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Reducing Greenhouse Gas Emission In Bangladesh Economics Essay

Atmosphere is a global public good and all nations around the globe dump pollution in the atmosphere at zero cost. As a result the concentrations of Greenhouse Gas (GHG) have been increasing in the atmosphere leading to its market failure. The four major components of GHG are carbon dioxide, methane, nitrous oxide and F-gases. In concentrating on GHG emission, main target is given to CO2 since it constitutes a large talk about of the GHG. The increasing concentrations of GHG in the atmosphere are getting extensive changes to climate for example rise in global mean temperatures by 0. 4-0. 8C and average annual rate in sea level by 1-2 mm within the last century.

Reducing GHG emissions in Bangladesh

Bangladesh is one of the very most prone countries of the hazard to climate change. IPCC article advises, a one-metre go up in sea levels would overflow 29846 sq km (total section of Bangladesh is 147570 sq kilometres) of Bangladesh and create 14. 8 million people landless. A lot of the land of Bangladesh is less than 20 foot high from the ocean level. Bangladesh's society is 150. 5 million in 2011 and per capita greenhouse emission is 0. 3 in 2008. Bangladesh happens to be adding to global carbon emissions by an amount slightly significantly less than its show in world GDP.

CO2 emissions per capita

(Tonnes)

Year

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

Source:

Although Bangladesh has low GHG emission, it's paying higher charges for the results of environment change associated with higher GHG attentiveness in the atmosphere. The frequency of natural disasters has rapidly increased. Bangladesh has been always arguing in favour of reduced global GHG emission in climate discussions. Bangladesh's own GHG emission is also showing an increasing craze. There's a projection of Bangladesh's greenhouse gas emission under different development scenarios up to 2050:

Source:

Figure 2

The vulnerability of Bangladesh for local climate change requires interventions to reduce GHG emission from her own end. There could be different policy involvement instruments for lowering greenhouse gas emission like creation of property protection under the law, market based bonuses (a tax, emission trading structure), different forms of rules, subsidies etc. When taking any insurance policy, it is important to judge the coverage under certain specifications like environmental performance, cost effectiveness, distributional influences and institutional feasibilities. Two suggested policy interventions to lessen GHG emissions in Bangladesh are:

Regulation (establishing renewable energy target to lessen carbon emission)

Regulations are most popular form of interventions to lessen GHG emission like green energy target, lights, specifying development technology or type to make use of or not to use etc.

Market based bonuses to reduce pollution (duty on carbon emission)

Market centered interventions create a cost motivation to internalise the price of externality and appropriate the market inability.

Regulation : Green energy target

A taxes on carbon emission

Regulations can be imposed by taking into consideration the particular circumstances of a firm or industry. For instance, it is possible to set a green energy aim for for a firm eating more energy following a limit.

A taxes on carbon emission is standard in nature. For instance, two companies - electricity making and transport, have to pay same amount of tax on each tonne of GHG emission.

The interconnection between laws and GHG emission result is more direct. So the final result of rules on GHG emission can be expected with some extent of certainty.

Tax gives confidence about the marginal cost of minimizing pollution however the amount of pollution lowering is uncertain under taxation.

Regulation requires reliable and correct information because abatement cost will possibly grow when the regulators don't have accurate information.

Sometimes tax is more complex compared to laws. In arranging the duty rate, understanding of all functions, MPC, MEC and MPB, or MB and MC is required.

Regulations require changes over time as MC function changes with changes in creation technology, type costs, and product demand.

MC curve shifts over time with changes in production technology, source costs, and product demand demanding changes in taxes.

Regulations are improbable to be most reasonably priced.

Tax allows the makers to find least cost or cost effective way of minimizing pollution.

Regulation does not generate government revenue but creates transfer cost for monitoring and putting into action those.

Tax generates federal government revenue.

Regulations are appropriate for producing countries as they build initial capacity by taking new technology e. g. solar energy, wind electricity etc.

Tax interventions are appropriate for developed countries as they require more institutional feasibility and sensitive monitoring system

Regulation offers implicit extra creation cost.

Tax brings explicit extra development cost and often politically unpopular and could assist rent seeking by lobby teams.

Regulations are enforced by targeting goods and services which emit more carbon.

Tax on carbon offers signal to suppliers and consumers about which goods and services produce more carbon and which produce less or nothing. Therefore, consumers and companies can plan to move from high-carbon products and technology to low-carbon products and solutions.

Under regulation, companies don't have incentives to reduce pollution after get together the regulation concentrate on.

Under tax, organization have bonuses.

