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The team would like to express its gratitude Martin Heger, Sachiko Kondo, Thierry Martin, The team gratefully acknowledges the financial to Dr. Farhina Ahmed, Secretary, Ministry of Taisei Matsuki, Yoko Nagashima, Vladislava support provided for the document by the Environment, Forest and Climate Change I. Nemova, Thu Thi Le Nguyen, Justice Odoi, Climate Sustainability Facility (CSF), Korea Green (MoEFCC), Dr. Abdul Hamid, Director General, Alexander Pankov, Anjali Suneel Parasnis, Md. Growth Trust Fund (KGGTF), Global Program on Department of Environment (DoE), and Ms. Nurun Mokhlesur Rahman, Poonam Rohatgi, Sayed Sustainability (GPS), and PROBLUE. Nahar, Additional Secretary, Planning Commission. Mujtaba Shobair, Ishaa Srivastava, Baljit Wadhwa, The work was done in full collaboration with Ayago Esmubancha Wambile, Lilian Pena Pereira those institutions. 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Deloitte Touche Tohmatsu India LLP Manager), and Gyongshim An (Program Leader), contributed to the preparation of the document. who provided overall guidance throughout the completion of this work. Critical support throughout various stages of preparation was provided by the following peer Ramim Ahmed, Faizul Karim, and Mehrin Mahbub reviewers: Richard Damania, Anthony Granville, M led the outreach and communications for the Towhid Nawaz Mowla, Hua Tan, Margaret Triyana, document. Stan Wanat and Bart Ullstein supported Ernesto Sánchez-Triana, Partha Guha Thakurta, the editing, Anthony Bagliani and Chez Voila Mike Tomin, and Yutaka Yoshino. undertook the design, layout, and infographics for the document. Mahajabin Afrin, Ian Richie Paulson, The team benefitted from the insights, feedback and Hanny provided overall administrative and collaboration from the following colleagues: support. Any remaining errors or omissions are Concept Aisa, Souleymane Coulibaly, Kamalika the authors’ own. Das, Shakil Ahmed Ferdausi, Bernard Haven, Design and visualizations by Voilà: | chezVoila.com Table of contents 3 Proposed Bangladesh Green-Growth Framework p.22 Preface p.viii Objective 1: Facilitate effective environmental governance and an energy transition 1 Introduction p.10 Policy Direction 1 Policy Direction 2 Policy Direction 3 Strengthen Enable energy Promote inclusive environmental independence connectivity governance and through energy through green accounting systems efficiency and transport and 2 logistics systems Analytical Basis for renewable energy trade Identifying Priority Recommendations p.16 Objective 2: Foster new growth engines and skills for green growth Policy Direction 4 Policy Direction 5 Policy Direction 6 Invest in new green Promote Livable Stimulate productive industries and human Green Cities agriculture, promote capital to promote through Urban the blue economy, job creation and Regeneration and strengthen coastal green innovationn New Smart Cities resilience, and and green innovation sustainably manage natural capital Objective 3: Achieve a just transition, enabling a resilient, green, and healthy society 4 Enabling Environment: Regulatory Framework, Institutional Arrangements, Policy Direction 7 Policy Direction 8 Policy Direction 9 and Policies p.40 Strengthen social Improve public Enhance 5 protection and the health and wellbeing engagement and capacity of citizens through a cleaner cooperation with Green Finance Diagnostic to adapt to an inclusive climate- environment the international community on for Green Growth in resilient economy climate change Bangladesh p.52 6 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh p.60 7 Conclusion p.80 Green Growth Framework in Bangladesh viii Preface This advisory document provides a green-growth framework for Bangladesh to achieve high-level objectives identified in the Bangladesh Country Partnership Framework for fiscal years 2023–2027, and the country’s goal of reaching high-income country status by 2041. It includes recommendations for coordinated policy and investment prioritization, the establishment of an institutional enabling environment, and financing options for green growth in Bangladesh. These recommendations seek to equip the Bangladesh Planning Commission and the Finance Division to identify, discuss, and prioritize activities and investment proposals received annually from line ministries. The report proposes a whole-of-government approach, utilizing this advisory document as a tool and consultation note as a basis for the 9th Five-Year Plan (FY2025–2030) preparation process. Green-growth ambitions are embedded in Bangladesh’s national plans, including the 8th Five-Year Plan (FY 2021–2025); Prospective Plan 2021–2041; Delta Plan 2100; the Mujib Climate Prosperity Plan; Nationally Determined Contributions; and National Adaptation Plan. These all reflect the government’s commitment to channel finance into green investments and implement policy reforms for green growth. Hence, green growth serves as a strategic organizing principle for objectives already set out by the Government of Bangladesh. Although it has green growth ambitions, there are significant challenges that deter implementation, including the need for prioritization of public investment and limited coordination between ministries, particularly with regard to planning, budget allocation processes and the alignment with line ministries to achieve national greener and economic targets. ix This advisory document addresses key gaps identified through multiple diagnostics carried out by the World Bank and consulted with the Bangladesh Planning Commission and the Finance Division, and supports the Government of Bangladesh’s series of policy reforms that focus on green climate-resilient goals. As part of these reforms, the Ministry of Planning has started to integrate green climate-resilient goals into the preparation, processing, approval and revision of public sector projects, and into project investment management. Such actions is supported by the World Bank as part of a series of development policy operations, and this advisory document provides guidelines for implementing green climate- resilient goals. It can serve as a basis for strategically engaging line ministries upstream, helping them understand how green growth can be realized in alignment with the country's economic and sectoral priorities. Its recommendations are intended to guide decision- making processes and build a wider consensus on priority policies, multi-sectoral themes, and action for channeling limited resources to achieve green growth. Chapter 1 1 Introduction - 1.1 Green Growth Green Growth Framework in Bangladesh in Bangladesh 12 The Imperative for Green Growth Initiatives in Bangladesh Environmental Degradation and Climate Change Threaten Bangladesh's Development Goals Figure 1.1 Trends in Bangladesh’s Wealth Composition, In the coming decades, Bangladesh faces risks constant 2018 US dollars per person to its development because of the significant degradation of its natural capital and the country’s considerable vulnerability to climate Bangladesh’s growth has come at the cost of the country’s natural capital change. Over the past three decades, the country has experienced notable economic growth and Per capita, constant 2018 USD significant poverty reduction, accompanied 14,000 $USD by a considerable increase in the country’s Human physical capital (Figure 1.1), largely the result of Capital improvements in infrastructure and the provision of essential utilities. Human capital has also seen marked progress, with notable achievements in the education sector. This progress has, however, been accompanied by a deterioration in natural 7,000 $USD capital, evidenced by a depletion of the country’s natural resources and high levels of pollution. The Produced expansion of manufacturing and rapid urbanization Capital has led to increased carbon intensity and limited resource-use efficiency. Natural Capital 0 1995 2018 Source: World Bank. 2021. The Changing Wealth of Nations 2021: Managing Assets for the Future 13 Introduction According to the World Bank’s 2023 Country Internal climate and rural-urban migration add Bangladesh Is Pursuing an Environmental Analysis, the annual cost of pressure on cities and essential services, Bangladesh’s environmental degradation, which especially during extreme climate events that Energy-security Transition for is linked to significant environmental health disproportionately affect disadvantaged groups. Long-term Growth risks, amounted to around 17.8 percent of the The nation also faces estimated average annual country's gross domestic product in 2019. The losses of approximately US$ 1 billion (0.7 percent Soaring energy prices, coupled with a high highest costs are due to outdoor and household of gross domestic product) from tropical cyclones dependency on the ready-made garment sector, air pollution, which together cause 54 percent of alone, and the coastal population is at risk from causes major disruptions to Bangladesh’s premature deaths from environmental causes. events such as 100-year coastal floods, which economic progress. In the second half of fiscal Lead exposure, and inadequate drinking water could become more frequent. Indeed, sea-level 2022, challenging external conditions gave and sanitation, responsible, respectively, for rise may double asset risk as well as threaten rise to a significant balance-of-payments deficit, 20 and 26 percent of total deaths, are further agricultural production, water supplies, and coastal prompting authorities to seek assistance through pressing challenges. Water pollution, including ecosystems. Furthermore, by 2040, climate an International Monetary Fund program. To river pollution and saline intrusion; plastic waste variability could result in the loss of 6.5 percent of mitigate the escalating trade deficit, authorities management; soil degradation; and exposure the country’s cropland, and 18 percent in southern implemented a series of import-suppression to mercury and heavy metals are also serious Bangladesh, and by 2050 a fall of fully a third in measures, including rolling electricity blackouts to environmental and natural resource issues. All Bangladesh’s agricultural gross domestic product. conserve energy. Consequently, energy shortages these have implications for productivity, welfare, have severely disrupted several key sectors, and human capital formation and retention. Climate and other environmental hazards including agriculture and manufacturing. Notably, have greater impacts on the poor and other Bangladesh's crucial ready-made garment industry Despite making progress in improving adaptive vulnerable groups. Efforts to reduce poverty, experienced significant declines. Given that this capacity and resilience, Bangladesh remains particularly amongst populations whose sector contributes more than 84 percent of the vulnerable to climate change–according to livelihoods rely heavily on natural resources, country’s total exports, any drop in ready-made Statista’s Global Climate Risk Index 2000–19, continue to be hampered by climate change. garment production has substantial repercussions the country ranks as the world's seventh most- Even after 50 years of independence, some for the economy. affected country. Climate-related hazards, such as regions in Bangladesh have poverty rates of up to floods and riverbank erosion, affect approximately 70 percent. Furthermore, communities exposed As a response, Bangladesh has established 1 million Bangladeshis annually, with two-thirds of to multiple natural hazards have experienced energy security as one of its top priorities for the country experiencing inundation every 3–5 less poverty reduction or even increased poverty long-term growth. In its 8th Five-Year Plan, the years. According to the World Bank's 2022 Country levels, which may result in costly coping strategies, government emphasized the need to improve Climate and Development Report, even under such as divesting productive assets and reducing efficiency in power generation, including through optimistic global climate scenarios, Bangladesh investment in human capital, affecting nutrition and expanding mining and exploration to increase the could face severe climate risks, which might lead to education, among other services. use of domestic coal and gas. To ensure that energy the internal migration of 13.3 million people by 2050. security is sustained in a cost-efficient manner, Green Growth Green Growth Framework in Bangladesh in Bangladesh 14 however, a significant element of Bangladesh’s research and development for green technology transition to energy security should focus on innovation, and green skill development. improving efficiency in the distribution of electricity, improving demand-side management, and Opportunities for new growth engines also lie expanding the use of cleaner sources of energy in more inclusive development approaches. including from renewable sources, such as solar, Promoting labor-force participation of females wind, and waste-to-energy. and other less-mobilized social groups can, for example, increase overall productivity and drive growth. Furthermore, inclusive approaches to growth lead to higher welfare outcomes, allowing for shared prosperity and a just transition to a Bangladesh is in need of new green economy. growth engines Trade has been a driving force behind Bangladesh’s economic growth, job creation, and poverty reduction in recent decades. The erosion of competitiveness based on low wages and the impending loss of trade preferences due to the expected graduation from least-developed country status are challenging the status quo. Factors such as high import taxes and non-tariff barriers have protected domestic industries at the expense of emerging exports. Bangladesh needs to explore new growth engines to increase its trade competitiveness and sustain long-term economic development. In doing so, Bangladesh should seek opportunities in green growth, promoting green industries and fueling the adoption of innovative technologies that also enhance living standards. Green growth can be nurtured in a number of forms, including through the greening of existing industries, 1.2 15 Introduction Challenges for Implementing Green Growth in Bangladesh Country Context: Bangladesh submitted updated Nationally To address these challenges and pave the way Determined Contributions to the Paris Agreement for a sustainable future, this advisory document Green Growth Ambitions in August 2021, committing to reduce emissions by proposes a framework of recommendations to within Government Plans 89.5 million tonnes of carbon dioxide equivalent, enable Bangladesh to transition to a green and or 21.9 percent, relative to business as usual by climate-resilient development pathway. 