Investment proposals coming to country’s potential carbon market

Local and overseas companies are showing growing interest in Bangladesh’s carbon market. Investment proposals have come in the forestry, agriculture, and energy sectors. These companies have also started feasibility studies of potential projects. The government says that through these projects, the national commitment to reduce carbon emissions will be fulfilled, while the forestry, agriculture, and energy sectors will also be developed in an environmentally friendly manner.

Australia-based ATEC, South Korea’s EWC, and Japan’s Mitsui and Sumitomo are conducting feasibility studies. In addition, two global NGOs—Eco-Social Solutions and Value Nature Ventures—and three local NGOs—Arannayk Foundation Bangladesh, Mati Organic Limited, and Bangladesh Bondhu Foundation—are also carrying out feasibility assessments. The government institution Institute of Water Modelling is also involved.

After feasibility assessments, the volume of investment will be determined. Among them, the Australian company has said it may invest up to USD 75 million.

Six organisations have proposed signing memorandums of understanding with the Department of Forest for afforestation. These are Eco-Social Solutions, Value Nature Venture, Bangladesh Bondhu Foundation, Arannayk Foundation, Mati Organic Limited, and the Institute of Water Modelling.

Japanese company Mitsui wants to implement a project in the agricultural sector on 250,000 hectares of land to stop excessive water use through the Alternate Wetting and Drying method. Using this method, production can be increased by 10 per cent with less water, and methane gas emissions can be reduced. On the other hand, Sumitomo wants to reduce methane emissions by stopping leakages in gas lines. In addition, Australia’s ATEC and Korea’s EWC want to implement projects to increase the use of clean cooking stoves as an alternative to gas used for cooking.

The Department of Forest said that due to its coastal afforestation, 116,000 hectares of new land will be created within five years in addition to Bangladesh’s existing land. Interested companies will be able to take advantage of carbon trading through afforestation on these new coastal lands.

When contacted, Deputy Chief Conservator of Forests (Planning) Rakibul Hasan told Prothom Alo that several companies have shown interest in investing in carbon trading. They want to engage in carbon trading through afforestation. The investment will be made under two models—one is direct investment, and the other is investment through public-private partnership (PPP).

Rakibul Hasan said investors will first conduct feasibility studies to determine how much land can be used for afforestation and how much carbon can be absorbed. Based on that, a Project Design Document will be prepared.

The forest official said, “We will allow the use of the land. They will implement the project. After that, how much of the absorbed carbon will go to the carbon market and what percentage we will receive will be determined through negotiation.”

Before implementing these projects, a technical committee under the Designated National Authority (DNA) will review whether opinions of local people were taken, whether public hearings were held, and whether government guidelines were followed.

To determine policy related to carbon trading and to approve such projects, the government formed an authority called the Designated National Authority (DNA) in June last year. It operates under the Ministry of Environment, Forest and Climate Change. The Secretary of the Ministry of Environment, Forest and Climate Change serves as the head of the DNA.

Carbon emissions are considered responsible for global warming caused by climate change. Industrialised countries bear greater responsibility for this. Currently, China is the world’s largest carbon emitter, accounting for 35 per cent of global carbon emissions. The United States is in second place. Other top carbon-emitting countries include India, Russia, Japan, Canada, and Saudi Arabia. Bangladesh’s contribution to carbon emissions is 0.48 per cent.

Carbon trading is a market-based mechanism to reduce emissions of carbon dioxide and other greenhouse gases. Under this system, governments or international bodies set a limit on how much carbon a country, institution, or company can emit. If emissions exceed the set limit, the concerned entity must purchase carbon credits from the market.

Countries or institutions that absorb carbon from the atmosphere or reduce emissions through afforestation, renewable energy, improved energy efficiency, or the use of clean technologies can generate these carbon credits. These credits are then sold to polluting institutions or countries.

The agreement adopted at the climate conference in 2015 is known as the Paris Agreement. Under this agreement, countries agreed to keep the global average temperature increase within 1.5 degrees Celsius. Countries also agreed to submit a framework outlining how much carbon emissions they would reduce, known as the NDC (Nationally Determined Contribution).

In the latest NDC submitted in 2025, Bangladesh’s projected carbon emissions by 2035 are estimated at 418.40 million tonnes. The NDC commits to reducing carbon emissions by 26.74 metric tonnes. Subject to global cooperation, Bangladesh has also pledged to reduce an additional 58.23 million tonnes of carbon emissions.

Currently, there are two carbon markets. One is the compliance carbon market, and the other is the voluntary carbon market. The compliance carbon market is where a country that fails to meet its carbon reduction commitments buys carbon credits from another country to make up the shortfall. The voluntary carbon market is where companies purchase carbon credits equivalent to their pollution to build an environmentally friendly image.

The World Bank has provided Tk 2.4 billion to Bangladesh to develop a framework for carbon trading and to establish a national carbon registration system (National Carbon Registry System). This funding is being provided under the Partnership for Market Initiative (PMI).

To bring investors to Bangladesh’s voluntary carbon market, the Asian Development Bank (ADB) has already signed a memorandum of understanding with the government. ADB and investors will conduct feasibility studies of projects. They will then develop projects, and once the government approves them, implementation will begin.

The country’s first carbon trading was conducted by the state-owned Infrastructure Development Company Limited (IDCOL). In 2006, IDCOL generated carbon credits from solar home systems and improved cookstoves and earned Tk 17 billion. After that, no carbon trading took place for a long time. The framework under which carbon trading occurred—the Kyoto Protocol—expired in 2020. With the adoption of Article 6 of the Paris Agreement in 2024, the possibility of carbon trading has emerged again.

The United Nations Development Programme (UNDP) reports that global carbon trading amounted to USD 100 billion in 2024. The organisation says that 28 per cent of global carbon emissions have come under carbon trading.

Mirza Shawkat Ali, a member of the DNA and Director of the Climate Change and International Convention Wing of the Department of Environment, told Prothom Alo, “We will be able to finalise the carbon trading framework by the middle of this month. In the NDC we submitted in 2025, we have given importance to carbon trading. We are planning to meet 40 to 50 per cent of our NDC target through carbon trading.”