The World Bank has recommended the Bangladeshi government to impose carbon tax on the petroleum products of Bangladesh and also fix the retail prices in order to curb down carbon emissions.

A carbon tax is basically a tax that is implemented on the carbon content of fuels which are the main contributors of harmful carbon dioxide emissions when the fuels are the burned. As the current situation has a low fuel prices due to the fall in prices in the global market, now is the ideal time for introducing carbon tax according to World Bank. A protracted period of low oil prices such as the one the world is currently experiencing is ideal for the introduction of carbon tax, the WB said.

The current country director of World Bank, Qimiao Fan, sent a letter to the Finance Minister, AMA Muhith stating that the best approach is to let domestic prices follow the international prices while using carbon tax as a tool for carbon pricing. Qimiao Fan also attached an indepth  analysis on the pricing of petroleum in Bangladesh as it was requested by our Finance Minister after the meeting with Annette Dixon, World Bank?s vice president for South Asia. The Economic Relations division of the Bangladesh government is seriously examining the proposal made by the World Bank.

At one point, Bangladesh charged a lower price for petroleum products in the local market compared to the prices in the international market. This forced the government to bear the cost of huge subsidies. But now as the price of oil products has rapidly declined in the international market, the government has been reluctant to make the corresponding price adjustments. This strategy was pursued in order to ensure that the Bangladesh Petroleum Corporation is able to recover some of the losses it made in the past.

The analysis of WorldBank says that according to the current macroeconomic situation of the country and the low petroleum prices in the international market, it is a unique opportunity to de-regulate the domestic oil prices. The current strategy of subsidizing oil prices has its negative impacts.  The negative impacts include high levels of vehicle traffic on the road leading to congestion, increased rates of accidents as well as environmental pollution.