2030. The Nationally Determined Contributions The Government of Bangladesh intends to point to the National Adaptation Plan 2023–2050, implement green growth in pursuit of sustainable approved in October 2022, which aims to build development. Indeed, ambitions for green climate resilience while stimulating sustainable and Overview of the Advisory growth are clearly embedded in national plans inclusive economic growth. and thus green growth does not add to existing Document plans but rather serves as a strategic organizing principle for objectives already set out by the This advisory document proposes a framework of government. Challenges in Shifting from recommendations for priority action to implement Bangladesh’s 8th Five-year Plan covering 2021– Intent to Actualization of Green green growth in Bangladesh. The framework 2025 targets comprehensive structural reforms provides a strategic blueprint to address key across six sectoral development strategies to Growth in Bangladesh development challenges, creating a roadmap for accelerate sustainable growth while building coordinated action and investment that will propel climate resilience across the economy. These will Bangladesh towards a greener, climate-resilient, The Government of Bangladesh faces challenges enhance public services, especially for people and economically vibrant future. in effectively implementing key green-growth living in poverty, and promote better management interventions, primarily due to two significant of the environment and natural resources to factors. First, the Annual Development Programme support productivity and growth. does not adequately prioritize public investment to support green-growth interventions. Second, Elements of green growth are also embedded limited coordination between the Programme’s in the Bangladesh Delta Plan 2100, which aims formulation and annual budget processes results to reduce the adverse effects of climate change in inadequate public investment management. This on the population and generate co-benefits for is evident in insufficient budgetary allocations to environmental sustainability, job creation, and the investment projects and low execution rates. provision of essential services. Chapter 2 2 Analytical Basis for Identifying Priority Recommendations - 2.1 Green Growth Green Growth Framework in Bangladesh in Bangladesh 18 Resilience, Inclusivity, Sustainability, and Efficiency Diagnostics Economic growth in Bangladesh has come at Myanmar since 2017 has put significant stresses Further benchmarking with upper-middle-income the expense of public goods, such as clean air on the country. countries suggests that Bangladesh’s resilience and water, that impact health and economic and sustainability are particularly far behind its productivity in areas that are difficult to measure Sustainability performance varies widely, comparators. In other words, for Bangladesh to and not reflected in many economic statistics. reflecting how spillovers from economic growth achieve its aim of becoming an upper-middle- As part of the Building Back a Greener Bangladesh have contributed to premature mortality, income country by 2031, critical vulnerabilities Analytics, the World Bank carried out a diagnostic elevated morbidity, and declining environmental to climate change and other environmental examining the performance of Bangladesh’s services. Bangladesh is water-stressed; challenges must be addressed. The country’s economy in terms of four areas of interest that deforestation has brought risks of heavy flooding productive assets, human capital, and overall well- together definite green, resilient, inclusive and rapid siltation; while death rates attributable being face significant risks from natural disasters. development, namely resilience, inclusivity, to air pollution are above average lower-middle- Furthermore, climate risks are aggravated by social sustainability, and efficiency. income country levels. The country is not vulnerability–more than half of Bangadesh’s urban performing as well as other countries at increasing population lives in informal settlements and is Resilience in Bangladesh is poor, as exposure its share of renewable energy in the national therefore particularly vulnerable to crime, disease, to the risks of natural disasters are high and energy mix and greenhouse gas emissions per and natural disasters. The coverage of social aggravated by high social vulnerability. More person have been increasing. assistance programs remains incomplete, with than half the urban population lives in slums only three in 10 households covered, and there and only a small proportion of the population is In terms of efficiency, Bangladesh lags on most are limits to the ability of programs to respond to covered by social protection benefits. Bangladesh natural resource metrics in comparison to other shocks. Managing the delta environment continues has long been associated with food insecurity, lower-middle-income countries. Agricultural- to be a top challenge for the country in adapting contributing to a high prevalence of stunting labour productivity ranks low, and Bangladesh to climate change and building resilience, with the among children younger than five years of age. has particularly poor water productivity. The coastal zone along the Bay of Bengal being highly country has low economic value added per unit of vulnerable to climate-related hazards such as Bangladesh lags behind in many inclusion greenhouse gas emissions, and its expenditure on cyclones, storm surges, coastal erosion, and sea- indicators, especially those tracking access to enacting air pollution abatement could be more level rise. Furthermore, the degradation of natural markets and places. Women’s engagement in effective and cost less. Although Bangladesh resources is of particular concern with regard to labour markets is very low, and the indicators performs relatively well in terms of governance freshwater scarcity and pollution, forest loss, and suggest that there are inadequate laws to protect effectiveness and digital penetration, it has air pollution. gender equality and lesbian, gay, bisexual, and relatively inefficient supply chain logistics and transgender rights. The massive influx of Rohingya low internet service provision. internally displaced people and refugees from 19 Analytical Basis for Identifying Priority Recommendations Figure 2.1. Jobs Created and Fine Particulate Matter Emissions Generated per US$ 1 million investment Green investments can be a driver of job opportunities, but di erent sectoral strategies are needed Job opportunities and environmental consequences of investment in different sectors in Bangladesh were also explored as part of PM2.5 EMISSIONS the resilience, inclusivity, sustainability, and 10,000 efficiency diagnostics, highlighting that green Coal and inclusive investment can be a driver of growth and debunking the false premise that x100 pure tradeoffs exist between emissions and job creation. Figure 2.1 plots the estimated number of jobs created from a US$ 1 million investment 100 against the estimated fine particulate matter (PM2.5) emissions that would be generated from the same investment. The opportunities Construction x100 highlighted include the potential for synergies between expanding some sectors, i.e., services, while greening others, i.e., agriculture and 1 manufacturing. Furthermore, targeted investment in clean energy could significantly reduce emissions across many critical sectors. This x100 analysis shows that environmental, economic and social objectives can be achieved simultaneously. Education 0.01 0.1 x10 10 x10 1,000 JOBS CREATED PER US$1 MILLION INVESTMENT Source: Source: World World Bank 2022. Bank, 2022. Bangladesh Bangladesh RISE RISE Benchmarking    Benchmarking 2.2 Green Growth Green Growth Framework in Bangladesh in Bangladesh 20 Prioritization Process for the Selection of Recommended Green Growth Objectives and Policy Directions The green-growth framework outlined in this Welfare impacts will be greater if efforts are advisory document was developed through a made to make green policies inclusive. Welfare prioritization process in which two major criteria impacts, which are important in determining were considered. the sustianable impact of interventions, can be derived through direct environmental benefits; a. Urgency: areas of high urgency were identified improvements in public health; distributional primarily through the resilience, inclusivity, sus- effects, including poverty reduction; job creation; tainability, and efficiency diagnostics. transitions to cleaner and decent jobs; and through b. Sustainable impact: areas identified as having increased resilience to shocks, including natural high sustainable impact; good job-creation disasters and commodity price volatility. potential; positive welfare impacts; and are Three objectives and nine policy directions were identified by World Bank analytics; existing derived through a prioritization process to serve government plans, especially the 8th Five-Year as a roadmap for action to implement green Plan; and consultations with representatives growth in Bangladesh. The policy directions of civil society, youth, businesses, academia, were largely drawn from a review of diagnostics and government agencies as having long-las- and government plans; a synthesis of priorities ting green-growth impacts. Furthermore, in that were commonly identified, documented, and the selection of the priorities, there was a highlighted from the diagnostics and government focus on addressing market failures, internali- plans; and a series of consultations. The potential zing externalities, improving governance, and for input, efficiency, stimulus and innovation green- nudging producers’ and consumers’ behavior. growth effects from the nine policy directions are The priorities aim to contribute to green- shown in Table 2.1. growth implementation through four effects: an input effect–increasing production factors; an efficiency effect–bringing production closer to the production frontier; a stimulus effect–sti- mulating the economy in times of crisis; and an innovation effect–accelerating development and adoption of technologies. 21 Analytical Basis for Identifying Priority Recommendations Table 2.1. Input, Efficiency, Stimulus, and Innovation Effects of the Proposed Nine Policy Directions Objective Policy Direction Input Efficiency Stimulus Innovation Facilitate effective 1 Strengthen environmental governance and environmental accounting systems governance and energy transition 2 Enable energy independence through energy efficiency and the trade in renewable energy 3 Promote inclusive connectivity through green transport and logistics systems Foster new growth 4 Invest in new green industries and human capital engines and skills to promote job creation and green innovation for green growth 5 Promote livable green cities through urban regeneration and new smart cities 6 Stimulate productive agriculture, promote the blue economy, strengthen coastal resilience, and sustainably manage natural capital Achieve a just transition ena- 7 Strengthen social protection and the capacity of citizens to adapt to an inclusive climate-resilient bling a resilient, economy green, and healthy society 8 Improve public health and wellbeing through a cleaner environment 9 Enhance engagement and cooperation with the international community on climate change Source: World Bank Chapter 3 3 Proposed Bangladesh Green-Growth Framework 3.1 Green Growth Green Growth Framework in Bangladesh in Bangladesh 24 Objectives and Policy Directions for Implementation The proposed Bangladesh Green-Growth Table 3.1 Bangladesh Green-Growth Framework’s Framework presents a green, climate-resilient Objectives and Policy Directions action roadmap for prioritizing policies and investment to address Bangladesh’s key OBJECTIVES POLICY DIRECTIONS development challenges–namely, climate change and degradation, the energy crisis, and the need Strengthen environmental governance and for resilient economic growth. The Bangladesh Green-growth Framework envisages three main Facilitate e ective environmental 1 accounting systems objectives and nine policy directions (Table 3.1). governance and Enable energy independence through energy energy transition 2 e ciency and the trade in renewable energy Promote inclusive connectivity through 3 green transport and logistics systems Invest in new green industries and human capital Foster new growth 4 to promote job creation and green innovation engines and skills Promote livable green cities through urban for green growth 5 regeneration and new smart cities  Stimulate productive agriculture, promote 6 the blue economy, strengthen coastal resilience, and sustainably manage natural capital Achieve a just Strengthen social protection and the capacity of citizens transition enabling 7 to adapt to an inclusive climate-resilient economy a resilient, green, and healthy society Improve public health and wellbeing through 8 a cleaner environment These objectives should Enhance engagement and cooperation with be pursued together at the same time. 9 the international community on climate change Source: World Bank 25 Proposed Bangladesh Green-Growth Framework Objective 1: Facilitate Policy Direction 1 Strengthen environmental governance effective environmental and accounting systems governance and an One of the most important tasks in implementing energy transition green growth in Bangladesh is laying the groundwork for the effective and sustained reduction of greenhouse gas emissions and air pollution. Air-quality standards across multiple The first objective of the proposed Bangladesh sectors will improve health and increase Green-growth Framework is to deal effectively climate resilience. with climate change and address energy-security issues by laying the foundations of enabling Opportunities policies and infrastructure for green growth. Diversifying away from fossil fuels will help Bangladesh improve its energy independence and • Bangladesh would benefit from (a) establishing effectively deal with volatile energy imports. This and implementing a national greenhouse objective calls for the increased use of new and gas emissions inventory and measure- renewable energy sources and efficient energy- ment, reporting and verification system, demand management. (b) establishing emission-disclosure targets, and (c) making greenhouse gas reporting Green infrastructure investment can confer many mandatory for businesses, government-owned economic benefits including boosting growth, enterprises, urban local bodies, and other creating jobs, promoting sustainable industries, economic actors. and building resilience against climate shocks and other disruptions. Setting up an ecosystem • Environmental degradation costs should be for environmental accounting will give valuable explicitly accounted for in planning, and green information about natural capital stocks, emissions, public financial management should integrate pollution, and so forth to policymakers for making environmental concerns in budgetary evidence-based decisions and channeling management. green financing. Green Growth Green Growth Framework in Bangladesh in Bangladesh 26 • Setting up a credit-risk guarantee fund at the Policy Direction 2 • Improving transmission and distribution: Bangladesh Bank can promote investment Enable energy independence through could improve the integration of the needed to reduce pollution directly or indirectly from energy efficiency and renewable high volume of energy generation from the brick-making sector and municipal waste energy trade renewable sources. management, along with encouraging clean (biogas) cookstoves and rooftop solar systems. • On the policy front, Bangladesh must move Immediate opportunities for further development away from fossil-fuel subsidies, short- • Bangladesh should pursue strategic affor- in Bangladesh’s energy sector will involve term emergency power use, and ensure estation and sustainable forest management institutional, governance, and fiscal policy competitive procurement of all power to increase its overall carbon-sequestration interventions. In addition to the sectoral priorities generation sources. capacity, strengthen coastal resilience and mentioned in the previous section, Bangladesh unlock climate financing opportunities. must prioritize interventions to improve energy • Rationalize tariffs: the government has access quality, affordability, and reliability and build recognized the need to increase the heavily resilience in its power systems. subsidizd power-sector gas prices. Critical Implementation Actors to be Empowered Recommendations The initial key