Renewable energy target

The current potential demand of energy in Bangladesh is 5569 MW where source is significantly less than 4000 MW. The overall economy of Bangladesh has been growing at a rate of 6-7 percent from last few years. These are causing go up in energy demand which increases GHG emission. Bangladesh's GHG emission from energy sector is relatively low as almost all of the energy is produced from natural gas which in turn causes low carbon emission. The existing contribution of renewable energy is 0. 5 percent. The federal government is likely to increase the show of renewable options in total electricity generation by 5% in 2015 and 10% in 2020.

Source:

Figure 3: Electric power Generation Fuel Mix of Bangladesh in 2009

But as the reserve of natural gas has been depleting rapidly and the demand of energy is increasing, dependency on fossil fuel and coal centered energy is increasing. Because of this it is expected that the GHG emission will go up. Natural gas contributed 64 percent of CO2 emission and petroleum products added 36 percent emission of Bangladesh during 2008-2009.

Efficiency of regulation

There will be an efficiency gain for legislation if the rules is implemented in expense effective way.

Price ($) KW electricity

S'= S + Regulatory Cost

S= MPC Regulatory Cost

MC

MB

Welfare Gain

0 = em

Reduction of pollution

Figure 4: Market ramifications of regulation

Quantity of coal and gas produced electricity

P'

P

Q

e*

Q'

D=MPB=MSB

Price and cost per device pollution

As the federal government is wanting to raise the share of alternative energy altogether energy, its imposing some regulatory costs on coal and gas produced electricity. In physique 4, MPC=S curve shifts to S' due to the regulatory cost. The amount of electricity made by coal and fuel has lowered from Q to Q' while price has increased from P to P'. In the next part, in the beginning at the marketplace solution, reduction of pollution is 0. Due to the regulation, the amount of pollution reduction raises from 0 to e*. Optimal level of pollution reduction will be at the intersection of MB and MC curve. From 0 to e* degree of pollution reduction MB > MC and the amount of welfare gain is the blue triangle.

The correlation between development of coal and power based electricity and GHG emission is high. So the regulations imposed on those will immediately influence the quantity of GHG emission. Rules are improbable to be most reasonably priced. For example, the expense of producing electricity by solar panel is higher in comparison to the expense of producing electricity by coal.

Table 1

Source:

But the price tag on coal and gas is also increasing which is minimizing the gap of the costs. A green energy flower like solar power can reliably provide for decades without emitting GHG at most affordable maintenance cost. Under rules, once firms meet up with the regulation concentrate on Q*, no incentive for further decrease.

Reduction of pollution

Cost per unit

Q*

Figure 5: Legislation and pollution reduction

$ If restrictions are not met

Distributional effects

Firms producing energy by using coal and energy will eventually lose their share on the market as their number decreases which will also decrease the amount of GHGs emission. The price of coal and fuel produced electricity will surge. The costs of products designed to use electricity a whole lot will can also increase and impact the buyers of these goods.

To raise the supply of alternative energy, more alternative energy crops will be built. It'll increase the demand for green energy accessories like solar power, wind mill etc. So the suppliers of these inputs will gain. Originally at the marketplace solution, amount of pollution reduction is zero. If the regulations are enforced the quantity of pollution reduction improves to e*. The individuals who are polluted initially are gaining as the quantity of pollution is lessening.

A duty on carbon emission

A taxes on the emitter of GHG can be proposed to reduce GHG emission in Bangladesh. The taxes will place an explicit additional cost on per unit emission. Before the tax, polluters emit GHG at zero marginal costs. The effect is excess supply of GHG gas in the atmosphere leading towards its market failure. In occurrence of the taxes, polluters give off GHG at a price equal to taxes rather than zero. This duty sets a price of GHG emission on the market where in fact the market chooses the number of emission.

Efficiency of carbon tax

Price ($) KW electricity

Quantity of electricity

MSC= MPC + MEC

S= MPC Regulatory Cost

MC

MB

Welfare Gain

0 = em

Reduction of Pollution

MEC

Govt. Revenue

Figure 6: Market effects of tax

e*

Pt

P

Qt

Qm

MPB

Pm

Price and cost per device pollution

In shape 6, the development of electricity generates GHG emission by product and MEC curve shows this negative externality. Market equilibrium is at the intersection of MPC and MPB curve and the market price is Pm and variety is Qm. However the social optimum reaches the intersection of MSC and MPB curve. To attain the efficient level of Q, if a tax is imposed on Q by the amount of MEC then your level of productivity and price will be Qt and Pt respectively. The quantity of electricity has reduced from Qm to Qt while price has increased from Pm to Pt. In the second part, primarily at the market solution, reduction of pollution is 0. Because of the tax, the amount of pollution reduction raises from 0 to e* and the quantity of welfare gain is the blue triangle. Within the above figure, taxes models price, market chooses amount. The efficiency of the programme depends on the ability of setting tax at a point that induces behavioural change.

