Towards Optimal Energy Use: Estimating Industrial Efficiency and Mapping Policy Needs in Bangladesh
Citation: Raihan, S., Hossain, I., Roy, S., Islam, I., & Ahmed, A. (2026). Towards optimal energy use: Estimating industrial efficiency and mapping policy needs in Bangladesh. SANEM Publications, Dhaka, Bangladesh.
This comprehensive research study analyzes energy efficiency in Bangladesh’s industrial manufacturing sector using a dual Data Envelopment Analysis (DEA) methodology combined with policy framework review and stakeholder consultations. The study employs Slack-Based Model (SBM) DEA with Variable Returns to Scale (VRS) to assess relative energy efficiency across industries. The intra-country analysis examines 60+ manufacturing sectors using 2019 Survey of Manufacturing Industries data from Bangladesh Bureau of Statistics, measuring energy efficiency against inputs (capital, labor, raw materials, energy) and outputs (gross value added). The cross-country analysis benchmarks Bangladesh against 12 peer nations (Japan, China, India, Vietnam, Egypt, Indonesia, Thailand, Turkey, Philippines, Morocco, Sri Lanka, Pakistan).
Fourteen sectors in the manufacturing industries are found to be on efficiency frontier including textiles, shipbuilding, and pharmaceuticals. However, rest of the manufacturing industries are found to have various levels of inefficiency. The least efficient industries are glass, metal products, and chemicals. Their energy efficiency scores are around 0.10. This implies that there are scopes for energy savings of more than 90% in these industries without any reduction in output. Even the most efficient among the inefficient sectors such as Beverage manufacturing can make energy savings of 24%. Thus, there is scope for 53% energy savings across all the manufacturing industries worth of Billions of BDT annually. Interestingly, though energy intensity per GDP of manufacturing industries in Bangladesh is lower than the rest of the world; inefficient conversion of inputs of labor, capital and energy into value added output is a stark reality of the country. On global comparison, Bangladesh’s energy efficiency score is 0.47, ranking 10th among 13 countries. Thus, the country is operating at less than half of its potential efficiency levels. Therefore, the focus of the country should be on generating more value per unit of energy rather than saving energy.
The research identifies critical barriers including infrastructure deficits, limited technical capacity, high capital requirements, and weak governance, while reviewing existing legislative frameworks. A comprehensive Industrial Energy Efficiency Policy is proposed to unlock substantial economic and environmental gains.