institutions involved in the above Opportunities interventions could be the following. The country’s successful energy transition • Cost recovery and energy efficiency: energy requires coordinated policy action to ensure tariffs and gas prices must adequately reflect the the sector's financial sustainability and enable • The Ministry of Environment, Forest, and cost to incentivize energy efficiency and invite private investments. Climate Change would benefit from being designated as the nodal body to host and investment in less carbon-intensive generation. Introducing fiscal prudence in the sector will administer the national greenhouse gas inven- require moving away from fossil-fuel subsidies. • Expanding renewable energy capacity and tory and associated information systems. Reforming subsidies could support climate change regional trade: the World Bank’s Scaling Up Renewable Energy Program investment plan goals and free up resources for sustainable- • The Bangladesh Securities and Exchange energy investments while implementing a green Commission could be empowered to lay down estimates a total renewable energy technical potential at 3.7 gigawatts (GW). The economics tax on fossil fuels could discourage greenhouse and enforce standards and requirements for gas emissions while generating revenue for clean listed companies to disclose non-financial of domestic projects in the near to medium term, however, will likely remain less favour- energy and environmental programs. sustainability-related information in line with global sustainability-reporting standards such able than imports. Indeed, expanded access The government needs to review the design of as the Global Reporting Initiative. to clean power sources in India, Nepal, and its power market to introduce more competition, Bhutan will support an increased share of reduce subsidies, improve efficiencies in state green and least-cost energy in the energy mix. 27 Proposed Bangladesh Green-Growth Framework companies, strengthen the role and competence Policy Direction 3 • Resilient urban, rural connectivity: investment of energy regulators, and develop a more Promote inclusive connectivity through is also needed to reduce spatial disparities in attractive environment for private investment. green transport and logistics systems access to social services and infrastructure and improve connectivity across regions and between rural and urban areas. Critical Implementation Actors Targeted logistics and connectivity infrastructure to be Empowered investment will strengthen the core of • Balanced intermodal connectivity: Bangladesh’s logistics-sector modernization. Bangladesh is looking to prioritize the devel- The initial key institutions involved in the opment of inland water transport and railways. Addressing current infrastructure gaps would above interventions could be the following. These options could be integrated into the reduce spatial disparities and support a greener Note that the government could benefit from existing transport system based on the growth path. The cost of doing this, however, is holding national consultations to refine the country’s changing traffic dynamics. estimated at US$ 608 billion by 2040. roles and responsibilities. Bangladesh has already begun developing a • Development of inland water transport: • Sustainable and Renewable Energy system-wide strategy for increasing logistics under the 2100 Bangladesh Delta Plan, the Development Authority, the Power efficiency. While doing this, policymakers government plans to improve the navigability Division, the Ministry of Power, Energy must ensure coordination between the public of river routes. and Mineral Resources; and private sectors. To this effect, action will be required to develop inclusive institutional • Revitalizing urban transport: the priority • Bangladesh Road Transport Authority, Roads arrangements, involving the private sector and focus of urban transport for the government and Highways Department (RHD); and service providers, such as logistics councils is improving transport and traffic infra- or committees to develop and implement structure and developing an integrated, • The Department of Environment, under logistics strategy. balanced system. Ministry of Environment, Forest and Climate Change. • Synchronizing urban mobility options: the Opportunities government plans to focus on not only motor- ized but non-motorized transport to achieve • Strengthening sectoral governance will an integrated and balanced system. be key to modernizing the logistics sector. Whereas physical investment in infrastructure Recommendations and technology is important to keep pace with the growing demand, sector governance • Boosting private sector participation needs to be strengthened concurrently to in the sector: policy priorities should improve its efficiency. include the development of an integrated Green Growth Green Growth Framework in Bangladesh in Bangladesh 28 multimodal transport and logistics master It will also be important to enable logistics plan, opening the transport sector for greater service providers to access bank finance and private and direct investment, including strengthen tax collection to create a level by foreign investors; and reducing the playing field for all service providers. state’s footprint. • To achieve seamless regional connectivity, • Introducing private participation in the it will be essential to negotiate and formalize port sector and separating port oversight integration agreements between neighboring and operations. countries and invest in the related infrastructure. • Strengthening regional connectivity with neighboring countries: Bangladesh will gain significantly from strengthened regional Critical Implementation Actors connectivity in infrastructure, including to be Empowered strengthening international digital connectivity. The initial key institutions involved in the above interventions could be the following. Recommended Action • Department of Environment; • Improving logistics infrastructure, asset quality, • Dhaka South City Corporation; capacity, and management is essential: to achieve this, encouraging private sector • Dhaka North City Corporation; participation will be key, as well as the timely • Chittagong City Corporation; design and implementation of regulations. • Dhaka Transport Coordination Authority; • Fiscal measures to encourage green growth • Sustainable and Renewable Energy in the logistics sector will need to ensure Development Authority; that the tax system treats all transport modes equally or tilt the field in favor of cleaner • Power Division; Ministry of Power, Energy and modes, such as inland waterways. Mineral Resources; • Bangladesh Road Transport Authority; • A conducive business environment can be created for Bangladesh’s logistics sector • Roads and Highways Department. by removing regulatory constraints limiting domestic and foreign private sector services. 29 Proposed Bangladesh Green-Growth Framework Objective 2: Foster Policy Direction 4 Invest in new green industries Diversification of the manufacturing industry and export base to insulate the economy from adverse new growth engines and human capital to promote job creation and green innovationn developments associated with dependence on one single product group. and skills for green and green innovation Restructuring of the industrial sector in a way growth that it creates more jobs as it grows, despite the ramifications of technological change and growing Shifting towards a more environmentally capital intensity of production. sustainable economy would trigger significant The proposed Bangladesh Green-Growth demand for green employment. An eco-conscious Framework's second objective is to create economy must embrace environmentally new growth engines on multiple fronts. This Recommendations responsible practices, technology, goods, services, includes developing green technology, and business strategies to foster sustainable The Government of Bangladesh should promote greening of brown industries, developing the growth and address climate change. high employment-generating, low-emissions blue economy, developing smart cities, smart industries by supporting investment in textiles, management of natural capital, and fostering an Bangladesh should invest in building infrastructure light manufacturing, food processing, and leather inclusive society. for green technology and industry development production. In line with the 8th Five-Year Plan, through green clusters, including in secondary the government should encourage the growth Greening industries: switching to cities, as integrated production bases for each green industries could be a major of modern service sectors such as education, green technology, along with targeted financing information technology enabled services, banking, driver to sustainable industrial and incentive mechanisms. development worldwide. and healthcare. The government should encourage the Opportunities in green industries ready-made-garment and other sectors to switch to resource-efficient, circular models Promoting green technologies in industries, for increased resource efficiency, sustainability, promotion of green jobs and small and medium- and competitiveness. sized enterprises. Government can support the greening of micro, Introduction of a circular economy and extended small and medium-sized enterprises through producer responsibility: this model should be green partnerships with large buyers and initiatives promoted in Bangladesh, especially in the ready- as a part of Bangladesh’s Energy Efficiency and made-garment sector, moving from a linear model Conservation Master Plan. to a circular one. Green Growth Green Growth Framework in Bangladesh in Bangladesh 30 • Bangladesh could benefit greatly from encour- Improving the quality-of-service delivery in • Skills programs should commit to closing aging the ready-made-garment, chemicals, education requires better-targeted education gender gaps in training and science, tech- brick making, cement, food and beverages, spending. This requires ensuring more efficient nology, engineering, and mathematics steel re-rolling, plastic, and leather production planning, budget execution, and reporting education. sectors to switch to resource-efficient produc- processes, as well as effective monitoring of public tion and distribution models, and low-carbon spending outcomes. • In addition to universities offering studies technologies by using renewable sources of in environment and climate change, energy and process innovation. Bangladesh Reforms to improve the quality of foundational revolving funds for adaptive research and can support the greening of micro, small and skills and science, technology, engineering, and innovation for low-carbon technologies medium-sized enterprises through green mathematics skills are important in removing could be introduced. partnerships with large buyers and initiatives supply-side skill constraints. Needed reforms as a part of the Energy Efficiency and include addressing the quality of teachers and the • Given spatial disparities, targeted infrastruc- Conservation Master Plan. To transition to a relevance of curriculums. ture and institutional investment and capacity circular economy, Bangladesh should devise a building should be undertaken in the educa- Digital literacy needs to be strengthened, variety of policy instruments in stages. tion sectors to focus on the most underserved especially as digital disruption of traditional sectors rural and slum areas. and occupations will make labor-intensive export- • The greenhouse gas emissions from livestock led manufacturing less feasible. can be reduced by improving emissions inten- Critical Implementation Actors sity per product. Emissions from the agricul- ture can be reduced by minimizing food loss to be Empowered Recommended action and waste across the food system through The initial key institutions involved in the above better integration of supply chains, access to interventions could be the following (note GOB • The government, private enterprises, and finance and insurance, and temperature-con- will benefit from holding national consultations to non-governmental organisations could trolled logistics and cold storage. refine the roles and responsibilities): support apprenticeship programs for green technology specialists. Opportunities for • Sustainable and Renewable Energy • The production of green guidelines for tech- Development Authority, Power Division, Increasing Human Capital nical and vocational education and training Ministry of Power, Energy and Mineral Education as an engine for green growth. institutions; certification standards for green Resources; According a World Bank study, the education skills; targets in annual performance agree- • Ministry of Environment, Forest and Climate sector scored highest in estimatimations of the ments with such institutions; and a revision of Change; number of jobs created from a US$ 1 million competency standards. investment against PM2.5 emissions. • Board of Investments and Bangladesh Export Processing Zone Authority; 31 Proposed Bangladesh Green-Growth Framework • Bangladesh Small and Cottage Industries Policy Direction 5 human health through the provision of safe Corporation; Promote Livable Green Cities drinking water, sanitation, and hygiene. through Urban Regeneration • Bangladesh Standards and Testing Institution; Recommendations and New Smart Cities • Ministry of Agriculture; • Ministry of Labor and Employment; • Bangladesh would benefit from implementing Green urban planning, the greening of buildings, the green building policy and related • Ministry of Industries; and green transportation can significantly address guidelines and reporting requirements of • Ministry of Finance; the issues of clean air, urban flooding, and urban the Bangladesh National Building Code, the heat islands. Rapid urbanization in Bangladesh Building Energy Efficiency and Environment • Bangladesh Bank; has increased transport demand, leading to Rating System, and incentivizing builders and • Financial Institutions Division; severe road congestion and deterioration in urban developers to construct green, affordable, and environments. The impact of such rapid growth resilient housing units. • Information and Communications Technology has major consequences on the ability of the Division; transport sector to provide mobility for all people. • Bangladesh could develop secondary smart • Bangladesh Tourism Board; and The declining quality of the urban environment cities with green infrastructure, services, has also caused irreparable damage to natural innovation, human capital, good governance, • Ministry of Disaster Management and Relief/ ecosystems in cities and surrounding areas. and strong enabling environments to make Department of Disaster Management, Ministry them attractive for investment. of Social Welfare/Department of Social Bangladesh could adopt the ambitious objectives Services. of making cities green, resilient, competitive, • In the pilot phase, Bangladesh should invest and inclusive while planning smart city in city-level diagnostics for identifying key development in parallel. urban development challenges. • Bangladesh could strengthen the implemen- Opportunities tation of smart-city projects by establishing legal foundations for smart cities. Investing in climate-smart cities: under the National Adaptation Plan, the Government of • Bangladesh should strengthen enablers of Bangladesh aims to develop climate-smart cities smart-city innovation such as technology reinforced with robust urban drainage networks research and development, financing mecha- and water management infrastructure; expanded nisms, businesses, institutions, etc. green