Regulatory or Market Pressures: What Promotes Environmental Grandstanding in Bangladesh?

Bangladesh has experienced high environmental degradation with rapid economic growth. In the first decade of industrialization, factories operated without environmental clearances or monitoring and enforcement by regulatory bodies. Further, inadequate coordination among government departments led to the clustering of industrial activity near urban centers without longer-term planning or land zoning.

Yet, Bangladesh also hosts the highest number of green factories in the world, as measured by the number of establishments certified for Leadership in Energy and Environmental Design (LEED) by the US Green Building Council (USGBC). This results in a paradox: the country simultaneously hosts a growing number of green factories, while also performing poorly in environmental performance and all ambient measures of environmental quality.

In a new journal article published in the Journal of Cleaner Production, Sungida Rashid and Nabil Haque explore the connections between these paradoxical trends observed in Bangladesh, with applicability for other emerging economies where development objectives and environmental compliance compete. They investigate how attributes of the regulatory agency combine with market aspects to influence environmental practices, such as the adoption of mandatory effluent treatment plants (ETPs) and voluntary environmental certifications. 

The authors find that access to green finance and the number of employees of the regulatory agency significantly affect the adoption of additional ETPs. On the other hand, the size of fines for pollution does not significantly affect the adoption of ETPs. It was also found that green finance and additional ETP adoption also increased the adoption of green factory buildings, which is a voluntary exercise. 

Ultimately, this study sheds light on the underlying relationships that can guide ongoing multilateral interventions to enhance capacity of regulatory agencies to implement environmental regulations. It also provides new evidence to formulate relevant strategies for enhancing environmental performance by scaling up green finance.