Japan backtracked from funding the Matarbari-2 coal-fired power plant after consulting Bangladesh, State Minister Nasrul Hamid said.
"To cut its carbon footprint, the Japanese government made the decision a year ago following a discussion with the Bangladesh government," he told UNB Wednesday.
The Bangladesh government had already decided to develop an LNG-based power plant instead of a coal-fired one at the site of Matarbari-2, the state minister said.
The remaining part of the project area will be used for developing a solar power plant, he added.
Bangladesh already cancelled 10 coal-fired power plants of more than 8000MW as part of its global climate change commitment, Nasrul said.
The country is implementing the 1200MW Matarbari-1 coal-fired power plant in Maheshkhali with the Japanese government's financial support.
The first unit (600 MW) of the plant is scheduled to come into operation in 2024.