infrastructure; effective solid waste and renewable energy mechanisms; and improved Green Growth Green Growth Framework in Bangladesh in Bangladesh 32 • Urban afforestation measures should Policy Direction 6 • Bangladesh should make efforts to arrest be pursued. Stimulate productive agriculture, and reverse the degradation of natural promote the blue economy, strength- capital using information and communications • Bangladesh should leverage international en coastal resilience, and sustainably technology based monitoring of natural cooperation to pilot smart cities. manage natural capital capital stocks and the involving of indigenous communities in conservation efforts. Critical Implementation Actors to be Empowered Need for Productive Agriculture Recommendations for The contribution of agriculture to Bangladesh’s Productive Agriculture The initial key institutions involved in the above interventions could be the following: gross domestic product is 14 percent, and it employs more than 40 percent of the workforce. • Investment in research and innovation in the • Ministry of Science and Technology; Agriculture remains the largest employment sector, agricultural sector: reducing environmental providing 20 percent direct and 50 percent part- footprints requires the scaling up of such • Local Government Division; time employment opportunities in 2021-22. measures as (a) adaptive cropping patterns • Information and Communication and intercropping, crop diversification, Technology Division; Under a business-as-usual scenario, it is projected integrated rice-fish farming and pond fish that the agricultural sector will stagnate and key production; (b) sustainable nutrient manage- • Dhaka Chamber of Commerce and Industry; national production targets for 2040 will likely be ment; (c) low emission rice production; (d) • Organizations in the information and communi- missed. Investing in a low-carbon and climate- innovative local practices such as floating-bed cations technology sector; and smart transformation of the agricultural sector cultivation on water bodies; and (e) improved can provide many economic opportunities and irrigation efficiency and water storage. • information technology experts and environmental benefits. Development and introduction of salt-tolerant urban planners. and drought-resistant rice varieties also need to be scaled up. Opportunities for Productive Agriculture • Investment in technological interventions in the agricultural sector: including synergies • Increased commercialization, widespread between livestock rearing and agriculture, adoption of climate-smart agricultural improving feeds, scientific cattle fattening, methods, and diversifying agricultural breeding, waste to energy, and health support production will boost resilience to climate systems, as well as in information and commu- change and encourage growth. nications technology for better outreach to end users. 33 Proposed Bangladesh Green-Growth Framework • Increasing access to credit and insurance an estimated US$ 6.2 billion in gross value added Recommendations for in the agriculture sector: sustainable in 2015, with approximately 270,000 households the Blue Economy market-based agricultural insurance also directly and indirectly dependent on marine fishery needs to be popularized among small and for their livelihoods. Conservation and afforestation • Improving institutional mechanisms to marginal farmers. activities in the Sundarbans have increased coordinate policy planning and imple- resilience against flooding and climate shocks, and • Institutional capacity building for mentation across key ministries will lower augmented the opportunities for fish production. social inclusion. transaction costs and ultimately enhance Nonetheless, much of Bangladesh’s blue economy the investment climate. potential is untapped, but investment and capacity development could steer needed progress. Critical Implementation • Bangladesh should improve fisheries- Actors to be Empowered management systems, infrastructure, Opportunities for the Blue Economy value-chain investments, and certification; The initial key institutions could be the following: encourage private-sector investment to increase the availability and quality • Center for Environmental and Geographic • The government could run ocean economic of sea fish; and comply with global Information Services; development scenarios to estimate the export-market regulations. economic benefits from various pathways for • Ministry of Environment, Forest and developing the ocean economy and identify Climate Change; • Bangladesh should invest in developing the needed policy reforms. Furthermore, there systems to measure and monitor the perfor- • Ministry of Agriculture; is a dire need for more research-oriented mance of its ocean economy along targeted investment in the development of climate-resil- development pathways. • Bangladesh Agriculture Research Institute; ient fish varieties, and export quality fisheries • Bangladesh Livestock Research Institute; such as hilsa, shrimps and tilapia. • Regional cooperation between the Indian • Department of Agricultural Extension; Ocean Rim Association and the Bay of Bengal Future growth in the blue economy will be economies will be critical to sustaining the • Department of Agricultural Marketing; driven by fisheries including mariculture, blue economy’s benefits. shipbuilding, coastal and maritime tourism, and • Department of Livestock Services. coastal and offshore wind generation. • Investment in supportive infrastructure and market assistance: augmentation of existing Promote the Blue Economy, agri-logistics, support for expanding market strengthening Coastal Resilience infrastructure and private sector partner- ships is required. For fisheries, shore-based As many as 30 million people depend on infrastructure is required for appropriate fish Bangladesh’s blue economy, which contributed handling, processing, preservation, transporta- tion, distribution, and marketing systems. Green Growth Green Growth Framework in Bangladesh in Bangladesh 34 Box 3.1 Critical Implementation Actors Leveraging Natural Capital to be Empowered Accelerating the Blue through Sustainable The initial key institutions involved in the above Management interventions could be the following. Economy in Smart Delta Cities • Center for Environmental and Geographic Information Services; Opportunities for Leveraging A considerable influx of approximately Natural Capital through • Bangladesh Forest Department; 123,800 people is expected in the • Ministry of Environment, Forest and southeastern coastal region over the Sustainable Management Climate Change; next five years, necessitating prudent urban planning to accommodate this • Bangladesh would benefit from leveraging • Depart of Fisheries; climate-smart agriculture and nature-based growth. The establishment of a smart • Ministry of Fisheries and Livestock; delta city, encompassing Matarbari, solutions as green growth engines by intro- Chakaria, and Cox's Bazar, presents ducing ecosystem-based solutions to land • Ministry of Agriculture; and degradation and climate change vulnerability. an opportunity to create a nationally • Proposed new agency for the blue economy. significant, eco-friendly waterfront city under the green-growth investment Recommendations for leveraging priority. This smart delta city would natural capital through serve as a center for the blue economy, offering residents and visitors a unique sustainable management blend of eco-tourism, outdoor activities, marine fisheries, aquaculture, and high- • In coastal areas and riversides, protect value goods and services. and restore mangroves and forests; build embankments for protection from wave Financing such smart delta cities erosion; and harvest rainwater to reduce demands a combination of international water stress. climate finance, public-private partnerships, domestic resources, • Bangladesh should promote ecotourism/ green bonds, and development nature-based tourism by providing financial assistance, enabling Bangladesh assistance, sustainable infrastructure, and to enhance climate resilience and adequate training and certification. promote sustainable development for future generations. 35 Proposed Bangladesh Green-Growth Framework Objective 3: Achieve a Policy Direction 7 Strengthen social protection and the between the Department and key national and international agencies. just transition, enabling capacity of citizens to adapt to an inclusive climate-resilient economy • To implement the 2100 Bangladesh Delta Plan, a resilient, green, and the country should undertake (a) tax reforms, (b) reforms in city corporations and munici- healthy society Managing climate risks has been a central issue palities for cost recovery in the urban water supply, and (c) the establishment of effective in Bangladesh’s development and investing in adaptation remains a priority in the government’s water-user associations in rural areas. In line The third objective of the Green-growth climate change strategy. Thousands of kilometers with the 8th Five-Year Plan, Bangladesh should Framework is to raise the overall quality of life for of roads and waterways are impacted by prioritize (a) operationalizing the Delta Wing Bangladesh’s people and enhance contributions flooding and this expected to worsen by 2050. within the General Economics Division, to the international community through strong Furthermore, by 2050 up to 20 percent of the (b) operationalizing the Delta fund and its advocacy for green growth. Efforts will be current network of railway track will also be accompanying institutional arrangement, directed toward building resilience to climate inundated. To address this, strategic planning and (c) establishing the Delta Knowledge Hub for change through ecosystem-based approaches to spatial vulnerability analyses must identify the hosting and offering intellectual support, and adaptation. Interventions will be directed towards most critical and exposed transport assets and (d) collaborating multilaterally with develop- stricter pollution controls aimed at improving address resilience and redundancy by shifting ment partners and other riparian countries. public health. development away from vulnerable zones and upgrading the network. • Bangladesh can strengthen disaster recovery programs to strengthen resilience by (a) integrating gender aspects into social • Bangladesh can enhance its disaster welfare programs, (b) transitioning in-kind preparedness by (a) improving the accuracy social protection programs to cash-based and lead times of disaster forecasts, (b) programs, and (c) increasing coordina- strengthening the Bangladesh Meteorological tion with the Ministry of Social Welfare to Department’s hardware and information and improve efficiency across multiple social communications technology infrastructure, and welfare programs. (c) strengthening the observation network for tropical cyclone monitoring. • Bangladesh can prioritize investments to strengthen the Meteorological Department’s institutional and technical capacities and enable better collaboration and coordination Green Growth Green Growth Framework in Bangladesh in Bangladesh 36 Critical Implementation Actors Policy Direction 8 • Bangladesh should allocate resources to to be Empowered Improve public health and wellbeing establish an environment fund to help mobilize through a cleaner environment sustainable financing for conservation action. The initial key institutions involved in the above interventions could be the following. • Fiscal policies should adopt the beneficia- Bangladesh is one of the most polluted countres ry-pays and polluter-pays principles to address • Center for Environmental and Geographic in the world and Dhaka was the second most air and water pollution. Information Services; polluted city between 2018 and 2021. Air pollution was deemed the second largest risk leading to • The Dhaka Rivers Ecological Restoration • Ministry of Environment, Forest and Climate Project should continue to be implemented to Change; death and disability in Bangladesh in 2019, with four of the country's top five causes of deaths improve water flows and enhance domestic • Bangladesh Water Development Board; being directly associated with it. By simultaneously wastewater management around Dhaka City. • Ministry of Social Welfare; reaching the ambient air quality target of 10 micrograms per cubic meter and 100 percent Opportunities • city corporations and municipalities; clean cooking in 2041, as much as 86 percent of • Bangladesh Meteorological Department; Bangladesh’s PM2.5 deaths could be averted. • Priorities for control measures to reduce • Ministry of Disaster Management and Relief; To achieve these targets, Bangladesh will ambient and household air pollution include: and have to improve its environmental governance (i) eliminate the burning of agricultural residue to safeguard a green, resilient, and inclusive and solid waste; (ii) improve management of • Delta Wing. agricultural fertilizers and livestock manure; recovery of its economy. Improving the Department of the Environment’s capacity to (iii) control emissions from industry and the enforce upstream regulation is key to addressing power sector; (iv) substitute household use negative externalities. of solid fuel for cooking by switching to liquid petroleum gas or electricity; and (v) collabo- rate with neighboring countries to address • Bangladesh could undertake efforts targeted transnational PM2.5 pollution. . at the development of regulations and policies to expand the Department of the Environment’s regulatory mandate to protect and improve environmental quality and promoting green growth. • Bangladesh should promote the public disclo- sure of key environmental indicators. 