Environmental Fiscal Reforms in Bangladesh

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December 2018
Sadiq Ahmed
Economic Dialogue on Green Growth (EDGG), UK aid

Bangladesh has made tremendous progress with development since independence reflected in rising income, sharp reduction in poverty and improvements with human development. Evidence, however, suggests that along with these positive outcomes there has been a substantial deterioration in the natural environment. Fortunately, there is now a growing recognition of the environmental damage of continuing with the business-as-usual development strategy and the risks it poses to the sustainability of development. In response, the government has adopted a large array of strategies, laws, rules and regulations, and adaptation and mitigation programmes and projects. But the results on the ground suggest that the implementation of these policies has been weak. Inadequate strategic thinking along with financial and institutional constraints has limited the implementation effectiveness of the government’s environmental protection strategy.

Addressing the financial and institutional constraints to better environmental management will take time and requires concerted efforts. A review of policies shows that the setting of standards, adopting laws, and defining rules and regulations—also known as command and control policies-- have been the focus of environmental management. Fiscal policy instruments constituting of incentive policies—taxes, subsidies, pricing – and public expenditure programmes-- have been weak or absent. Global experience shows that a combination of command and control policies with incentive policies are more likely to result in better environmental outcomes than the use of only command and control policies.

This paper examines the options for Bangladesh to use fiscal policy instruments to improve the environmental management