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Background and Objectives
In tandem with sustained economic growth in the last three decades, led by industrial sector, Bangladesh’s overall energy consumption and associated greenhouse gas (GHG) emission have increased. As the country aspires to become a high-income country by 2041, the trends of energy consumption and GHG emission are expected to continue in the foreseeable future. The recently prepared third national communication for the United Nations Framework Convention on Climate Change (UNFCCC) highlights that per capita GHG emission in 2005 was 0.85 ton of Carbon dioxide equivalent (CO2e) against previously declared 0.23 ton of CO2e for the same year in the second national communication submitted to the UNFCCC in 2012. The third national communication further reveals that per capita GHG emission was 0.98 ton of CO2e in 2012. On the other hand, the power systems masterplan 2016 (PSMP-16) projects a substantial increase in the use of coal, i.e., by up to 35% from present paltry 1.3%, in power generation in 2041 and the Nationally Determined Contributions (NDC) also has provision for using coal in power generation. While according to NDC, Bangladesh has vowed to reduce GHG emissions in power, transport and industry unconditionally by 5% and conditionally by 15% in 2030 compared to business-as-usual (BAU) scenario, the trend of growth in GHG emission might significantly exceed the BAU GHG emission in 2030. The NDC of Bangladesh includes, among others, energy efficiency and renewable energy, to fulfill the target of mitigation. However, renewable energy and energy efficiency are yet to yield significant results. Therefore, the country should have policies in place to guarantee that pledges on emission reduction are materialized. On the other hand, increasing use of coal is planned in PSMP-16 based on the assumption that coal would remain the cheapest fuel in the future whereas renewable energy is evidently cheaper than coal in the international market. Moreover, carbon pricing scheme, such as, emissions trading scheme (ETS) or carbon tax, globally plays important role in mitigating GHG emissions while promoting sustainable energy, but no such scheme is included in NDC of Bangladesh. In view of these, the study has shed light on the role and rationality of carbon pricing in Bangladesh in relation to GHG mitigation and promotion of sustainable energy. Specifically, the study has looked into the main motivation for introducing a carbon pricing scheme in Bangladesh and which instrument would be appropriate for Bangladesh. In addition, the study has argued whether it would be more suitable to start with a gradual phase and finally, the study has recommended the x implementation framework of a carbon pricing instrument, i.e., the steps that would lead up to the implementation of the instrument.