degree of end product and monetary value will be Qt and Pt severally. The sum of electricity has decreased from Qm to Qt while monetary value has increased from Pm to Pt. In the 2nd portion, ab initio at the market solution, decrease of pollution is 0. Due to the revenue enhancement, the sum of pollution decrease additions from 0 to e* and the sum of public assistance addition is the bluish trigon. In the above figure, revenue enhancement sets monetary value, market chooses measure. The efficiency of the programme depends on the ability of puting revenue enhancement at a point that induces behavioral alteration.

Distributional effects

Firms bring forthing end product that by merchandise emit GHG will lose their portion in the market as their measure decreases which will besides cut down the sum of GHG emanation. The monetary value of electricity will lift which will besides increase the monetary values of merchandises which use electricity a batch in production. The consumers of those merchandises will be worse off by paying higher monetary values. Furthermore, more than 75 per centum of Bangladesh ‘s export gross comes from Ready Made Garments ( RMG ) sector which consumes high electricity in the production procedure. A rise in electricity monetary value led by the C revenue enhancement will increase their production cost and cut down their fight in the international market.

There is a addition in authorities gross by the xanthous rectangle. A part of the generated gross may be used to counterbalance RMG manufacturers by supplying fiscal inducements. Most revenue enhancements create deformations but C revenue enhancement corrects deformation. Carbon revenue enhancement may give dual dividend – one by cut downing emanation and another by financing the decreases of inducements.

Carbon revenue enhancement increases the sum of pollution decrease from 0 to e* . The people who were polluted ab initio are deriving as the sum of pollution is diminishing. Tax allows the manufacturers to happen least cost or cost effectual manner of cut downing pollution. In figure 8, from 0 to e* degree of pollution, revenue enhancement is higher than MC of pollution decrease. Firms will happen it profitable to cut down pollution by contriving new engineering, puting in research and development instead than paying the revenue enhancement. After e* degree of pollution decrease, MC of pollution decrease is higher than the revenue enhancement. So it will be cost effectual for the house to pay the revenue enhancement.

Monetary value and cost per unit pollution

Decrease of pollution

Thymine

MC of decrease of pollution

e*

Figure 7: Pollution decrease efficiency

0 = mutton quad

Tax

In Bangladesh, comparative snaps of the merchandises should be considered in puting the C revenue enhancement because revenue enhancement imposed on C base on ballss to purchasers and the portion that will go through on depends on comparative snaps. In figure 8, the full load of revenue enhancements base on ballss on to consumers when snap is perfect.

Price ( $ ) KW electricity

Measure of electricity

MSC= MPC + MEC

S= MPC Regulatory Cost

MSC=MPC+MEC

Megabit

Qt

Measure of electricity

MEC

Figure 8: Effectss of revenue enhancement on monetary value depending on snaps

Qm

Platinum

Phosphorus

Qt

Qm

MPC

Autopsy

Platinum

Autopsy

Price ( $ ) KW electricity

A C revenue enhancement will increase the cost of production for non merely the merchandises straight involve pollution e.g. electricity and conveyance but besides for other merchandises utilizing electricity and crude oil inputs in production. As their production cost rise, their monetary value will besides lift. 31.5 % population of Bangladesh live below the poorness line in 2010. The C revenue enhancement will increase the load of hapless people through increased monetary value. To better the load, fiscal aid can be provided to the low-income families by utilizing the revenue enhancement gross. In figure 9, we can see that as revenue enhancement is imposed on electricity, the monetary value of electricity additions so the budget line of the consumers will revolve inward and the consumer will travel to a lower indifference curve ICt. The consumer can be compensated by an income subsidy which attains the same degree of public-service corporation as before revenue enhancement.

Measure of electricity

Intelligence community

ICt

Measure of Ten

Figure 9: Income permutation to the consumers

In 2009, 5 per centum of entire labour force of Bangladesh was unemployed. A C revenue enhancement may deteriorate the scenario by happening originative devastation associated with the occupations of C intensive merchandises and production procedures. But it will besides make occupations for C extended merchandises and production procedures. The net aggregate employment consequence is near to zero.

Recommendation

Energy is the lifeblood of turning industry sector of Bangladesh. The strength of current possible energy shortage can be well met by fuelling the growing of renewable energy. Different fiscal inducements can be offered for that intent. For illustration, Bangladesh imports renewable accoutrements from abroad like solar panels from Germany. If import responsibilities are removed from the accoutrements of solar panel, the cost of bring forthing solar energy will diminish. Furthermore, the hapless people populating in the rural countries holding no electricity entree besides lack the capableness to put in renewable energy at family degree. Government can supply them fiscal aid in establishing solar panel. Private investing should besides be encouraged by making proper fiscal inducements. For big scale investing Public Private Partnership ( PPP ) can be formed. R & A ; D for contriving renewable accoutrements at domestic degree can cut down the production cost well.

It may be hard to implement a C revenue enhancement with developing establishments happening higher administrative costs. In Bangladesh, the current revenue enhancement construction lacks the capableness and institutional feasibleness to implement C revenue enhancement. Before presenting C revenue enhancement, the revenue enhancement mechanism is needed to be restructured by developed institutional capableness. In puting the revenue enhancement chief focal point should be given to on electricity, gas, coal, some crude oil, fleeting emanations and some fabrication while exclude agribusiness, crude oil used by little vehicles and primary production and little concern.

Decision

Although Bangladesh is achieving relentless economic growing, per capita energy ingestion is still really low. So in future there will be increase in entire energy production and ingestion which in bend will increase the sum of C emanation. A cardinal manner to transform into low C economic system is baronial ordinances on renewable energy mark which can make double benefits for Bangladesh- environmental and energy sufficiency. The decrease in GHG emanation in the ambiance will convey environmental betterments. Furthermore, it will cut down the possible demand and provide spread of power and aid to achieve energy sufficiency. A C revenue enhancement can besides be charged by reconstituting revenue enhancement mechanism with significant infrastructural betterments.

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