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Low Carbon Approach: Ensuring environment friendly economic growth

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Saturday, March 2, 2013

 

Low carbon approach would lead to green economy and sustainable development

Dr Mohammad Sakhawat H Bhuiyan

 

 

DR Atiar Rahman of Bangladesh Bank, widely acclaimed as 'green' governor, has been working relentlessly yet silently for green banking. Along with inclusion of environment protection clause as a condition of loan sanction, he has been taking various measures to make the Bangladesh Bank itself 'green' by installing more energy-efficient LED lighting, solar panel on the roof of the bank building, and so on. Charity begins at home and that more likely encourages others as it happens in case of banks like BRAC and Mutual Trust. These initiatives and many more were discussed at a seminar on green banking, organised by the Institute of Livelihood Studies, recently.

 

I would like to say that there are ample avenues to explore in favour of green banking, even more broadly, green economy, and want to share some of my humble understanding that I have got from 'Sustainability in Crisis' conference organised by the University of Cambridge.

 

It has been widely reported in the academic field that environmental growth is in direct conflict with economic growth unless these two are synchronised. The logic is simple more economic growth consumes more natural resources that hinder environmental protection, greater economic growth demands more production that emits more carbon and eventually exacerbates global warming. Likewise, more production as a result of higher economic growth induces more consumption which at one point exceeds the limit of necessity and causes wastage. Thus, in simple logic, the urge of more economic growth ends with the further deterioration of the environment.

 

But this simple logic does not remain simple when we consider the value of money interest. Profit making organisations always have a target to achieve the profit rate at least more than the interest rate of the economy. More interest rate induces entrepreneurs to make more profit and thus they go for more production and consumers end with a considerable amount of unnecessary consumption. If I say this alternatively, then it will be like less consumption and less production delaying the deterioration of the environment. Less production will be possible if companies have less profit target, and a company may have less profit target if the interest rate in banks is lower. Therefore, a true environmental growth can have a strong boost by a simple yet too sensitive decision to lessen the interest rate. A single decision like this will minimise many problems related to environment.

 

As an alternative, without drastic interference to the traditional financial policies, environmental growth can be achieved through apparently contradictory economic growth when environmental issues are infused with economic issues in a balanced synchronisation. This idea is not too challenging to implement and found, theoretically, possible by many world renowned scholars. The prime concern of the environmental growth currently is to mitigate climate change. The three possible suggestions for this are radical application of environmental pricing, investment to innovate environmentally viable technology, and at the end, behaviour change of mass population.

 

In favour of environmental growth, the government and its financial institutions may consider working on the first two. For the application of environmental pricing, it can formulate and implement Environmental Tax Reforms (ETR) as implemented by EU countries such as Denmark, Finland, Germany, Netherlands, Sweden, and the UK. ETR is about shifting of taxation from 'goods' (like income, profits) to 'bads' (like resource used, pollution added, waste produced). Similar kind of reform was done before in Bangladesh when VAT was introduced. So, the formulation and implementation of ETR would not appear as an unachievable challenge.

 

In this case, Bangladesh may be the pioneer among developing countries as no countries other than developed ones have so far implemented ETR. While the third suggestion, i.ebehaviour change of mass population, is beyond the scope of financial institutions, the second suggestion, that is the investment to innovate environmentally viable technology, is certainly within their scope to promote. The way the leading parts of the world have been shifting towards 'fair trade' policy, 'organic' consumption, 'responsible' fishing, and 'child labour' free production for fairer society and protected environment, the same way they would most likely consider to shifting toward products that take 'less carbon' in production as well as create 'less carbon' in consumption. Consumers of mainly developed countries might look for products with 'less carbon' tag, as many of them are now looking for products with 'organic' or 'fair trade' tags And for that they are found willing to pay more which I observed while I was in Europe. For quality production at low cost, Bangladesh has got a large market in developed countries and, for the 'low-carbon' production, Bangladesh could have even larger market if it is well promoted and mobilised.

 

Full-fledged 'low carbon' production is yet to begin and therefore requires innovative technology for low-carbon production of every possible product. Like agro-investment, the Bangladesh Bank may introduce interest-free finance for low carbon production projects. If it gets success, then it will not only contribute to the environmental growth but also to the country's economic growth by creating export opportunities for 'less-carbon' products to the developed countries.

 

A plant grows best if it is watered close to its roots, instead of watering on only one or two of its branches. The environment can be protected better and faster if its problems are resolved from roots, rather than just one or two superficial greening initiatives, while I agree that these initiatives altogether significantly contribute to a cleaner environment.

 

However, the urge is to address the issue at its root for a more effective and efficient environmental growth. Instead of waiting for initiatives from the West, we have to take immediate initiatives because, for the current global warming, Bangladesh will be immediate sufferer for its geographical location. Responsibility for our safety is ours. So we need to undertake environmental growth activities on a broader scale immediately before it appears too late.

 

 

 

The writer is Assistant Professor, University of Liberal Arts Bangladesh.

E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

Source: thedailystar

 

 


 

 

 

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