EconPapers    
Economics at your fingertips  
 

The Impacts of Fossil Fuel Subsidy Removal on Bangladesh Economy

Sakib Amin (), Laura Marsiliani () and Thomas Renström ()
Additional contact information
Laura Marsiliani: Durham University Business School, UK
Thomas Renström: Durham University Business School, UK.

Bangladesh Development Studies, 2018, vol. 41, issue 02, 65-81

Abstract: This paper investigates how the removal of fossil fuel subsidy affects the welfare of a small, oil-importing country like Bangladesh. In doing so, an energy augmented Dynamic Stochastic General Equilibrium (DSGE) model is developed. The model is calibrated and simulated for the Bangladesh economy under three scenarios, and the results reveal that a 10 per cent reduction in fossil fuel subsidy results in an overall increase in household welfare by 0.36 per cent. However, complete removal of fossil fuel subsidy would increase welfare by 1.89 per cent. The results also show that the subsidy removal schemes improve the country’s fiscal burden. We highlight the fact that fossil fuel subsidy acts as a barrier to the development of renewable energy technologies in Bangladesh which can play a significant role in promoting the country's future energy security. So, the paper suggests that the government should use the revenue earned from the fuel subsidy removal to offer incentives to new electricity generators who would enter in the market planning to produce electricity with renewable technology. Following a revenue-neutral subsidy scheme, the government should also encourage the existing electricity generators to adopt renewable technologies in generating electricity.

Keywords: Fossil Fuel Subsidy; DSGE Model; Renewable Energy; Bangladesh (search for similar items in EconPapers)
JEL-codes: D58 H20 Q41 Q48 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://bids.org.bd/uploads/publication/BDS/41/41- ... %20Fossil%20Fuel.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:badest:0823

Access Statistics for this article

Bangladesh Development Studies is currently edited by Dr. Binayak Sen

More articles in Bangladesh Development Studies from Bangladesh Institute of Development Studies (BIDS) E-17, Agargaon, Sher-E-Bangla Nagar, Dhaka 1207. Contact information at EDIRC.
Bibliographic data for series maintained by Meftaur Rahman, Cheif Publication Officer, BIDS ().

 
Page updated 2023-01-03
Handle: RePEc:ris:badest:0823