37 Proposed Bangladesh Green-Growth Framework Recommendations Policy Direction 9 Bangladesh could develop a mechanism linking Enhance engagement and cooperation its academic, industrial, and research sectors • Interventions for addressing microbiolog- with the international community on involved in green research and development. ical pollution that should be prioritized: (i) climate change This would also energize relevant investment, household point-of-use treatment of drinking boost efficiency, build competence in human water with ceramic filters; (ii) safely managed, resources, and help establish a world-class green- improved, non-shared sanitation for house- Bangladesh has led climate action, particularly technology information structure. holds; and (iii) the promotion of hand washing, amongst lower-middle-income and climate- targeting caregivers of children under five. vulnerable countries. • Bangladesh should invest in building infra- structure for green technology and industry A major policy direction of the 8th Five-Year Plan development through green clusters, including • For mitigation exposure to arsenic in drinking is to substantially enhance the public spending in secondary cities. water, three control interventions should be on research and development to support prioritized: (a) tube wells; (b) ponds with sand international and domestic solutions to climate • Based on the level of domestic technology filtration, and (c) use of household point-of-use change. Research grants to top universities on development, Bangladesh should support filters for drinking water. specific areas of development interest can be market activation and commercialization of a great facilitator of innovation. Linking this to green technologies. Critical Implementation Actors the agricultural and industrial sectors can also to be Empowered leverage public resources with private funding. • Bangladesh could actively engage in inter- The 8th Five-Year Plan envisages spending national negotiations on climate change and The initial key institutions involved in the above 1 percent of gross domestic product on research make contributions by playing a construc- interventions could be the following: and development by 2025, rising to 3 percent by tive role in building an effective global 2030 and maintained thereafter. climate regime. • Department of Environment, Ministry of Environment, Forest and Climate Change; Recommendations • The Government of Bangladesh should build • Ministry of Science and Technology; and partnerships for technology transfers, tech- Solutions for Bangladesh requires research nical assistance programs, and trade deals • Ministry of Health and Family Welfare. and development: as a first step to building an for green products and services to boost its efficient system for green-technology innovation, green economy. Bangladesh should develop mechanisms for prioritizing research and development investment • Bangladesh could engage with independent in green technologies. evaluation agencies to improve its interna- tional competitive rankings and standing in the International Green Growth Index. Green Growth Green Growth Framework in Bangladesh in Bangladesh 38 Critical Implementation Actors to be Empowered The key institutions involved in the above interventions would be the following: • Ministry of Foreign Affairs; • Economic Relations Division of the Ministry of Finance; and • Ministry of Environment, Forest and Climate Change. Chapter 4 4 Enabling Environment: Regulatory Framework, Institutional Arrangements, and Policies 4.1 Green Growth Green Growth Framework in Bangladesh in Bangladesh 42 Strengthening the Regulatory Framework for Green Growth in Bangladesh Environmental Laws, Exploring the Enactment Framework provides an important starting point for fiscal planning, more systematic detailing of Regulations, and Plans of a Framework Act that estimated costs of climate investment and green- Incorporates Climate Risks growth revenue is needed. Furthermore, the Framework should include prioritized investment, Environmental activism in Bangladesh started and Green Growth green growth-engine revenue, and enabling immediately after independence, gathered policies, along with the national budget and be force in the post-1990 period and has further included in the Annual Development Plans. accelerated in the wake of global concerns about Adopting a systematic framework act would allow climate change. Nonetheless, the country’s overall for a comprehensive systematic approach to environmental-management performance requires implementing green growth that is climate resilient. strengthening implementation capacity constraints Such an act could create a high-level national and financing issues exist. coordination committee for the development of green climate resilience as an important Currently, the overarching policy framework for step in meeting the Nationally Determined green growth is the 2009 Bangladesh Climate Contributions and ensuring local adaptation. Change Strategy and Action Plan, which is The proposed act would support alignment currently under revision. Furthermore, Bangladesh and transparent implementation of government has made commitments to the United Nations policies and programs. Framework Convention on Climate Change and the government has set policy priorities. The high-level national coordination committee would enable stakeholder representation formulating and monitoring the implementation of the national climate strategy and the Bangladesh Climate Fiscal Framework 2020. Although this 4.2 43 Enabling Environment: Regulatory Framework, Institutional Arrangements, and Policies Strengthening Institutional Arrangements for Green Growth in Bangladesh Governance and Institutional The Department, however, faces many constraints–a shortage of funding; an excessive Arrangements for focus on the system for project approvals on Environmental Management: environmental grounds; a lack of technical skills; a large number of uncoordinated and Background and Challenges poorly implemented donor-driven projects; and the absence of a quantitative monitoring and evaluation framework. In 1989, the government created the Ministry of Environment, Forest and Climate Change There is also a lack of proper coordination as the main agency responsible for managing between the Ministry of Environment, Forest and the environment. There are eight specialized Climate Change and other ministries with major agencies that support the implementation of the inputs in determining the state of the environment. Ministry’s agenda, including the Department of the Environment, which is responsible for: Another weakness is the absence of a role for local government institutions in environmental • Monitoring environmental quality; management, reflecting a general pattern of highly centralized governance in Bangladesh. • Controlling and monitoring industrial pollution; • Establishing regulations and guidelines for activities affecting the environment; • Reviewing environmental impact assessments Financing Challenge (EIAs) and managing the environmental clearance process; A shortage of financial resources is one of the key • Promoting environmental awareness through reasons for Bangladesh’s weak environmental public information programs; and protection. Table 4.1 shows several key ministries • Coordinating the implementation of a number that could contribute significantly to climate action of international protocols and conventions to and development but have been allocated very which Bangladesh is a signatory. few resources to pursue this. Green Growth Green Growth Framework in Bangladesh in Bangladesh 44 Table 4.1 Climate-Relevant Allocations for Ministries, Financial Year 2022 Total budget Climate-relevant Climate-relevant portion Selected ministries / agencies (Tk, millions) allocation (Tk, millions) of total budget (%) Ministry of Textiles and Jute 6,915.5 345.5 5.0 Ministry of Environment, Forest and Climate Change 12,226.4 3,792.1 31.0 Ministry of Power, Energy and Mineral Resources 20,864.9 1,294.9 6.2 Ministry of Land 22,283.8 1,079.4 4.8 Ministry of Fisheries and Livestock 34,372.2 10,596.7 30.8 Ministry of Women and Children Affairs 41,891.5 5,463.9 13.0 Ministry of Shipping 51,373.3 4,444.6 8.7 Ministry of Housing and Public Works 63,453.1 4,457.0 7.0 Ministry of Water Resources 88,265.8 28,339.0 32.1 Ministry of Disaster Management and Relief 99,508.3 24,582.2 24.7 Ministry of Agriculture 162,014.4 58,000.6 35.8 Ministry of Science and Technology 212,040.5 26,761.7 12.6 Sustainable and Renewable Energy Development Authority 253,978.4 10,707.4 4.2 Road Transport and Highways Division 329,419.8 2,534.9 0.8 Local Government Division 392,194.6 27,522.5 7.0 Source: Ministry of Finance 45 Enabling Environment: Regulatory Framework, Institutional Arrangements, and Policies Suggested institutional reforms Strengthening the Ministry of Environment, storm-water regulations, sewerage connection, Forest and Climate Change: for the Ministry to and tariff levies. Proper implementation of green-growth play its role as the central body for environmental policies will require substantial improvements in management, its capabilities must be significantly Strengthening delta-management institutions: institutional arrangements for sound environmental strengthened. As a first step, progressive efficient implementation of the 2100 Bangladesh management. The main institutional reforms increases in its budget must be provided to Delta Plan requires a high level of institutional are highlighted Figure 4.1. This framework was reach the target of 0.5 percent of gross domestic coordination and financing, as well as enabling designed to serve as a single structure both product by 2041. laws, policies, and regulations. for implementing the Nationally Determined Climate action: climate policies and national Decentralizing environmental management: to Contributions and for including and integrating the adaptation goals should be integrated into the ensure proper environmental management, the implementation of the National Adaptation Plan. planning and decision-making process in all government needs to decentralize implementation core ministries. Furthermore, ministries should to local institutions for proper management merge climate adaptation principles into existing of the environment. Figure 4.1 Proposed Nationally government rules and regulations, such as urban Determined Contribution-National Action Plan Alignment of key ministries with green growth: Implementation Framework coordination among ministries and agencies would help harmonize the policies to promote better environmental performance. The following are NDC - NAP potential recommended institutional roles and Advisory Committee action under the proposed Bangladesh Green Growth Framework. a. The Ministry of Commerce’s mandate could NDC - NAP NDC - NAP NAP include updating export policy to incorporate Implementation Coordination Implementation environmentally sustainable production consi- analytical support Committee analytical support derations. It is also well-positioned to sponsor laws targeting the import of specific chemicals that can harm the environment or the public. b. The Ministry of Industries has the potential to take on a greater leadership role in environ- Power Sector Industry Sector Transport Sector Sectoral Adaptation mental management and resource-efficient Working group Working group Working Group Working Groups cleaner production through its core function of issuing and overseeing industrial policy. Source: Ministry of Environment, Forest and Climate Change Green Growth Green Growth Framework in Bangladesh in Bangladesh 46 c. The Bangladesh Export Processing Zones f. The private sector: the government should Authority could do more to ensure each actively engage with the private sector to of its zones is properly sited, designed, ensure that opportunities and obstacles for re- and managed from environmental, health, source-efficient cleaner production in different and safety perspectives. sectors are well understood, obtain feedback on public pollution-control interventions, and d. The Bangladesh Economic Zone Authority promote cleaner production. should adopt guidelines and procedures to ensure that new economic zones are planned to incorporate comprehensive environmental impact assessments. e. The Ministry of Finance can play a key role in fostering green growth through fiscal policy, as well as facilitating access to finance for green investment. On both fronts, the Mi- nistry’s agencies, including the National Board of Revenue and the Bangladesh Bank, have some initiatives which should be developed and scaled up to support the rapid pace of industrial development. 4.3 47 Strengthening Budgeting and Planning for Green Growth in Bangladesh Strengthening environmental concerns vision and mission statement in their strategic in planning and budgeting: integrating planning. Such a commitment will enhance their environmental concerns in budgetary corporate responsibility and demonstrate their management is essential to green growth. dedication to contributing positively to the nation's Bangladesh has made progress recently, but environmental goals. progress on green public financial management remains to be made. The full incorporation of the They can also play a pivotal role in facilitating green public financial management agenda is, the green transition of small and medium-sized however, a long-term endeavor and will require enterprises by prioritizing environmentally friendly long-term commitment, resources, and efforts. procurement of goods and services. By providing Institutional capacities in the Ministries of Finance technical support and capacity-building programs and Planning as well as concerned line ministries and actively seeking out and procuring sustainable will have to be substantially strengthened. products, state-owned enterprises can create a strong demand for green products. Strengthening green budget formulation: in the short term, the Budget Management Committees, The private sector, such as the ready- Budget Working Groups, and Budget Management made garment one, and non-governmental Branches must be sensitized to greening the organizations have been leading Ministry Budget Framework. In the medium term, socioeconomic development causes in links of resource allocation to the government’s Bangladesh. The government must actively environmental goals must be strengthened while seek their involvement in green-growth policy each ministry/division should state the relevance advocacy and implementation. of their strategic objectives to environmental conservation and the sustainable management of natural capital in Budget Frameworks, and specify the activities they are adopting. State-owned enterprises in Bangladesh have a pivotal role to play in fostering climate-change mitigation and adaptation efforts. It is essential for these enterprises to incorporate a climate-relevant Green Growth Green Growth Framework in Bangladesh in Bangladesh 48 Box 4.1 Need for Regular and Reliable Production of Environmental Data and Statistics For the Government of Bangladesh to Better environmental data and statistics will prioritize policies and to achieve a green, contribute to the target monitoring of the resilient, inclusive development pathway, government’s 8th Five-Year Plan, allowing better environmental data and statistics are for the incorporation of criteria to prioritize required. There is a strong need to improve and monitor green-growth interventions the capacity of Bangladesh Bureau of Statistics and embed green, resilient, inclusive and relevant data-producing government development principles in budget planning. departments to ensure the sustainable Furthermore, such data would enhance production of timely and quality environmental polluters’ accountability and the improved statistics. These include environmental compliance and enforcement of environmental pollution monitoring data, such as ambient management. air and water quality, solid and water-related waste, hazardous waste and emissions from industries; disaggregated biophysical data on ecosystems, data on ecosystem services; and socioeconomic data on the impact of the environment on the local economies and livelihoods, among others. Source: World Bank 4.4 49 Enabling Environment: Regulatory Framework, Institutional Arrangements, and Policies Indicative Policy Framework for Green Growth in Bangladesh Implementation of the Bangladesh Delta Plan: as one of five key measures to help bridge the polluter-pays principle must be applied to create the successful implementation of the 2100 Plan gap between current commitments and the a strong disincentive against illegal disposal of requires robust institutional coordination, sufficient emissions reductions needed to stay within the industrial, commercial, and household wastes in financing, and supportive legal frameworks. 