Box 2.4. The green transition: How will it affect households in South Asia?

mAnAgIng tHe AfteRsHocks

With elevated global energy prices, net energy importers of South Asia face the trade-off between short-term strategy and long-term energy goals. In the short term, countries want to limit energy costs and secure energy access, by increasing the production of non-renewable energy and reducing the burden on households through fuel subsidies. In the longer-term, transition to a greener economy is important for energy security and climate co-benefits. Both are important objectives, but as the short-term goals are often more pressing, they tend to be more politically popular choices. It is thus important to emphasize at this junction the potential benefits of a green transition in South Asia. Box 2.4 complements that discussion and studies the benefits and distributional impacts of the transition for households.

Box 2.4. The green transition: How will it affect households in South Asia?

Green transition away from fossil fuels and other polluting sources is complex as producers and consumers adjust their behavior. As part of the green transition, it is important to analyze the distributional impact of the transition on households and the accompanying policy reforms that may be necessary to ensure an inclusive transition. To do so, the current distribution of access to energy and energy expenditure can serve as a baseline.

One measure of access to energy and one of the Sustainable Development Goals (SDGs) is access to electricity, which is high for the region at 95 percent,25 but inequality remains both across and within countries. Access to electricity is below 50 percent in Afghanistan, while it is 100 percent in Bhutan, Maldives, and Sri Lanka. Within countries, household surveys (Household Income and Expenditure Survey, HIES; Living Standard Survey, LSS; National Sample Survey, NSS) show that households residing in rural areas are less likely to have access to electricity, and households in the lowest quintile of total per capita expenditure are less likely to have access to electricity in both urban and rural areas (Figure 2.15). Blackouts are frequent in the region, averaging 25.5 times per month,26 which leads to unequal access since poor households likely cannot afford backup generators. The inequality shows that access to electricity remains an important SDG goal for some South Asian countries as access to electricity is associated with increased productivity (Dinkelman 2011; Khandker et al. 2012). With the region’s vast renewable energy potential, increasing the region’s reliance on

25 World Development Indicator, World Bank Global Electrification Database. Last accessed September 26, 2022. https:// data.worldbank.org/indicator/EG.ELC.ACCS.ZS?locations=8S. 26 World Development Indicator, Enterprise Survey 2020. Last accessed October 1, 2022. https://data.worldbank.org/ indicator/IC.ELC.OUTG