Killing billions to save millions? Analyzing the double jeopardy of fossil-fuel-led economic development in Bangladesh

Abstract

AbstractAccording to the Global Climate Risk Index, Bangladesh is the world’s seventh most climate-vulnerable nation. Being on the verge of facing extreme climatic backlash emerging from unwitting economic development, Bangladesh must comprehend that the current economic growth is not a panacea for its environmental integrity. However, considering Bangladesh’s recent economic sustainability, curbing economic development will be uninviting. As such, we propose a conceptual framework to obtain environmental integrity without decommissioning economic development. Deploying data from 1972 to 2020 and novel econometric methodologies, we unearth that FDI ameliorates Bangladesh’s environmental quality, whereas export with no comparative advantage jeopardizes it due to its redundancy issue. Considering export and FDI as substitutionary in Bangladesh, we support for FDI-led development for an interim period until the redundant export issue is resolved. Furthermore, exchange rate depreciation increases CO2 emissions. We advocate an exchange rate appreciation policy that will curb redundant exports and improve environmental quality. Findings also validate the EKC hypothesis in both the short run and long run. Turning point estimation indicates that Bangladesh is still below the required income level to phase out growth-induced CO2 emissions. Moreover, natural resource rent improves environmental quality, whereas consumption of non-renewables degrades it. Besides, gross domestic savings (GDS), agricultural value-addition (AVA), and primary schooling increase emissions. We propose GDS and FDI be channeled into the AVA sectors to equip them with green technologies. This paper further suggests including fundamental concepts of climate change education in pre- and secondary-level textbooks to indoctrinate the younger section of society on environmental pollution.