Bangladesh could fetch US$1bn annually from carbon market, says World Bank official

Bangladesh has the potential to fetch around US$1.0 billion annually from the global carbon market, said global lead for carbon markets and finance of the World Bank Chandra Shekhar Sinha on Saturday.

He said the country needs to expedite the process of learning to bag the opportunities as offered globally under carbon trading.

Mr Sinha was speaking at a discussion on the sidelines of COP29 conference in Baku, the capital city of Azerbaijan.

“Bangladesh has the ability to facilitate the opportunity to grab the carbon market,” Mr Sinha added.

The Infrastructre Development Company Ltd (IDCOL) organised the event titled “Bangladesh Journey in Article 6: Pioneering Carbon Market Opportunities” at Bangladesh Pavilion.

Secretary of the Ministry of Environment, Forest and Climate Change (MoEFCC) Dr Farhina Ahmed was the chief guest at the discussion. IDCOL executive director and chief executive officer (CEO) Alamgir Morshed moderated the discussion.

Speaking on the occasion, the MoEFCC secretary stressed that the Bangladeshi private sector's greenery and afforestation should be considered as forest too, as the country is a land-scarced one.

The MoEFCC secretary said that every person can take advantage of carbon trading having proper knowledge and information over the carbon market.

“This knowledge is very important,” she said, adding, “All the citizens and private sectors should be aware and have knowledge on what the carbon market is.”

She hoped that Bangladesh would jump in with efficiency and knowledge to grab the opportunity of the global carbon market.

The MoEFCC will extend all-out cooperation to the private sector to gain successes in carbon trading, she assured.

IDCOL executive director Alamgir Morshed said the company has so far implemented projects worth US$1.60 billion.

“We got approval to implement projects worth $2.6 billion but are yet to implement projects worth US$1.0 billion due to shifting the policy to Article 6 from clean development mechanism (CDM).”

Carbon trading expert Shymal Barmon said the market price per tonne of carbon might increase by 50 per cent to US$30 from $20.  

He said Bangladesh has the potential to trade 40 million tons of carbon now.

Deputy Director of the Department of Environment Md Harun Or Rashid in his keynote presentation said Bangladesh has already set out a list of actions to achieve Article 6 for entering into the potential carbon markets with more efficiency.

Bangladesh has a target to reduce its green house gas (GHG) emission by 27.56 million tonne carbon-dioxide (MtCO2e) by 2030, or 6.73 per cent below business as usual (BAU) emission; unconditionally, reduce an additional 61.9 MtCO2e, or 15.12 per cent below BAU emission, by 2030, conditionally subject to international support.

Bangladesh has included Article 6 international carbon market mechanism as an opportunity to enhance its targets.

Potentially around 70 per cent of the nationally determined contributions (NDC) conditional commitment can be brought under the Article 6 carbon market mechanism, he said.

Bangladesh has already developed the legal foundations of A6 designated national authorities (DNA).

Institutional arrangements and operational procedures and infrastructure for the pilot activity between the carbon initiative for development (Ci-Dev) and IDCOL are in place, he said, adding that a list of priority areas has already been presented in the NDC.

A great opportunity for international carbon credit buyers and countries interested in internationally transferred mitigation outcomes (ITMOs) to develop carbon projects or buy carbon credits from Bangladesh to meet their commitments—NDC fulfillment requirements.

Md Enamul Karim Pavel, head of renewable energy at IDCOL, also spoke on the occasion.

Sources said the value of the global carbon market reached a record high of US$949 billion in 2023.

Carbon trade is the buying and selling of credits that permit a company or other entity to emit a certain amount of carbon dioxide or other greenhouse gases.

The carbon credits and the carbon trade are authorised by governments with the goal of gradually reducing overall carbon emissions and mitigating their contribution to climate change.

Carbon trading is also referred to as carbon emissions trading.

After much deliberation, rules for a global carbon market were established at the Glasgow COP26 climate change conference in November 2021, enacting a globally unified approach first laid out at the 2015 Paris Climate Agreement.

The agreed-upon framework, known as Article 6, will comprise a centralised system and a separate bilateral system.

The centralised system is for the public and private sectors, while the bilateral system is designed for countries to trade carbon offset credits, helping them meet their emission targets.

Under the new agreement, those who create carbon credits will deposit 5.0 per cent of proceeds generated into a fund to help developing countries tackle climate change.

There is no fixed price of carbon worldwide—prices fluctuate by jurisdiction and by market supply and demand. Benchmark EUA Futures prices on July 24, 2024 ranged from €66.10 to €76.10.14

The aim of Article 6 international carbon markets is to allow for enhanced ambition of climate actions for implementation of nationally determined contributions (NDCs) and to promote sustainable development and environmental integrity.

Parties that have successfully met their own emissions reduction targets can sell their extra reduction credits to finance enhanced climate action. This can move investments to areas and sectors where emissions reductions can be achieved as efficiently as possible.

Article 6 establishes an international carbon market with multilateral governance under the UNFCCC, setting common global standards and guidance for development and trading in emission reductions and Internationally Transferred Mitigation Outcomes.

While there is no global marketplace for carbon trading, several regional jurisdictions have created their own markets for the exchange of carbon credits. The state of California operates its own cap-and-trade program.

Several other US states and Canadian provinces got together to create the Western Climate Initiative.

In July 2021, China started a long-awaited national emissions-trading programme.

In 2021, China launched the world’s largest market for carbon emissions trading. Firms representing 40 per cent of the country’s carbon output will be able to trade their emissions rights.

Another major carbon trade market is the European Union’s Emissions Trading System (ETS).

The EU’s trading market is still considered the benchmark for carbon trading.