Energy demand and economic consequences of transport policy

Transport sector is a major consumer of energy. Concern of energy scarcity and price fluctuations enhanced significance of transport sector in national planning. This paper analyses energy demand for transport services in Bangladesh for different policy scenarios. Aggregate transport demand model is integrated into Long-range Energy Alternatives Planning model to forecast consequences of transport policy on energy demand and economy. Demand for imported energy for transport sector is observed to increase from 1.7 million ton of oil equivalent (Mtoe) in 2005 to 11.8 Mtoe in 2030 for business-as-usual scenario. In increased fuel price scenario, cost of importing fuel for transport sector is projected to increase from 1.37 to more than 14.9 % of Gross Domestic Product during the same period. Country’s energy demand may be reduced by 2 and 4 Mtoe in 2030 by improvement of waterway and railway, respectively. Moreover, by using compressed natural gas in motor vehicles cost of importing fuel may be reduced by US $5 billion annually in 2030 and a further reduction of transport sector energy demand by 9 % can be achieved through eliminating subsidy on fuel.