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Decarbonisation Policies and Energy Price Reforms in Bangladesh

Amin, Sakib; Jamasb, Tooraj; Llorca, Manuel; Marsiliani, Laura; Renström, Thomas

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Sakib Amin

Tooraj Jamasb

Manuel Llorca


Bangladesh electricity sector suffers from heavy subsidization of fossil fuels and regulated electricity prices. These interventions distort the fuel mix in electricity production, promote overconsumption of fossil fuels and slow down the low-carbon transition. As a signatory of the 2015 UNFCCC Paris Agreement, Bangladesh has pledged to reduce GHG emissions by 15% (of which 5% is unconditional) with respect to Business as Usual by 2030, yet its overall CO2 emissions are increasing. Urgent actions are needed for Bangladesh to fulfil its climate pledge. We use a fit-for-purpose Dynamic Stochastic General Equilibrium (DSGE) model to evaluate the effects of several decarbonisation policies, namely the implementation of carbon taxes and the removal of fossil fuel subsidies and intra-sectoral electricity price distortions. We find that all policies can deliver a win-win situation in terms of macroeconomic variables and CO2 emissions with respect to a benchmark scenario that includes existing price distortions and no carbon taxes. The reduction of 4.6% in CO2 emissions achieved in the price reform policy experiment indicates that liberalised energy markets can help achieve its Paris Agreement target. Thus, we recommend that the government considers reforming electricity and fossil fuel price structure to foster economic development and environmental sustainability.


Amin, S., Jamasb, T., Llorca, M., Marsiliani, L., & Renström, T. (2022). Decarbonisation Policies and Energy Price Reforms in Bangladesh. Energy Policy, 170, Article 113224.

Journal Article Type Article
Acceptance Date Aug 25, 2022
Online Publication Date Sep 9, 2022
Publication Date 2022-11
Deposit Date Aug 25, 2022
Publicly Available Date Oct 12, 2022
Journal Energy Policy
Print ISSN 0301-4215
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 170
Article Number 113224
Public URL


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