From agriculture to energy: BD builds framework to monetize carbon reduction

Bangladesh Prepares to Turn Climate Action Into Carbon Market Revenue

Thebangladaily.com – Bangladesh is moving to build a stronger foundation for carbon trading as climate vulnerability and the need for new foreign-currency earnings push the issue higher on the national agenda. Although the country produces only a small share of global greenhouse gas emissions, it faces some of the harshest consequences of rising temperatures, sea-level change, floods and other climate-related pressures.

The government sees carbon credits as a possible way to support climate-friendly investment while creating an additional income stream for the economy. With suitable policy, reliable technology and recognition from international buyers, Bangladesh believes the sector could eventually generate thousands of crores of taka in foreign exchange each year.

Interest is growing among both domestic and overseas companies, particularly for projects involving forests, farming, renewable energy and cleaner industrial practices. Prime Minister Tarique Rahman has directed the relevant authorities to take necessary steps as Bangladesh prepares to participate more actively in the global carbon market.

What a carbon credit represents

A carbon credit is issued when a person, company, institution or country can demonstrate a measurable reduction in greenhouse-gas emissions or an increase in carbon absorption. In most cases, one credit represents one metric ton of carbon dioxide, or the equivalent amount of another greenhouse gas, that has been reduced, avoided or removed from the atmosphere.

These credits may then be sold to buyers, including companies in industrialized countries that need to meet emissions-reduction commitments. Carbon trading is designed as a market-based approach: governments or international bodies establish emissions limits, and organizations that exceed those limits may need to buy credits from entities that have cut or absorbed emissions.

For Bangladesh, the opportunity is not limited to one area. Potential carbon-credit activities include afforestation, improved agricultural methods, solar power, biogas, renewable-energy systems, waste management, upgraded brick kilns and clean cooking stoves. Expanding investment in such fields could produce environmental benefits while also making projects more attractive to climate-finance partners.

A National Framework Takes Shape

Bangladesh has not yet played a major role in international carbon trading, but work is underway to establish a national framework. The country plans to engage with international carbon-market arrangements under Article 6 of the Paris Agreement, which provides pathways for cooperation between countries on emissions reductions.

A central element of the proposed system will be a national registry for carbon-credit projects. The registry is intended to record project information in one place and help prevent the same emission reduction from being sold more than once. That safeguard is important for international buyers, who require confidence that each credit is unique, traceable and valid.

The government created the Designated National Authority, or DNA, under the Ministry of Environment, Forest and Climate Change last June. Its role includes developing carbon-trading policies and approving projects that seek to operate within the new framework.

Bangladesh’s contribution to global carbon emissions is estimated at 0.48 percent. The contrast between this limited contribution and the country’s high exposure to climate impacts has reinforced the case for using international carbon finance to support low-emission development.

Verification Will Determine Market Credibility

Protecting a forest or planting trees alone does not automatically create saleable carbon credits. A project must show that it has delivered additional carbon absorption or avoided emissions that would otherwise have occurred. The process requires credible measurement, reporting and verification, commonly known as MRV.

MRV systems must meet international standards if credits are to be accepted by overseas buyers. They involve calculating emissions reductions, maintaining records, monitoring results and securing independent verification. This is widely regarded as the most costly and time-intensive part of building a functioning carbon-credit project, yet it is also essential to the integrity of the market.

Strong MRV procedures could help Bangladesh avoid disputes over credit quality and improve confidence among investors. They would also give policymakers a clearer picture of how much climate benefit individual projects are actually delivering.

Coastal Afforestation Draws Investment Interest

Newly accreted coastal land has emerged as an important prospect for afforestation and carbon-credit development. Plantation work in these areas could combine land restoration, tree cover expansion and long-term carbon absorption.

Several organizations have submitted proposals for Memorandums of Understanding and shown interest in investing in afforestation on coastal land. They include EcoSocial Solutions, Value Nature Venture, Bangladesh Bondhu Foundation, Arannayk Foundation, Mati Organic Limited and the Institute of Water Modelling.

International companies are also examining the potential of such projects. ATEC of Australia, EWC of South Korea, and Mitsui and Sumitomo of Japan are undertaking feasibility studies.

Within the next five years, coastal accretion is expected to add 116,000 hectares to Bangladesh’s existing land area. The expansion could create opportunities for companies interested in carbon trading through plantation initiatives on the new land.

Investment in afforestation is expected to proceed through two routes: direct private investment and public-private partnership arrangements. The choice of model will matter because carbon projects typically require long-term management, clear land arrangements, transparent benefit-sharing and sustained monitoring after trees are planted.

Building on an Earlier Carbon-Trading Experience

The state-owned Infrastructure Development Company Limited, known as IDCOL, was the first organization in Bangladesh to conduct carbon trading. In 2006, IDCOL earned BDT 170 crore from carbon credits, demonstrating that verified emissions reductions can produce financial returns for Bangladeshi initiatives.

That earlier experience offers a useful reminder that carbon-market income depends on more than environmental ambition. Projects need dependable data, recognized methodologies, clear approvals and buyers willing to purchase verified credits. As Bangladesh develops its national registry and policy structure, those elements will determine whether interest from investors becomes a durable climate-finance channel.

A well-regulated carbon market could help channel funding into sectors already central to the country’s environmental future. Forest protection and coastal plantations can increase carbon storage; renewable energy can reduce dependence on higher-emission sources; and cleaner technologies in households, agriculture and industry can lower pollution while improving efficiency.

The task now is to ensure that projects deliver real, measurable climate gains and that the resulting credits retain value in international markets. If Bangladesh establishes a trusted system for approval, monitoring and trading, carbon finance could become a practical addition to its broader response to climate change.