Bangladesh must embrace the global green transition
This interim period is a once-in-a-lifetime opportunity to transform Bangladesh into a global epicentre for climate adaptation and the energy transition
Despite India's much lower labour costs, solar panels are cheaper to manufacture in ASEAN than in India. This is because advanced manufacturing in ASEAN is an extension of the Chinese supply chain, optimised for maximum efficiency through a combination of industrial policy and comparative advantage.
The Chinese high-speed rail network—the largest constructed in human history—is being extended into Vietnam, Laos, and Thailand. Greenfield FDI from China to ASEAN reached record levels in the past year.
We are witnessing a process of economic integration between China and ASEAN that will transform the face of Asia and could become the foundation of a larger pan-Asian integration. Notably, this integration is deeply tied to the global green transition away from fossil fuel consumption.
The European private equity firm FSN Capital describes the green transition as the "largest capital reallocation in a generation." China leads the world in all the enabling technologies underlying the green transition—solar panels, wind turbines, batteries, electric vehicles, ultra-high voltage transmission, high-speed rail, nuclear, and more. In each of these sectors, Chinese manufacturers produce the highest quality products at the lowest prices and in the largest quantities.
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The green transition also overturns the logic of the global petro-economy by providing energy independence to fossil fuel importers. For decades, fossil importers have had to rely on export earnings to buy energy and create a foundation for modernity. This hinders growth in developing countries, as export earnings are constantly consumed by the need for fuel imports, and exposes them to devastating price fluctuations caused by war or natural disasters.
We remain trapped in an old economic paradigm—we export garments to the West to import fuel from the Gulf, an unproductive cycle that traps us at the bottom of the value chain. We now have an opportunity to break out of this cycle through the green transition
The cost-of-living crisis in Bangladesh is itself a product of increased LNG prices caused by the Ukraine war, which ultimately culminated in an overthrow of the government by popular revolution.
There is something miraculous about a solar panel. It provides energy at zero marginal cost—once a panel is installed, it will simply provide electricity as long as the sun is shining. Solar panels have a remarkably long 25-year warranty period, are cheap, and are widely available. Bloomberg energy analyst Jenny Chase claims that we may be approaching a world where electricity is essentially free whenever the sun is shining.
The explosive growth in solar power worldwide has been largely driven by cost reductions originating in Chinese firms. This miracle extends to batteries and electric vehicles—the Chinese EV manufacturer BYD sells brand-new cars at the seemingly impossible price of $9000, and prices for grid-scale storage batteries (currently the biggest barrier to wider renewables adoption) continue to plummet.
The availability of these technologies at these prices is nothing short of a global techno-economic paradigm shift, an entirely new way of life for oil-importing countries in the Global South. Taxi drivers in Brazil already report enormous cost savings and increased profits from switching to cheap BYD EVs. In Ethiopia, there is now a total ban on the import of internal combustion engine cars to accelerate the green transition.
Asia has also witnessed explosive growth in solar energy—Vietnam has installed 9.5 GW of solar capacity on rooftops alone, and Pakistan is now one of the world's largest markets for solar power. In both Pakistan and Vietnam, the growth of distributed solar power has been so rapid that the grid is unable to handle the amount of power being generated, highlighting the critical need for grid upgrades to fully enable the new energy economy.
However, this is a luxury problem—both Pakistan and Vietnam are now prime investment destinations for companies working on concepts like virtual power plants to fully maximise output from distributed renewable power sources. The solar panels are already installed, meaning a large chunk of the initial capital expenditure has already been borne by households.
Notably, both Pakistan and Vietnam are deeply economically integrated with China, with multiple joint ventures for renewables and manufacturing. India has attempted to take a route of self-sufficiency but is still unable to manufacture solar panels as cheaply as China and ASEAN. The lone Indian EV company—Ola—lags quite substantially behind firms like BYD.
The reality is that advanced manufacturing in today's world requires imports and investments from China. This may explain the policy shift in India, where the Finance Minister recently announced that they will now support increased Chinese FDI into India.
Sadly, Bangladesh is falling behind in all of these areas. Our economic integration with China was constrained by the previous regime's tight embrace of India. The Awami League was also unsupportive of renewable energy, often resorting to now outdated arguments that renewable energy is a luxury for developed countries. There are indications that this policy was also dictated by vested interests that profited from fossil fuel imports. All of these issues need to be investigated and addressed by the interim government.
We remain trapped in an old economic paradigm—we export garments to the West to import fuel from the Gulf, an unproductive cycle that traps us at the bottom of the value chain. We now have an opportunity to break out of this cycle through the green transition.
The green transition will create jobs, attract investment, generate value, and provide positive externalities like reduced noise, pollution, and emissions. But perhaps most importantly, energy independence will ease our balance of payments. Most of our export earnings are immediately consumed by fuel imports. Reduced fuel consumption would enable greater imports of capital goods, DNA sequencers, data centres, industrial robots—all the things that we need to construct modernity, a new way of life.
Bangladesh will need to mobilise a lot of capital to support the green transition. There are few people in the entire world as capable of mobilising climate finance as Dr Yunus, currently our head of state. This interim period is a once-in-a-lifetime opportunity to transform Bangladesh into a global epicentre for climate adaptation and the energy transition. We should all collectively embrace this opportunity and find ways to contribute to what could be the largest economic transformation in our national history.
Zain Ali is currently doing a PhD in genetics at Lund University, Sweden
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
