As the world’s climate crisis escalates, Asia is playing a significant role due to its highest contribution to CO2 emissions, accounting for around 60 per cent of the total 40 billion metric tons of carbon emissions. According to the emission index, Bangladesh ranks 35th globally in terms of greenhouse gas emissions. According to the emission index, Bangladesh produces 1.3 tons of CO2 per person, placing it 170th out of 191 countries in terms of emissions produced per capita.

Although Bangladesh contributes less than 1 per cent to global carbon emissions (which is increasing over time, see Figure 1), it remains one of the most climate-vulnerable nations in Asia. According to the Centre for Research on Energy and Clean Air (CREA), approximately 200,000 people die in Bangladesh every year due to various forms of pollution. Every year, thousands of people are displaced due to the floods and lose their lives and properties. A study by Z. R. M. Abdullah Kaiser, a scholar in Urban & Public Affairs, in Lakshmipur found that 40 per cent of residents had to move at least once between 2016 and 2020 due to riverbank erosion. By 2050, the World Bank warns, 17 per cent of the country’s land could be underwater, forcing 35 million people to flee if the situation remains unchanged.

Let’s examine the contributing sectors of carbon emissions and their sources in Tables 1 and 2, respectively. It is noticeable that all sectors are related to industry in either a backward or forward linkage. Ultimately, industrialisation is the main contributor to carbon emissions. So, if the industry can run its operations in an environmentally friendly manner, whether through backward or forward linkage, then the mission will be drastically reduced.

However, this is the cruel irony of climate change: Bangladesh pollutes little but pays a dear price. Still, new thinking suggests the country could turn this burden into an opportunity to make money and reduce carbon emissions by creating a cap-and-trade market.

cap-and-trade market: Cap-and-trade is a market-based mechanism designed to reduce carbon emissions. Essentially, it establishes a cap or limit on the total emissions permitted in a country or sector. Companies receive or purchase permits for carbon emission limits that allow them to emit a certain amount of CO2. If they reduce their emissions below their allocated limit, they can trade or sell the excess allowances to other companies. This financial incentive encourages companies to innovate and reduce emissions while ensuring that the overall emission target is met. See Figure 2, how the Cap-and-Trade works.

The successful examples of cap-and-trade systems implemented in other countries, such as the EU Emissions Trading System (EU ETS) in Europe, the carbon market in California, and the nationwide market in China, have demonstrated how emissions can be regulated through the market, making pollution a commodity. In the case of Bangladesh, a cap-and-trade mechanism would offer a cost-efficient approach to achieving its carbon emission reduction targets, while also supporting the country’s sustainable economic growth.

The opportunities

The textile industry. Bangladesh’s garment factories are energy-intensive and still heavily rely on fossil fuels. By investing in efficiency and renewable energy, they could reduce emissions and earn credits to sell to other industries.

Renewable energy. With ample sun and wind, Bangladesh has already installed over six million solar home systems. Scaling up solar parks and wind projects could not only displace fossil fuels but also generate tradable carbon credits.

Forests and mangroves. Bangladesh’s Sundarbans and other forests act as natural carbon sinks. Reforestation and conservation projects could generate credits while protecting biodiversity and coastal communities.

Carbon credit exports: Countries, such as China and India, already trade carbon credits on international markets. If Bangladesh develops a robust and sustainable system, it could sell credits abroad, turning sustainability into a source of foreign income.

The challenges

Creating a carbon market won’t be easy. First, Bangladesh needs a strong monitoring, reporting, and verification system to ensure accurate emissions data and prevent fraud. Second, small and medium enterprises, many of which are unfamiliar with carbon pricing, will need education and support. Third, the market requires a sufficient number of participants to function; liquidity will be limited if only a few players are involved.

Why does Bangladesh now need a Cap-and-Trade market?

Bangladesh has pledged under the Paris Agreement to cut its greenhouse gas emissions by 21.8 per cent by 2030, with international support. Given its rapid industrialisation, especially in energy, textiles, and transport, the pressure is mounting. Traditional policies alone may not be enough. Innovative financial tools like cap-and-trade could provide a path forward.

However, the country already has a foundation. Bangladesh Bank has championed green banking and issued green bonds. These steps show the financial system can adapt to sustainability goals. Cap-and-trade would be a natural next step.

Turning Carbon into a Resource: The world often sees Bangladesh as a climate victim: poor, vulnerable, and overwhelmed by disasters. But it doesn’t have to stay that way. By adopting cap-and-trade, Bangladesh could recast itself as a climate innovator—one that not only survives the crisis but also thrives by turning carbon into a resource.

Hence, the call is urgent. With the right policies, Bangladesh can meet its emission targets, protect its people, and open new doors for economic growth. If implemented correctly, cap-and-trade could transform the country’s most significant challenge into its greatest opportunity.

News Link: Can Bangladesh turn carbon into cash?