Bangladesh has the potential to generate nearly US$ 1 billion annually from the carbon market, according to Chandra Shekhar Sinha, the World Bank’s Global Leader for Carbon Market, Climate Finance, and Economics.
He made the statement at a discussion hosted by the Infrastructure Development Company Ltd (IDCOL) during COP29, highlighting the country’s ability to capitalise on the carbon market opportunities outlined in Article 6 of the Paris Climate Agreement.
IDCOL’s Executive Director, Alamgir Morshed, moderated the session and discussed the company’s efforts to implement climate-related projects, revealing that IDCOL has already implemented projects worth $ 1.6 billion and secured approval for an additional $ 2.6 billion in projects.
However, due to policy shifts from the Clean Development Mechanism (CDM) to Article 6, IDCOL has yet to implement projects worth $ 1 billion.
Md Enamul Kari Pavel, IDCOL’s Head of Renewable Energy, and carbon trading expert Shymal Barmon both emphasized Bangladesh’s substantial carbon trading potential, estimating that the country could trade carbon credits worth between $ 1 to 1.5 billion.
Barmon also noted that market prices for carbon could rise to $ 30 per tonne from the current $ 20.
Md Harun Or Rashid from the Department of Environment outlined Bangladesh’s action plan to address gaps in its carbon market strategy, focusing on achieving the target of trading 40 million tonnes of carbon.
Dr. Farhina Ahmed, Secretary of the Ministry of Environment, Forest and Climate Change, stressed the importance of creating a low-carbon footprint environment and ensuring transparency and accountability in the country’s carbon certification process.
The global carbon market, valued at a record 881 billion euros ($ 949 billion) in 2023, plays a crucial role in addressing climate change by allowing emissions reductions to be traded. Article 6 of the Paris Climate Agreement lays the framework for this international market, enabling countries to sell excess carbon credits to support climate action.
The carbon market remains volatile, with prices fluctuating based on supply and demand in different regions. As nations like Bangladesh look to leverage these markets, global standards under Article 6 aim to ensure environmental integrity and sustainable development.
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 centralized system and a separate bilateral system.
Under the new agreement, those who create carbon credits will deposit 5% 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 US state of California operates its own cap-and-trade program.
Several other U.S. states and Canadian provinces got together to create the Western Climate Initiative.4
The EU’s trading market is still considered the benchmark for carbon trading.
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
