Overview
Bangladesh is one of the most climate-vulnerable countries globally, facing the adverse impacts of climate change such as sea-level rise, flooding, and extreme weather events. Despite contributing less than 1% of global carbon emissions, the country has seen a significant increase in greenhouse gas emissions, primarily from burning fossil fuels for energy. This situation has prompted the government of Bangladesh to revise its Intended Nationally Determined Contribution and submit its Nationally Determined Contribution in 2021 to meet the requirements of the Paris Agreement.
To achieve its goals, the government has set a target to meet 40% of the country’s electricity demand from renewable energy sources by 2041. Bangladesh has significant potential for renewable energy, particularly solar and wind energy, which could help to reduce its dependence on imported fossil fuels and mitigate the adverse impacts of climate change. Solar PV and wind energy costs have dropped by up to 80% in the last decade, making renewable energy increasingly affordable.
Despite the potential benefits of renewable energy, there are risks associated with renewable energy finance in Bangladesh. Some of the risks include policy and regulatory uncertainty, lack of access to financing, inadequate infrastructure, and technical and operational risks. To ensure that renewable energy enterprises can flourish in Bangladesh, it is essential to minimize risks and put in place de-risking mechanisms.
De-risking mechanisms can help to address some of the risks associated with renewable energy finance, such as providing long-term financing, improving access to financing, and offering policy and regulatory support. De-risking can also help to attract private investment in renewable energy projects, which could help to accelerate the transition to a low-carbon economy in Bangladesh.
Key Points
To reduce its dependence on fossil fuels and mitigate climate change, the Bangladesh government has set a target to generate 40% of electricity from renewable energy sources by 2041.
Risks associated with renewable energy finance in developing countries, such as Bangladesh, include policy and regulatory uncertainty, lack of access to financing, inadequate infrastructure, and technical and operational risks.
De-risking mechanisms can help address these risks and attract private investment in renewable energy projects.
The top 5 de-risking instruments identified in the survey are establishing an on one stop-shop for renewable energy permits, streamlined customs procedures, government support for the early-stage industry, transparent and time-bound enforcement mechanisms, and reducing administrative steps.
Other de-risking mechanisms identified include formulating a realistic and reliable renewable energy finance strategy, adopting a competitive bidding process, offering attractive incentives for investors, and establishing a long-term national renewable energy strategy and targets.
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