Distributional effects

Firms producing productivity that by product emit GHG will lose their share on the market as their quantity decreases that will also reduce the amount of GHG emission. The price of electricity will grow that will also boost the prices of products designed to use electricity a whole lot in development. The consumers of these products will be worse off by paying higher prices. Furthermore, more than 75 percent of Bangladesh's export revenue comes from Ready Made Apparel (RMG) sector which consumes high electricity in the development process. A rise in electricity price led by the carbon duty will increase their creation cost and reduce their competitiveness in the international market.

There is an increase in government income by the yellow rectangle. Some of the made revenue enable you to compensate RMG producers by providing financial incentives. Most taxes create distortions but carbon tax corrects distortion. Carbon duty may yield two times dividend - one by reducing emission and another by financing the reductions of incentives.

Carbon tax escalates the amount of pollution reduction from 0 to e*. The individuals who had been polluted at first are getting as the quantity of pollution is reducing. Tax allows the companies to find a minimum of cost or cost effective way of minimizing pollution. In physique 8, from 0 to e* degree of pollution, tax is higher than MC of pollution reduction. Firms will find it profitable to reduce pollution by inventing new technology, buying research and development rather than paying the tax. After e* degree of pollution reduction, MC of pollution decrease is higher than the tax. So it will be affordable for the company to pay the taxes.

Price and cost per unit pollution

Reduction of pollution

T

MC of reduced amount of pollution

e*

Figure 7: Pollution decrease efficiency

0 = em

Tax

In Bangladesh, relative elasticities of the products is highly recommended in establishing the carbon taxes because tax enforced on carbon moves to customers and the show that will pass on depends on comparative elasticities. In figure 8, the full burden of fees passes on to consumers when elasticity is perfect.

Price ($) KW electricity

Quantity of electricity

MSC= MPC + MEC

S= MPC Regulatory Cost

MSC=MPC+MEC

MB

Qt

Quantity of electricity

MEC

Figure 8: Effects of duty on price depending on elasticities

Qm

Pt

P

Qt

Qm

MPC

Pm

Pt

Pm

Price ($) KW electricity

A carbon taxes will raise the cost of production for not only the products directly entail pollution e. g. electricity and transport also for other products using electricity and petroleum inputs in development. As their development cost surge, their price will also go up. 31. 5% population of Bangladesh live below the poverty collection this year 2010. The carbon duty will raise the burden of poor people through increased price. To ameliorate the responsibility, financial assistance can be provided to the low-income households utilizing the tax income. In number 9, we can see that as duty is imposed on electricity, the price of electricity increases so the budget line of the consumers will rotate inward and the buyer will move to a lesser indifference curve ICt. The consumer can be compensated by money subsidy which attains the same degree of tool as before tax.

Quantity of electricity

IC

ICt

Quantity of X

Figure 9: Income substitution to the consumers

In 2009, 5 percent of total labour push of Bangladesh was unemployed. A carbon tax may deteriorate the scenario by taking place creative destruction from the jobs of carbon extensive products and production processes. Nonetheless it will also create jobs for carbon considerable products and production processes. The web aggregative employment impact is close to zero.

Recommendation

Energy is the lifeblood of growing industry sector of Bangladesh. The depth of current potential energy deficit can be considerably found by fuelling the expansion of renewable energy. Different financial incentives can be offered for your purpose. For instance, Bangladesh imports alternative accessories from overseas like solar panels from Germany. If import duties are taken off the accessories of solar panel, the price tag on producing solar energy will decrease. In addition, the indegent people moving into the rural areas having no electricity access also lack the capability to install renewable energy at home level. Government provides them financial assistance in introducing solar power. Private investment should also be encouraged by creating proper financial incentives. For large size investment General public Private Collaboration (PPP) can be created. R&D for inventing green accessories at local level can decrease the production cost greatly.

It may be difficult to enforce a carbon duty with underdeveloped companies occurring higher administrative costs. In Bangladesh, the current tax composition lacks the capability and institutional feasibility to put into action carbon taxes. Before bringing out carbon taxes, the tax mechanism is required to be restructured by developed institutional capability. In establishing the duty main emphasis should get to on electricity, gas, coal, some petroleum, fugitive emissions and some production while exclude agriculture, petroleum utilized by small vehicles and principal production and small business.

Conclusion

Although Bangladesh is attaining prolonged economic growth, per capita energy ingestion is still suprisingly low. So in future there will be upsurge in total energy creation and consumption which will boost the amount of carbon emission. An integral way to transform into low carbon current economic climate is imposing restrictions on renewable energy target which can create two-fold benefits for Bangladesh- environmental and energy sufficiency. The decrease in GHG emission in the atmosphere will bring environmental improvements. Moreover, it will reduce the potential demand and supply gap of electric power and help to attain energy sufficiency. A carbon taxes can be recharged by restructuring taxes mechanism with large infrastructural advancements.

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