Desk Report : Bangladesh could be ostracised if it does not phase out coal-based power projects, Planning Minister MA Mannan said yesterday.
"We must get out of the coal-based power industry because if we don't, we will be alone with the whole world on one side and us on the other," he said during a webinar on energy efficiency financing.
Mannan went on to say that the government was looking for alternative sources of energy.
For example, the prime minister has already emphasised on building a second nuclear power plant and as such, a search for adequate space for the project has begun in the country's southern region.
"It is a green and profitable alternative to fossil fuel-based power generation," Mannan said.
By using fossil fuel, the world has achieved development through the industrial revolution. Although only a few grabbed the benefits of that revolution, all of humankind has been facing grave consequences ever since.
"We have to find an alternative to fossil fuel and phase out coal," he added.
In the name of low cost loans, many development partners impose conditions that make project implementation difficult and Bangladesh has been paying the price for such conditional loans, he said.
"But by 2026, the country will get out of such conditional loans so that the private sector doesn't face any hurdles in the future," said the planning minister.
"The limited number of low cost funds available to local financiers is a major challenge for energy efficiency financing, barring energy efficient projects from being feasible," said Nazmul Haque, chief investment officer of Infrastructure Development Company Limited.
"Building awareness regarding energy efficiency benefits among project sponsors and banks and financial institutions is key," he added.
Besides, implementing supporting policies and incentives such as preferential taxation on energy efficiency, investment, subsidies and introducing credit risk guarantee schemes to support small and medium enterprises in the sector are also needed.
"High collateral requirement from major local financiers for concessional financing is a difficult proposition to sell to clients," Haque said while presenting a paper, styled "Energy Efficiency Financing: Prospects & Challenges" at the event organised by local fortnightly Energy & Power (EP).
Another challenge in financing is inadequate technical know-how, and qualified energy auditors and technical experts to quantify the bottom-line benefits of energy efficiency measures for project sponsors.
"So, technical assistance for developing the required technical capacity and expertise within the country and building up the capacity of local banks and financial institutions for assessing and financing energy efficiency projects will open the door in this regard," he added.
Khondkar Morshed Millat, general manager of Bangladesh Bank's sustainable finance department, said there were two perspectives in sustainable financing policies mandated by the central bank.
The first is ensuring sustainable financing allocation and the other is measuring achievements against those allocations.
"For example, if any bank or financial institution allocates a Tk 100 loan, then Tk 15 will be for sustainable financing projects and within the Tk 15, Tk 2 will have to be disbursed on green projects," he said.
And from the perspective of achievement, if a bank or other financial institute invests Tk 100, then Tk 20 has to be for meeting its sustainable disbursement financing target and of the amount, Tk 5 of the term loan disbursement has to be for green financing.
Milat said by 2050, 100 per cent of disbursed loans would be for sustainable financing and 50 per cent of that would have to be disbursed for green projects.
Farzana Mamtaz, a member of the Sustainable and Renewable Energy Development Authority, said the confidence of local financial institutes should be built up to ensure financing for energy efficiency projects.
To do that, businesses should be developed on the profit of energy efficiency or demonstrative business models, she said.
"Then, the public and private sector will be willing to get credit and financial institutions will be courageous in disbursing loans for that," Mamtaz added.
Al Mudabbir Bin Anam, programme coordinator at GIZ Bangladesh, said energy conservation and efficiency facilitates more output, which was very important for cutting greenhouse gas emissions and reducing global warming.
Mollah Amzad Hossain, editor of the fortnightly, moderated the event.