2° C warming target. surface water bodies. Establishing such mechanisms as the Delta Wing, Delta units in sectoral ministries, and the Project/ Adoption of a carbon tax: a green tax on fossil Sustainable management of forestry resources: Programme Selection Committee for investment fuel is a tremendously useful policy for integrating speeding up the process of afforestation across coordination is crucial. To bridge the substantial environmental considerations into the growth forested zones–and increasing its overall target– financing gap, higher budget allocations, efficient strategy because it not only discourages the should be a high priority. On the policy front, the execution, and diverse funding sources are consumption of CO2-emitting fossil fuel but also biggest challenge is the control of illegal poaching essential. Furthermore, regular reassessment of provides a very attractive resource of revenue of forest resources. A related issue is the lack of investment needs is crucial to avoid delays that generation. adequate data that prevents effective monitoring may escalate costs and vulnerabilities. and evaluation. Once an adequate database is Taxation on pollution from industrial units is a established, the planning of forest investment, Managing air and water pollution: the adoption way in which the polluter-pays principle can be based on demand and supply forecasts and the of the Delta Plan will have positive effects on applied. The usual practice to control industrial consistency of these with needs for sustainable water quality by improving the population’s air pollution in Organisation for Economic Co- use, can be done. access to clean water and sanitation, and better operation and Development countries is to use management of solid wastes. There is, however, a combination of laws, regulations, technology, Coastal forest restoration for climate resilience: a huge backlog of unmet demand for piped and taxation. Bangladesh has set air-quality restoring mangroves in coastal areas is crucial water and safe sewerage services in both urban standards but monitoring by industrial units is for ensuring Bangladesh's coastal stability and and rural areas. Additionally, the adoption of the difficult because of the absence of proper testing resilience. Mangroves act as natural barriers, polluter-pays principle is absolutely essential to equipment and a database. This problem needs to protecting millions of people from coastal flooding improving air and water quality. be addressed urgently with technical assistance during cyclones and averting billions of dollars in from international donor agencies. annual damage. Furthermore, mangroves play a Removal of fuel subsidies: the ideal cost for significant role in carbon sequestration, absorbing each fuel per consumption unit includes supply Prevention of surface-water pollution: water carbon dioxide four times faster than mature land- expenses, damage from global climate impact pollution from the inappropriate waste disposal based forests. and local air pollution, and a standard value- is amongst the most pressing environmental added/general consumption tax. The International challenge in Bangladesh. In addition to laws and Energy Agency regards fossil-fuel-subsidy reform regulations that set preventive measures, the Green Growth Green Growth Framework in Bangladesh in Bangladesh 50 Climate-smart urban development: rapid for meeting natural disaster costs. Development urbanization in Bangladesh has driven economic aid could play a critical role, and a risk-layering growth, but it has also led to environmental approach in disaster-risk financing could degradation and heightened climate vulnerability. significantly reduce financial costs. To address these issues, urban planning must integrate adaptation strategies, focusing on Encouraging private investment in climate improved governance, resilient and affordable change: the Bangladesh Climate Fiscal Framework housing, urban-rural connectivity, and nature- could enable private investment to address climate based solutions. change through the government’s judicious use of regulations, taxes, subsidies, financial-sector Climate-smart agriculture: to ensure sustainable policies, and pricing policies. Establishing well- growth, agriculture must be adaptive and resilient structured public-private partnerships could help to climate change, with a focus on diversification bring in private capital and increase efficiency in and climate-smart agricultural practices. The sectors critical for the climate agenda. latter offers multiple benefits, including higher productivity, increased resilience, and lower Addressing market and institutional barriers greenhouse gas emissions. Ensuring access to can increase financial-sector capacity to climate-adaptive technologies, capacity building, support sustainable projects: priority action and financial support will empower women and includes (a) setting appropriate macroprudential strengthen rural households. incentives reflecting environmental risks in capital and provisioning requirements; (b) mandatory Strengthening social protection: climate shocks certification of environmentally friendly assets; have a disproportionate impact on the poor, (c) knowledge and capacity strengthening of especially women, leading to irreversible losses banks to originate and monitor green loans; in human and productive capital. To address and (d) increasing the availability of long- this, social protection systems must respond term finance for the climate agenda through quickly to provide support. Integrating gender green finance instruments. aspects into social welfare programs could reduce vulnerabilities and ensure access to support services. Strengthening macro-financial resilience to disasters: strengthening disaster resilience and financing is essential, as there is no comprehensive strategy or regulatory framework Chapter 5 5 Green Finance Diagnostic for Green Growth in Bangladesh 5.1 Green Growth Green Growth Framework in Bangladesh in Bangladesh 54 Green-finance Landscape in Bangladesh Green-finance efforts to internalize negative environmental several sources of funding to address growing externalities and foster new environmentally disaster costs, more remains to be done. The friendly investment. impact of climate change and climate-related Green-growth requires leveraging substantial natural disasters can lead to losses for the financial funding to promote economic growth that Bangladesh needs to address bottlenecks that sector estimated at 3–5 percent of outstanding preserves the environment. The World Bank impede the flow of financial resources to green- loans. Furthermore, despite microfinance has estimated that, just to meet the Sustainable growth projects. Financing green growth requires being well-developed, it offers limited help to Development Goals, domestic governments need an enabling environment for private financial affected households. to provide 50–80 percent of the funding and that institutions. It also requires addressing financial- the remaining amount should come from market failures that keep costs high and reduce third parties. incentives to provide finance to productive sectors and firms. Preserving the ability of governments to invest in Key Green-finance Stakeholders Underdeveloped capital markets in Bangladesh the transition to green economies will be critical contribute to significant restrictions in access in Bangladesh to counteract the inequitable impacts of climate change and the COVID-19 pandemic. Unlocking, to long-term finance. The country’s two stock leveraging, and channeling investors’, private exchanges are relatively small; banks and other The 2020 Bangladesh Climate Fiscal Framework sector, and donors’ financing into environmentally financial institutions account for roughly a quarter presents information about a wide range of friendly projects and initiatives will become of the market capitalization; the corporate climate-related policies, plans, strategies, and increasingly important in supporting Bangladesh’s bond market is nascent; and access to foreign different sources for funding them. It does not, transition to a greener economy. borrowing is limited by a high level of foreign however, present a comprehensive list of sources exchange restrictions. financing green growth. Furthermore, due to data Green financing aims to ensure sufficient limitations, it is difficult to ascertain exactly the total and adequate financial flows to support the The banking sector’s capacity to provide amount of green finance being distributed or to implementation of a green-growth strategy. financing and price risks is constrained. The calculate the exact financing gap that needs Financing green growth goes beyond the country needs to preserve financial stability and to be closed. establishment and use of financial instruments foster credit growth by improving asset quality and and should consider the demand side for green increasing the capitalization of banks, especially Regarding green banking, the Bangladesh development with the supply of resources to do state-owned ones. Bank has led the country through innovative so. Both the demand and supply sides of green regulations, policies, and incentives, including Although substantial efforts have been made pioneering the use of green central banking as finance are necessary for the advancement of to strengthen disaster resilience and introduce 55 Green Finance Diagnostic for Green Growth in Bangladesh an instrument to operate different green funds Figure 5.1 Bangladesh, Green Financing’s Share at concessional rates. Although the Bangladesh of Total Term-loan Disbursements, Financial Years Bank has established targets for direct green 2016–2021, percent and sustainable finance, there are gaps in regulatory and supervisory processes, and Loan disbursements for green finance non-compliance is inconsequential. have been steadily rising in Bangladesh Long-standing banking sector vulnerabilities, Share of Total Term-loan Disbursements magnified by COVID-19, impede efficient 100% channelling of savings to green, productive Others investments. The existing regulatory and supervisory framework for banking sector needs to be aligned with international good practice and promote bank financing of underserved market segments. 50% Bangladesh lags other emerging markets and developing economies in its volume and range of green-finance instruments because of structural weaknesses in its banking system. As highlighted in the 2022 Bangladesh Country Economic Memorandum, developing capital markets should 0.5% 0.6% 0.7% 1.2% 1.4% 4.4% Green be among the top policy priorities to unlock long- 0% Finance term finance for green investments. FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 Source: Bangladesh Bank Green Growth Green Growth Framework in Bangladesh in Bangladesh 56 The government remains the most relevant Demand for Green Financing source of financing for green growth and environmentally sustainable development. Current initiatives, although important, remain Financing climate action alone for Bangladesh insufficient. Furthermore, despite the fact is estimated to require at least US$ 176 billion that carbon finance could provide additional over the next two decades. Figure 5.2 shows opportunities to attract resources to foster climate- the investment needed over the next decade for related projects, the government has not made Bangladesh to reach its climate-mitigation targets enough use of the Clean Development Mechanism and ambitions. under the Kyoto Protocol. Equity investors, institutional investors, and Figure 5.2 Bangladesh, Climate-Smart Investment international organizations are fundamental Potential, 2018–2030, US dollars billions to funneling green financing towards public and private green activities. In Bangladesh, Bangladesh’s Climate-Smart Investment Potential (2018–30) these actors play an essential role in supplying will invest significantly in green buildings green finance. $, Billions Bangladesh also has experience with instruments such as green bonds, green Green buildings $119B concessional loans and grants, green fiscal policy, and green central banking. The lack of a pipeline of green projects, and the absence Transport infrastructure $23B of standards and guidelines defining technical specifications and the eligibility of projects and initiatives helps explain why only a handful of Urban water $13B initiatives has been funded through green bonds. Furthermore, discretionary approval processes for external commercial borrowing limit foreign Agriculture $9B borrowing and the ability to attract capital from international institutional investors. Waste $4B Source: International Finance Corporation Renewable Energy $3B 57 Green Finance Diagnostic for Green Growth in Bangladesh Complementary plans and initiatives will Table 5.1 Bangladesh, Cost-Benefit Analysis of also require billions of dollars to be fully Major Environmental Health Risk Interventions implemented. Bangladesh needs to increase its spending on programs related to environmental protection and climate change to 3 percent of gross domestic product by 2031 and to Between US$ 2.8 million (Tk 235 million) and $161 million PM2.5 control measures 3.5 percent by 2041. (Tk 13,524 million) per year per μg/m3 of ambient PM2.5 Shifting to a green economy may require Household air pollution control Total cost of interventions amounts to Tk 3,958–16,754 per household per year even more. Addressing household and outdoor Drinking-water quality Tk 1,922-4,119 per household per year, depending on the method air pollution; inadequate water, hygiene, and sanitation; and arsenic contamination of drinking Drinking-water sanitation 2,990 Tk per household per year water in Bangladesh will require significant Drinking-water hygiene Tk 7,630 per household per year economic resources that could be financed, Arsenic in drinking water Tk 2,146–2,745 per household per year, depending on the intervention at least in part, through different green finance instruments (Table 5.1). Source: World Bank (2023, forthcoming) Green Growth Green Growth Framework in Bangladesh in Bangladesh 58 Bangladesh’s ministries and government been used in Bangladesh for different climate- and these have, however, been directed towards food agencies involved in the creation and oversight environmentally-sustainable-related projects. security and agricultural adaptation, despite the of policies, regulations, and incentives to sector's vulnerability to climate change. foster green finance are not coordinated by Carbon Financing in Bangladesh: the a dedicated body to secure access to green Infrastructure Development Company Limited The Government of Bangladesh’s finance from local and international sources. is a public non-bank financial institution that Public-Private Partnership Authority specializes in the financing of medium to large- Climate-friendly green incentives have been scale infrastructure, energy efficiency, and The Public-Private Partnership Authority aims to created, but evidence of impact is still missing. renewable energy projects in Bangladesh. It has a provide an enabling environment for government An in-depth analysis of existing green incentives strong pipeline of climate change projects focused institutions to engage in such partnerships for the could provide guidance about which of them on both adaptation and mitigation in various delivery and implementation of sustainable public- provides better results and opportunities for industries, such as cement, bricks, textiles, and oil. service infrastructure. It supports line ministries improvements moving forward. to identify, develop, tender, and finance high- A broader use of carbon financing could allow quality public-private partnerships, and provides Bangladesh to fund energy-efficiency initiatives a professional, transparent, centralized portal for to reduce the demand for energy from its largest interested investors and lenders. As of May 2021, industrial consumers–the ready-made garment, 79 projects had been undertaken with support International Green Financing textile, steel, cement, and fertilizer-producing from the Public-Private Partnership Authority and Vehicles Accessed by Bangladesh industries. The government needs to integrate are at different stages of the project cycle. The carbon pricing into its climate strategies and projects span several sectors including transport, finance some of its environmental initiatives power, industry, health, IT, and urban development. Bangladesh Bangladesh already has experience through decarbonization projects and carbon- accessing international green financing vehicles pricing instruments. including the Green Climate Fund; the International Fund for Agricultural Development and the Green Transformation Fund: The Bangladesh Adaptation for Smallholder Agriculture Program; Bank’s Fund facilitates access to finance in foreign the Global Environment Facility and the Small exchange for importing capital machinery and Grants Program; and the United Nations Capital accessories for environmentally friendly initiatives. Development Fund’s Local Climate Adaptive Disbursement from it, up to Financial Year Living Facility. 