The positive distributional consequences of targeted SHS programs from the simulation result mainly from the fact that the concentration of non-electrified households and the poverty rate are closely correlated across districts. In Figure 3, the poverty map which is constructed based on household consumption per capita<sup>11</sup> is contrasted with the map of concentration of nonelectrified households at the upzila level, which reveals the strong spatial overlap between the two indicators.

Improving the efficiency and equity of SHS projects requires better project targeting as well as better integration of renewable energy projects with existing development projects on the ground. To this end, it useful to overlay the location choice indicators for SHS program delivery with the poverty map to target SHS programs. For example, SHS programs should be placed in localities where the affordability rate is sufficiently high and where there also exist poverty alleviation programs to avoid duplication while maximizing the impact through resource pooling and coordination. Yet, so far, many of the SHS programs have been implemented in isolation, with little attention being paid to the integration into the existing social program operated at the local level. With the rapid increase in carbon finance for climate mitigation projects in developing countries, the issue with regard to how renewable energy projects should be targeted and integrated with poverty programs should, therefore, be highlighted in the policy-making in order to maximize the carbon mitigation and development impact.

# **6. Conclusions**

Using the Bangladesh national household survey, this study provides three key findings. First, dissemination of SHS for rural electrification can generate substantial carbon benefit in the context of rural Bangladesh. The annual carbon avoided from kerosene displacement as a result of SHS installation would be equivalent to about 4% of total annual carbon emissions in Bangladesh in 2007 if all households without electricity access were provided with SHS. This figure will go up to about 15% if the grid-electricity generation is used as the energy baseline to estimate the carbon benefit from SHS.

Second, under the assumption that the existing micro-credit scheme plus a cash subsidy is made available to all non-electrified households in rural Bangladesh, the affordability assessment indicates that scaling-up SHS adoption is indeed possible in many parts of rural areas. Among the 41 districts in the survey, about 17 districts have an affordability rate over 25% as well as high concentration of non-electrified households in comparison to the national average. This means there exists a potential market for SHS and it is also possible to reduce the costs of SHS dissemination due to economies of scale to promote a profitable participation of the private sector in the SHS market.

Third, contrary to the commonly held views that subsidies for promoting SHS dissemination in rural areas benefit mainly better-off households, our policy simulation shows that SHS subsidies in rural Bangladesh are progressive when programs are appropriately targeted even using the private sector delivery model.

> 11 The 2005 poverty map is constructed using the 2005 Household Living Standard survey by the World Bank.

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