| Project Detail |
This knowledge and support technical assistance (KSTA) aim to improve the policy and regulatory framework, and the institutional capacity of relevant government agencies to support climate financing. In the climate finance area, the TA will aim for the following outputs: (i) Climate financing policy and regulatory framework enhanced; (ii) Market based funding strategy for long-term climate risk financing and capital market solutions to support carbon reductions proposed; and (iii) Feasibility studies for sectors critical to climate risk mitigations and adaptations (including renewable energy, energy efficiency, and green transportation sector) developed.
Project Name Support for Climate Financing
Project Number 56229-001
Country / Economy Bangladesh
Project Status Approved
Project Type / Modality of
Assistance Technical Assistance
A low-lying, densely populated country with a high poverty rate, Bangladesh is particularly vulnerable to the impact of climate change. Rapid economic development has significantly increased power consumption and greenhouse gas emission (GHG) in Bangladesh. The carbon dioxide (CO2) emission per capita has grown from 0.2 ton in 2000 to 0.64 ton in 2020. Bangladesh is also a country highly vulnerable to climate risk, ranked seventh on the Global Climate Risk Index 2021. In 2021, 60.2% of the countrys power generation comes from liquified natural gas, 22.5% heavy fuel oil and 6.2% coal, besides increased CO2 emission, and other pollutions, high reliance on imported fossil fuels, drains public, and private resources and expose the country to energy security issues.
Bangladesh has committed to the implementation of Paris Agreement under the Nationally Determined Contributions (NDC) and setting an ambitious goal of 6.73% reduction in GHG emission by 2030 (15.12% conditional reduction in GHG emissions with support from international community) versus the business-as-usual scenario. To achieve these targets, sizeable investments primarily from private sectors will be required, with the appropriate policy, regulatory, and institutional support.
The government has taken steps to support green financing. Sustainable finance (which focused on climate financing but also include social and environmental aspects) was formally defined in the introduction of the Sustainable Finance Policy in December 2020. Recognizing the financial sectors crucial role in promoting green financing, Bangladesh Bank initiated the formulation of the policy to guide banks and financial intermediaries for their participation and contribution in the implementation of the NDCs. In 2020, Bangladesh Bank issued the guidelines on refinance scheme for 55 green products or projects belonging to nine green categories in response to the growing demand for financing of low-carbon, environment-friendly products. Besides policy and guidelines, Bangladesh Bank also launched the Green Transformation Fund in 2016 to provide foreign exchange financing for the import of capital machineries and accessories in eligible green and environment-friendly initiatives. On the supply side, the government set a 10% renewable energy target, while on the demand side, the government also set a target of reducing energy intensity per GDP in 2029/2030 by 20% compared to the 2013/2014 level.
Despite the commitment of the government, more robust progress is needed. The renewable energy accounts for 3% of the power generation, far short of the government target of 10%. Availability of financing remains a major constraint, as the local banking sector cannot provide long-term financing, or the due diligence required. Total amount of green financing during FY2021 amounted to BDT 100.7 billion, at the same level of FY2019 and accounts for 4.4% of total financial sector disbursement. The various government refinancing schemes for green A low-lying, densely populated country with a high poverty rate, Bangladesh is particularly vulnerable to the impact of climate change. Rapid economic development has significantly increased power consumption and greenhouse gas emission (GHG) in Bangladesh. The carbon dioxide (CO2) emission per capita has grown from 0.2 ton in 2000 to 0.64 ton in 2020. Bangladesh is also a country highly vulnerable to climate risk, ranked seventh on the Global Climate Risk Index 2021. In 2021, 60.2% of the countrys power generation comes from liquified natural gas, 22.5% heavy fuel oil and 6.2% coal, besides increased CO2 emission, and other pollutions, high reliance on imported fossil fuels, drains public, and private resources and expose the country to energy security issues.
At present, despite various existing programs, the incorporation of climate finance is not an integral part of government budgetary process with proper planning, monitoring, and measurement. Climate change has yet to be reflected in the financial sector supervisory and monitoring framework to ensure that the financial sector becomes more resilient to climate and transition risks. Furthermore, gender inclusiveness has not been adequately reflected in the various climate finance related government policies regulations from Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC). At the project finance level, there remains a heavy reliance on financing from the IFIs for funding for key public infrastructure financial institutions such as Infrastructure Development Company Limited (IDCOL) because of the lack of capital market support for infrastructure financing, particularly in green finance. All these point to a need for stronger regulatory, policy, and institutional development support in the climate finance area.
For private sector development, climate change adaptation and mitigation represent great opportunities of growth and transformation for many industries as witnessed in the renewable energy, energy efficiency, and electric transportation sectors globally. Adopting best-practice green standard also can enhance the long-term competitiveness of key export industries of the country. The country can further support the private sectors to take advantage of these new opportunities with updated industrial policies, introductions of green technologies and adoption of new business models, but it will require significant external inputs.
Impact
Green growth and climate resilience promoted |