2022, was US$ 138.75 million in 43 projects and EUR 61.72 million in 26 projects. Existing green financing vehicles could foster the flow of resources to support the green Bangladesh Climate Change Trust Fund, growth agenda in Bangladesh. The following established in 2009, has supported 788 projects are examples of financing vehicles that have across various sectors. Less than 10 percent of Chapter 6 6 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh 6.1 Green Growth Green Growth Framework in Bangladesh in Bangladesh 62 Methodology This chapter (a) identifies the main barriers and bottlenecks that impede the channelling of financial resources towards green-growth projects in Bangladesh, and (b) offers recommendations to address those barriers and bottlenecks. The chapter uses the green- finance value chain, a tool that maps the main stakeholders and processes associated with an environment that enables the flow of green finance, in this case, in Bangladesh (Figure 6.1). Using the green-finance value chain as an analytical framework allows (a) an understanding of associated barriers and bottlenecks, and (b) the exploration of solutions to overcome them to finance green growth in Bangladesh. 63 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh Figure 6.1 The Green-Finance Value Chain is a tool that maps the main stakeholders and processes associated with an environment that enables the flow of green finance Goverment (MoF, BB, DoE, BSEC, and others) Create regulatory environment and enforce rules to engace green financing and green growth Institutional Investors Buy government bonds that can be linked with Green/Blue Borrowers sustainable criteria (public & private) Green Finanching Prepare green Consumers Stable Capital Equity Investors projects, Projects and initiatives that Market meet green criteria: provide Seek low-cost Invest projects linked to products, and sustainable, Environmental, Social and services, verified transparent data, meet expected financial e ective Governace (ESG) impact technologies products and and adopt returns and have positive Sustainable environmental impact that services environment environmentally International Organizations sustainnable supports green growth practices Provide funding, technical assistance and convening power to support development strategies linked toi green resilient, inclusive activities Financial institutions Allocate financial resources through di erent green instruments to support green growth Source: World Bank COUNTRY ENVIRONMENT Green Growth Green Growth Framework in Bangladesh in Bangladesh 64 Barriers to Channeling Green • The high cost of doing business attributable • There is Inadequate expertise to evaluate to on-site visits to projects in a green portfolio green technologies and investments within Finance into Bangladesh’s Green- and the need for specialized human resources government as well as in financial institutions Growth Projects to inspect and verify project activities; assessing the viability of green investment; • Inadequate in-house technical capacity: the • There is a lack of a project pipeline to attract Borrowers face significant hurdles: processing and administering of loans for investment in such green sectors as trans- green projects suffers from a lack of tech- port and urban planning. • A lack of capability to adopt and implement nical capacity to assess environmental and green practices and technologies; social goals, risks, and the future potential of green technologies. • Limited knowledge and capacity to prepare bankable green projects; • The high capital investment requirements for The Government of Bangladesh lacks going green: institutional structures for implementing its • Stringent requirements to borrow; and policies and targets and for effectively holding polluters responsible. Specifically, it faces • Low demand for green products. the following: • Low interagency coordination to advance Financial institutions continue to perceive green a green growth, backed by a national action projects, businesses, and technologies as risky. plan and green finance policy, to support They face the following challenges: Bangladesh’s green growth commitments; • Structural weaknesses in the financial • Lax enforcement mechanisms to punish sector limit the capacity of finance to reach environmental offenders: without a proper underserved segments, such as cottage, business environment and regulatory frame- micro, small and medium-sized enterprises, work for attracting investors, the potential economic sectors perceived as risky, and for advancing green finance in Bangladesh long-term projects; remains limited; • An appetite for low risk and a short-term focus contribute to slow green-loan disbursement; 65 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh Figure 6.2 Barriers Affecting Key Green-Finance Value Chain Actors when Financing Green Growth in Bangladesh Figure 6.2 shows the gap between the demand and supply of green financing in Bangladesh. Closing the gap between those needing finance and those providing is central to promoting green growth in Bangladesh. Barriers a ecting key actors What is holding key actors back? Government Institutional Investors Financial Institutions Borrowers Consumers Low interagency Structural weakness in Structural weakness in Lack of capability to Low demand for coordination to advance the financial sector the financial sector adopt and implement green products a comprehensive national green practices and green growth strategy High cost of Low risk appetite and technologies doing business short-term focus Lax enforcement Limited knowledge and mechanisms to punish Inadequate in-house High cost of capacity to prepare environmental o enders technical capacities doing business bankable green projects Inadequate expertise Inadequate in-house High capital investment to evaluate green technical capacities requirements for going technologies and green investments Stringent requirements to borrow Lack of a project pipeline to attract investment in Low demand for green sector green products Source: World Bank 6.2 Green Growth Green Growth Framework in Bangladesh in Bangladesh 66 Recommendations This report identifies three categories of Recommendation 1 opportunities to facilitate the financing of green growth in Bangladesh: Create a Governance Framework a. Create a governance framework for for Greener Growth green growth; b. Use a mix of incentives to boost en- • Adopt a broad-based national green-growth vironmental markets; action plan backed by the right mix of regula- c. Strengthen institutional and borrower tory and institutional frameworks. capabilities. • Constitute a high-level national oversight Implementing these steps will accelerate the flow body to coordinate and monitor the progress of resources from the suppliers of green finance to of green growth efforts. the sectors most in need. • Strengthen the institutional framework to collect and analyze point-source data to (i) inform policy design and enforcement, and (ii) create a pipeline of verified invest- ment-ready projects. • Promote green technologies that measure and monitor pollution can mitigate risk due to lack of verifiable information investors and financial institutions face when lending. Eco-certification based on the data could also provide a sense of confidence in the practice, technology, or product. 67 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh Figure 6.3 Steps for Strengthening Government Agencies to Collect and Analyze Point-Source Data to Facilitate a Pipeline of Verified Investment-Ready Projects Set up a point source Collaborate with A2I to set up a Penalize polluters data system central department to analyze the data and support businesses in Applies polluter-pays principle. Engage local Can also be used for emissions government bodies managing their data training systems to have strong oversight 1 2 3 4 5 6 Train DoE sta and partner Make data available to other Disclose data organizations to set up and ministries and agencies such as publicy oversee the system Bangladesh Bank Information is in line This information can be used for with sustainability environmental assessments, disclosure standards eco-certifications/labels, financial decision making Source: World Bank Green Growth Green Growth Framework in Bangladesh in Bangladesh 68 Recommendation 2 environment to effectively connect the flow • Speaking the same language is a neces- of financing to sectors that need to go green. sary first step to addressing the barriers of Use a Mix of Incentives to Boost insufficient know-how and capacity. Starting • Boost the private-sector’s adoption of green Environmental Markets by defining what classifies as green, creating practices and technologies, and boost the a list of associated issues such as air pollution, offering of green products and services. plastics production, and their associated. Gaps identified through this study will need • Encourage the adoption of green practices further analysis regarding the up-front and promote green businesses that generate • Financial institutions need to train staff to financing required, estimated reductions in positive environmental externalities. factor in green aspects and impacts in all pollution, partnerships to implement, and so their operations. Financial analysts need • Clusters of industries can be supported to on. For example, guarantee schemes may to assess not only the borrower’s financial provide environmental infrastructure. work for some sectors while others may viability but also the future potential of a require a partial tax along with the use of the • Cottage, micro, small and medium-sized proposed green practice and technology. revenues to finance supporting programs for enterprises should be included. developing green know-how, technologies, • Bangladesh's economy and labor market • Simultaneously, adopt incentives that products, and industries. have the potential to expand green indus- address the actual and perceived risk for tries, such as transportation, plastic and financial institutions, such as guarantees and other waste recycling, and ship recycling, publicly developed eco-certifications. to contribute significantly to a greener Recommendation 3 economy with the right policies and skills. • Going beyond the banking sector, green financing can be promoted through lever- Boost Institutional and • Cottage, micro, small and medium-sized aging private-sector funds in the capital and Borrower Capabilities enterprises need support in improving their bond market. managerial and technical capabilities, to • Sustainable public procurement can also be Bangladesh has established diverse green prepare and implement viable green projects used as an incentive to drive markets toward initiatives spanning finance, banking, information for investment. sustainable production. Directing public and communications technology, tourism, and procurement, currently US$ 25 billion annually hospitality sectors. • The Small and Medium-Sized Enterprise in Bangladesh, towards sustainable sourcing Foundation could offer technical backstop- would generate a demand for green goods, ping services to entrepreneurs by estab- green technologies, and green services. • Build skills and expertise on green financing lishing a dedicated unit for the preparation across sectors, from science and technology • Fostering a collaborative institutional of bankable projects and act as an inter- experts in government agencies to financial arrangement implementing green finan- mediary between the financial institutions institutions, and from private businesses cial incentives could provide an enabling and entrepreneurs. to students. 69 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh • The Government of Bangladesh could incor- porate green growth and green financing into the curriculums of colleges, universities, and government-related training academies to boost investment and associated technical knowledge for analyzing proposed projects, products, or technologies as a green solution for the present or future. • Develop a pipeline of training to adopt across government, businesses, and finan- cial institutions. 6.3 Green Growth Green Growth Framework in Bangladesh in Bangladesh 70 Green Finance Roadmap for Green Growth in Bangladesh The recommended action is a mixture of policy choices spanning from institutional to regulatory aspects. It is a good starting point for Bangladesh to establish momentum for green-finance delivery for projects to promote an environmentally sustainable economy. The action recommended in Tables 6.1–6.3 would enable a gradual transition to a low-carbon economy that promotes green growth–growth that is both environmentally sustainable and socially inclusive. 