the past two decades by international institutions and NGOs, studies that focus on the carbon benefits as well as the distributional impact of subsidies based on large scale household surveys are extremely lacking.

This study aims to fill this gap using the first available national household survey that collects data on SHS installation in rural Bangladesh. Bangladesh is one of a few countries that have made significant progress in providing electricity access to rural population through SHS. The SHS programs that were financed from Global Environment Facility (GEF) and International Development Assistance (IDA) had installed over 300,000 SHS (accounting for about 1.6 % of non-electrified rural households) in rural Bangladesh by 2009. This study focuses on (1) the quantification of the carbon benefits, particularly on kerosene displacement; (2) SHS affordability; and (3) the distributional consequences of SHS subsidies.

This paper is structured as follows: section 2 reviews the development of SHS dissemination in LDCs. Section 3 summaries the progress of rural electrification in Bangladesh. In section 4, we present the statistical summary of the 2005 national household survey. Section 5 presents methodology and results in the above three areas. Section 6 concludes.

# 2. **SHS dissemination in less developed countries**

Despite technology maturity and the constant decline in SHS prices, the current level of SHS dissemination among rural populations is low. According to the Global Status Report 2009, out of the 400 million households who lacked access to grid electricity in 2007, only about 2.5 million received electricity from SHS.<sup>4</sup> A recently published IFC report, entitled “Selling Solar “, summarizes the lessons from more than a decade of experience in SHS dissemination in developing countries and concludes that many IFC programs financed through GEF have not been able to create sustainable SHS business in rural areas.

Several factors underlie the slow progress in SHS dissemination for rural electrification. These include lack of information about SHS and grid-extension plans, lack of financial resources for SHS businesses and consumer financing programs, and lack of trained staff and human resources for system delivery and maintenance (Kaufman, 2000 and IFC, 2007). But a more important factor is likely to be the lack of supporting policies and political commitment that can critically influence the transfer and dissemination of renewable technologies for rural electrification. For example, many pricing policies, including subsidies to kerosene and existing fossil fuel-based electricity generation and import taxes on SHS components, are biased in favor of existing utilities, hindering the wider dissemination of alternative renewable technologies (Miller et al, 2000).

While a few countries in Africa and Latin America made some progress in SHS or solar lanterns for rural electrification, the growth of SHS adoption in recent years has been concentrated mainly in Asia, including Bangladesh, India, Sri Lanka, Nepal, Thailand and China. Government

> 4 For almost 20 years, the World Bank Group, working with many developing country governments with financial support from many donors, in particular from GEF, has supported over 25 countries in SHS dissemination, with over 1 million SHS installed in rural areas (IFC Report, 2007).

3