An analysis of the correlation between income and the consumption of energy in Bangladesh

Abstract

This research takes a methodical look at how rising incomes and climate change affect energy use in six different divisions of Bangladesh. To investigate the indirect mechanism of income influence on the consumption of energy, this study employs indicators of industrial structure upgrading and urbanization in a novel way using the fixed effects model which has not been used so far in this kind of study. The results show that income affects energy use in two ways: directly and indirectly. The influence of income on the consumption of energy is inverted U-shaped and may be readily observed. Furthermore, by encouraging urbanization and upgrading of industrial structure, income can indirectly lower energy use. While energy consumption is negatively impacted by climate change, it is less severe than the effect on earnings. Furthermore, there are substantial geographical and temporal variations in the effect of wealth on energy use. Energy use decreases significantly as income rises over time. Income has a detrimental effect on the consumption of energy in the developed southern area. Energy usage is positively affected by income in the undeveloped northern area. In light of Bangladesh’s unique the consumption of energy profile, we must reject the “one size fits all” approach and instead concentrate on reducing wasteful spending in areas like income growth, industrial structure and urbanization, and while simultaneously increasing efficiency and precision in our aiming. This study aims to provide policymakers with fresh insights to inform decisions on energy production and consumption policies considering urbanization and industrial growth.