71 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh Table 6.1 Short-Term (1–2 Years) Action to Facilitate Financing of Green Growth in Bangladesh Intervention Recommended Action Barrier addressed Governance Set up system to track the inflow of foreign resources and Inadequate in-house technical capacity faced by financial institutions framework for publicly disclose the use of these funds to create trust in the Who benefits? green growth capital market and to attract sustainable investors. Investors Does it exist? Who could implement it? Partially The Ministry of Finance, Bangladesh Bank, Bangladesh Investment Development Authority, Bangladesh Securities and Exchange Commission, and others Recommended Action Barrier addressed Set up a separate unit to evaluate green technologies, Inadequate in-house technical capacity faced by financial institutions products, and services to provide technical assistance to A lack of a project pipeline to attract foreign investment in green sectors evaluate their future potential. Who benefits? Does it exist? Financial institutions No Who could implement it? The Ministry of Environment, Forest and Climate Change to lead, but it will also require the training of experts within the financial institutions Recommended Action Barrier addressed Develop and approve the national green taxonomy Inadequate in-house technical capacity faced by financial institutions (a framework for defining what can be called environmentally A lack of a project pipeline to attract foreign investment in green sectors sustainable investment). Who benefits? Does it exist? Investors, Financial institutions, Borrowers No Who could implement it? Ministries of Environment, Forest and Climate Change, and Finance Source: World Bank Green Growth Green Growth Framework in Bangladesh in Bangladesh 72 Intervention Recommended Action Barrier addressed Incentives The Bangladesh Bank and domestic banks reduce instalment Stringent requirements faced by borrowers size and extend grace period to lessen fiscal burden on Who benefits? entrepreneurs seeking green finance loans. Borrowers Does it exist? Who could implement it? No The Bangladesh Bank to take policy decisions to further rationalize loan-repayment tenure, reduce instalment size and grace period, and address other factors applicable to green finance transactions. Commercial banks and financial institutions to implement policy decisions The above actions should increase banks and financial institutions’ loan disbursements from their current level Recommended Action Barrier addressed Carry out further analysis to determine the right mix of fiscal Low-risk appetite incentives to address high-polluting industries, boost green Short-term focus markets, and attract private investments. Who benefits? Does it exist? Borrowers, Financial institutions, Investors Yes Who could implement it? Ministry of Environment, Forest and Climate Change with the Ministry of Finance Recommended Action Barrier addressed Adopt green guarantee scheme to minimize perceived risk Low-risk appetite to financial institutions (this is a credit-guarantee program to Short-term focus lessen lenders’ risks in issuing green loans). Stringent requirements faced by borrowers Does it exist? Who benefits? Partially Financial institutions, Borrowers Who could implement it? The Bangladesh Bank to introduce credit-guarantee scheme dedicated to green finance 73 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh Intervention Recommended Action Barrier addressed Capabilities Strengthen sustainable finance units (SFUs) with skilled Inadequate in-house technical capacity faced by financial institutions human resources to (a) evaluate green products, projects, Who benefits? and technologies more readily; and (b) monitor the different Borrowers phases of project implementation and activities. These will reduce the perception of green-financing risk for banks. Who could implement it? Banks to implement in their own offices Does it exist? The Bangladesh Bank to provide guidance on skills and certification to be required for officials Yes engaged in green financing operations Recommended Action Barrier addressed Set up banking agents in outreach (remote, less Limited know-how and capacity to prepare bankable green projects faced by borrowers accessible, underserved) areas to receive applications from A lack of a project pipeline to attract foreign investment in green sectors entrepreneurs there to enable them to access green finance Who benefits? Does it exist? Borrowers, Investors Partially Who could implement it? The Bangladesh Bank to take policy decisions to allow financial institutions to employ agent banking for receiving loan applications in outreach areas Recommended Action Barrier addressed Establish a dedicated unit to help entrepreneurs overcome Limited know-how and capacity amongst borrowers to prepare bankable green projects barriers to accessing finance. Who benefits? Does it exist? Borrowers No Who could implement it? The SME Foundation to set up a dedicated unit within its institutional structure at its headquarters and branches to help entrepreneurs have smooth access to green finance Recommended Action Barrier addressed Integrate carbon pricing into the Government of The lack of interagency coordination Bangladesh’s climate strategies. The lack of a project pipeline to attract foreign investment in green sectors Does it exist? Who benefits? No Government, Borrowers Who could implement it? The government to finance some of its environmental initiatives through decarbonization projects and carbon-pricing instruments. Green Growth Green Growth Framework in Bangladesh in Bangladesh 74 Table 6.2 Medium-Term (2–3 Years) Action to Facilitate Financing of Green Growth in Bangladesh Intervention Recommended Action Barrier addressed Governance Adopt a national green growth action plan backed by an The lack of interagency coordination framework for appropriate combination of regulatory and institutional Who benefits? green growth frameworks. Government, Borrowers, Financial institutions, Investors Does it exist? Who could implement it? No Ministries of Finance, and Environment, Forest and Climate Change to lead Recommended Action Barrier addressed Establish a complementary green finance action plan for The lack of interagency coordination greening the industrial and service sectors. The lack of a project pipeline to attract foreign investment in green sectors Does it exist? Who benefits? No Government, Borrowers, Financial institutions, Investors Who could implement it? Ministries of Finance, Environment, Forest and Climate Change and Industries to lead, but the Bangladesh Bank, Bangladesh Securities and Exchange Commission, and Bangladesh Investment Development Authority should be key participants Recommended Action Barrier addressed Constitute a high-level national oversight body to monitor The lack of interagency coordination progress in greening economic growth. The lax enforcement of laws against environmental offenders Does it exist? Who benefits? No Government, Borrowers, Financial institutions, Investors Who could implement it? Ministries of Finance and Environment, Forest and Climate Change to lead Source: World Bank 75 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh Intervention Recommended Action Barrier addressed Governance Engage local government bodies to have strong oversight The lack of interagency coordination framework for to safeguard environmental and ecological services at the Who benefits? green growth grassroots in local-level project development, planning, and Borrowers implementation. Who could implement it? Does it exist? The Ministry of Local Government, with support from the Ministry of Environment, Forest and Climate No Change, to lead in formulating policies to safeguard environmental and ecological services at the grassroots Recommended Action Barrier addressed Internalize green-accounting system and introduce green The lack of interagency coordination budgeting with a sound tracking system of resource allocation The lack of a project pipeline to attract foreign investment in green sectors and expenditure for promoting inclusive green growth. Who benefits? Does it exist? Government, Borrowers, Financial institutions, Investors No Who could implement it? Ministries of Finance and Environment, Forest and Climate Change to lead in introducing green budgeting Recommended Action Barrier addressed Adopt policy and strategy to establish a system for collecting The lax enforcement of laws against environmental offenders point-source data to monitor pollution levels and contribute to Inadequate in-house technical capacity faced by financial institutions the analysis by financial institutions. The high cost of doing business Does it exist? Who benefits? Partially Government, Financial institutions, Borrowers, Investors Who could implement it? The Ministry of Environment, Forest and Climate Change, the Department of the Environment, and Aspire to Innovate to lead Green Growth Green Growth Framework in Bangladesh in Bangladesh 76 Intervention Recommended Action Barrier addressed Governance Strengthen capacity for monitoring, reporting, and Inadequate in-house technical capacity faced by financial institutions. framework for verification to enable commercial lending institutions and The lack of a project pipeline to attract foreign investment in green sectors. green growth BSEC to streamline the monitoring of green-finance impacts. The high cost of doing business Does it exist? Who benefits? Partially Financial institutions, Investors Who could implement it? Ministry of Environment, Forest and Climate Change, Bangladesh Bank, and Bangladesh Securities and Exchange Commission to lead in creating policies and practices that promote monitoring, reporting, and verification Intervention Recommended Action Barrier addressed Incentives Strengthen the capital market to promote alternate financing High capital investment by using innovative bonds. Who benefits? Does it exist? Borrowers Partially Who could implement it? The Ministry of Finance, Bangladesh Bank, and Bangladesh Securities and Exchange Commission to lead in enabling a conducive atmosphere for green investment by using green and blue bonds Intervention Recommended Action Barrier addressed Capabilities Introduce an ICT-based centralized system with borrowers’ The high cost of doing business for financial institutions financial information to enable the BB and lending agencies Low-risk appetite to have strong oversight of ESG and green finance impact. Short-term focus Does it exist? Stringent requirements faced by borrowers Partially Who benefits? Financial institutions, Investors, Borrowers Who could implement it? The Bangladesh Bank to institute a robust information and communications technology-based setup in its Sustainable Finance Division The setup to include a network with banks and financial institutions to monitor environmental- safeguard compliance in every stage of project implementation, including the business-operations phase 77 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh Intervention Recommended Action Barrier addressed Capabilities Provide training on sustainability and sustainable financing Inadequate expertise in government agencies to evaluate green technologies and investment to civil servants within the MoF, Planning Commission, city Who benefits? corporations, and so forth. Government, Borrowers Does it exist? Who could implement it? Partially The Bangladesh Civil Service Administration Academy Recommended Action Barrier addressed Undertake a national awareness-building campaign to The low demand for green products promote green products and services among consumers. This Who benefits? will contribute to achieving a national green growth vision. Consumers, Borrowers Does it exist? Who could implement it? No Relevant government ministries such as the Ministries of Industries, Agriculture, Environment, Forest and Climate Change, and the Ministry of Information and Broadcasting direct their subordinate agencies to pursue a nationwide campaign. Green Growth Green Growth Framework in Bangladesh in Bangladesh 78 Table 6.3 Long-Term (3–5 Years) Action to Facilitate Financing of Green Growth in Bangladesh Intervention Recommended Action Barrier addressed Governance Introduce an environmental management system to ensure The lack of capabilities to adopt and implement green practices and technologies. framework for small and medium-sized enterprises comply with international The high cost of doing business. green growth standards. Inadequate expertise to evaluate green technologies and investment. These include the International Organization for Who benefits? Standardization 14000 set of standards on environmental management, and the International Organization for Borrowers, Financial institutions, Investors Standardization 9000 set of standards for organizations to Who could implement it? ensure they comply with regulation. The Ministry of Industries and Small and Medium-Sized Enterprise Foundation to lead in introducing Does it exist? environmental management systems in small and medium-sized enterprises Partially The new industrial and Bangladesh export policies recognized the importance of motivating small and medium-sized enterprises to introduce environmental management systems and follow International Organization for Standardization guidelines In the long run, this will expand opportunities for Bangladeshi products in international markets Intervention Recommended Action Barrier addressed Incentives Implement the polluters-pay principle through carbon and The lax enforcement of laws against environmental offenders. fossil-fuel taxes and emissions trading system. Low demand for green products. Tax, in the form of additional taxes and value-added tax, goods Who benefits? and services produced by polluting industries. Borrowers, Consumers Does it exist? Who could implement it? No The National Board of Revenue to lead this and execute the polluter-pays principle with support of the Ministries of Finance and Environment, Forest and Climate Change Source: World Bank 79 Roadmap for Facilitating Green Finance for Green Growth in Bangladesh Intervention Recommended Action Barrier addressed Incentives Create a green fund using the resources raised from tax on Lax enforcement of laws against environmental offenders. emissions and pollution taxes, etc. The low demand for green products This fund to be leveraged with refinancing schemes for small Who benefits? and medium-sized enterprises and restore degraded natural Borrowers ecosystems. Who could implement it? Does it exist? Ministries of Environment, Forest and Climate Change and Finance to lead in setting up a green fund No with clear objectives for using these resources for green activities Recommended Action Barrier addressed Introduce cluster financing for shared technologies or High capital investment. practices adopted among related businesses. Stringent requirements faced by borrowers. This will enable entrepreneurs to have enhanced access to Who benefits? finance. Borrowers Does it exist? Who could implement it? No The Bangladesh Bank to introduce a cluster-financing scheme on a pilot basis Based on the success of the policy decision, this could be scaled up Recommended Action Barrier addressed Establish green public procurement to boost demand for eco- The low demand for green products certified products. Who benefits? Does it exist? Borrowers No Who could implement it? The Central Procurement Technical Unit under the Planning Commission Intervention Recommended Action Barrier addressed Capabilities Prepare projects to access the Green-Finance Value Chain for The lack of capability to adopt and implement green practices and technologies. resilience building of climate-vulnerable SMEs in coastal areas. Limited know-how and capacity to prepare bankable green projects Does it exist? Who benefits? Partially Borrowers Who could implement it? The Small and Medium-Sized Enterprise Foundation, the Palli Karma-Sahayak Foundation, the Ministry of Finance, the Department of the Environment, and the Bangladesh Bank 7 Chapter 7 Conclusion Green Growth Green Growth Framework in Bangladesh in Bangladesh 82 In conclusion, the Bangladesh Green Growth Furthermore, the document emphasizes the Framework advisory document offers a importance of an institutional ecosystems comprehensive roadmap for realizing the approach to mobilize green finance into green country's priority development opportunities growth investments. It offers recommendations through the promotion of green growth. The to address existing challenges in green finance, document synthesizes the critical issues of such as enhancing institutional governance, environmental degradation, climate change, and using incentives to boost environmental markets, energy security, and emphasizes the need for and building awareness and expertise on green new growth engines for the sustainable economic financing across sectors. By implementing these development of Bangladesh. recommendations, Bangladesh can accelerate the flow of resources from green finance providers The document outlines three main objectives to the sectors most in need, ultimately enabling and nine policy directions that should be sustainable and resilient economic growth. prioritized and implemented by key stakeholders in a coordinated manner. It provides specific Overall, the document provides a strategic recommendations for each policy direction, and holistic approach to transition towards covering areas such as environmental governance, green growth in Bangladesh, emphasizing green industries, and coastal resilience, the importance of prioritization, institutional highlighting the importance of integrating green strength, coordination, regulations, and growth principles into priority sectors of the incentives. The document lays out the potential for economy. Bangladesh to become a leader in environmentally sustainable and socially inclusive growth.