Bangladesh, a country full of resilient people and fertile deltas, is facing a crisis. It is one of the most climate-sensitive countries in the world. Rising sea levels, erratic weather patterns and extreme weather events are not distant threats, but a lived experience for millions of people.
Yet amid the looming crisis, a ray of hope emerges: carbon trading. It is the buying and selling of credits that allow a company or other entity to emit a certain amount of carbon dioxide or other greenhouse gases.
Once a remote concept, this innovative mechanism now offers Bangladesh the opportunity to transform from a vulnerable nation into a carbon champion, reaping economic and environmental benefits while securing its future.
Recognizing the gravity of the climate change situation, the international community has come together under the umbrella of the United Nations Framework Convention on Climate Change (UNFCCC).
Carbon dioxide, the leading cause of climate change, is traded on the global carbon market like any other commodity. Countries set emissions caps, and entities that exceed these limits can purchase “carbon credits” from others who have reduced emissions.
The Kyoto Protocol, adopted in 1997, laid the foundation for carbon trading through the Clean Development Mechanism (CDM). However, CDM had some limitations in achieving the required reduction in CO2 emissions. To speed up the process, a new agreement known as the Paris Agreement was signed later in 2015.
Under the Paris Agreement, existing CDM projects will continue and earn credits, with one change: no new project has been awarded since 2020, officially closing CDM. In addition, if projects meet certain criteria, they can switch to the Paris Agreement credit mechanism under Article 6.4.
Article 6 of the Paris Agreement introduces the possibility of market-based solutions through a cooperative approach. This is where carbon trading comes into the picture again.
Carbon dioxide, the leading cause of climate change, is traded on the global carbon market like any other commodity. Countries set emissions caps, and entities that exceed these limits can purchase “carbon credits” from other countries that have reduced emissions. What is carbon credit?
A carbon credit is earned when a country or entity takes action to, for example, reduce or remove one ton of carbon dioxide or an equivalent amount of other greenhouse gases (GHGs) from the atmosphere. Projects that reduce emissions can benefit financially from trading – that is, selling – these credits on a platform.
How can Bangladesh benefit from carbon trading?
So how can Bangladesh join this global green drive? The answer lies in its unique strengths: enormous renewable energy potential and lush mangrove forests that act as carbon sinks.
Imagine wind turbines swirling over emerald green rice fields, capturing the wind’s energy while reducing dependence on fossil fuels. Imagine the mangrove forests along the Sundarbans, whose tangled roots trap carbon like nature’s filter. These are not just dreams; they are the foundations on which Bangladesh can build its carbon trading empire.
How can Bangladesh benefit from carbon trading?
The scope is enormous. By participating in carbon trading, Bangladesh can attract investments for projects that promote renewable energy, climate-smart agriculture and sustainable forest management. These projects not only generate carbon credits, but also contribute to the country’s long-term climate resilience.
Sales of carbon credits translate into revenue for developers and communities. This can contribute to poverty reduction, job creation and overall economic development.
Participation in carbon trading requires robust carbon accounting methodologies. This promotes the development of local expertise and technology in the field of measuring, monitoring and verifying emission reductions.
The challenges
Despite the promising prospects, there are also challenges to consider. A key hurdle is establishing robust carbon accounting systems. For a project to issue credible carbon credits, it is critical to determine the precise amount of emissions reductions that will be achieved.
Dedicated to poverty alleviation and sustainable development, the Palli Karma-Sahayak Foundation (PKSF) is a leading national institution, recognizing the enormous potential of carbon trading for Bangladesh and actively working to unlock its benefits.
To recognize the importance of carbon accounting as a fundamental challenge, PKSF recently convened a consultative meeting with experts from research institutes and universities. The meeting highlighted the capabilities of these institutions, but also underlined the need for a coordinated approach. Experts called for a national platform to explore and promote carbon accounting, with PKSF playing a leading role.
PKSF, with its extensive network of partner NGOs reaching 1.9 million households across the country, is well positioned to play a crucial role.
How can Bangladesh realize the full potential of carbon trading?
The government must set the stage for this important trade. Clear policies and regulations provide the soil from which carbon credits can flourish. However, the government cannot be the only gardener. The way forward requires collaboration and a joint effort from all stakeholders: government, civil society, academia and the private sector.
To fully realize the potential of carbon trading, Bangladesh needs a multifaceted approach. Some of the steps to take are as follows.
Policy framework: A robust national policy framework that sets clear rules, monitors emission reductions and guarantees transparency. Therefore, it is crucial that a dedicated carbon trading authority be established for efficient management.
Capacity Building: The government, along with NGOs and private sector players, must invest in capacity building. This includes training staff in carbon accounting, project development and market mechanisms.
Community engagement: We need to engage and empower local communities, who are the stewards of forests and make a vital contribution to reducing emissions. Benefit-sharing mechanisms that reward communities for conservation efforts are essential.
Financing mechanisms: To support emission reduction projects, sustainable financing channels such as green bonds and public-private partnerships are needed.
Bangladesh, a country that has consistently demonstrated leadership on climate action, is well positioned to embrace the opportunities presented by carbon trading. Bangladesh can take advantage of carbon trading opportunities by placing a strong emphasis on capacity building, implementing strong carbon accounting systems and identifying projects.
More importantly, this is not just about market profits, but about breathing cleaner air, protecting coastal communities and ensuring a more sustainable future for generations to come.
Mrs Fozla Hossain. Sketch: TBS
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Mrs Fozla Hossain. Sketch: TBS
Mrs Fozla Hossain is a development expert based in Bangladesh.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of The Business Standard.
