Carbon Finance in Bangladesh - World Bank

Wpfreeware 6:49 AM Carbon Finance

Carbon finance in Bangladesh

Carbon finance in Bangladesh is gaining traction as the country explores various financial mechanisms to combat climate change. Bangladesh, being highly vulnerable to climate impacts, has been active in implementing green finance initiatives and leveraging carbon credits as part of its strategy.

Carbon Credits in Bangladesh

Carbon credits are generated through projects that reduce greenhouse gas emissions, such as renewable energy initiatives, energy efficiency projects, and reforestation. These credits can be traded on international markets, providing financial incentives for emission reduction. Bangladesh has been involved in such projects, notably through programs like the Solar Home System, which has installed over 3.5 million solar units, reducing reliance on kerosene and diesel, and earning significant carbon credits​ ( World Bank Blogs) (The Business Standard).

Green Finance Initiatives

Bangladesh Bank has been at the forefront of promoting green finance since launching its sustainable finance policy in 2012. The policy mandates that financial institutions allocate a portion of their loans to sustainable projects, leading to substantial investments in renewable energy, waste management, and other eco-friendly initiatives​ ​. The bank also offers incentives like lower interest rates and longer repayment terms for green projects.

Future Prospects

The government aims to enhance its renewable energy share in the national grid and develop more projects that qualify for carbon credits. Continued efforts to improve the regulatory framework and increase awareness among financial institutions and businesses are crucial. Additionally, developing a robust domestic carbon market could help stabilize prices and attract more investments in green technologies​ (Light Castle) ( World Bank Blogs).

Overall, carbon finance presents a promising avenue for Bangladesh to achieve its sustainability goals while fostering economic development.

Compilation from CDM PROJECT DEVELOPMENT Report of IIDFC

Uncontrolled industrialization, inefficient burning of fossil fuels and consumption of energy have endangered the Global Environment as well as the entire human species. The effects of climate change include an upward trend in global mean temperature, rise in the sea level and a probable increase in the frequency of some extreme weather events such as drought, changing rain pattern, flood etc. The Intergovernmental Panel on Climate Change (IPCC), in its Annual report on Climate Change has already identified Bangladesh as one of the most vulnerable countries to Climate Change.

To combat with climate change IIDFC has introduced & developed “Carbon Finance” which is a market-based mechanism to encourage Climate Change Mitigation. Under such scheme, IIDFC has taken up a Clean Development Mechanism (CDM) project titled as “Improving Kiln Efficiency in the Brick Making Industry in Bangladesh”, an Hybrid Hoffman Kiln (HHK) Project to construct 16 new energy efficient brick kilns in two bundles to significantly reduce emission of Carbon dioxide (CO2) gas and other pollutants that are heavily damaging the atmosphere by the traditional Fixed Chimney kilns (FCK) of the country.

IIDFCL, being the first local Financial Institute, entered into Carbon Trading through signing Certified Emission Reduction Purchase Agreement (CERPA) with the World Bank & the Government of Denmark on 25th August, 2009 to sell a total of 249,000 tons of Certified Emissions Reductions (CER) to be generated from these 16 kilns. But due to some constraints which become visible while implementing these projects, a total of 125,000 tons of CERs were generated up to December 2015. Being a modified Chinese version of the original German technology, HHKs were difficult to set up and operate smoothly in the geographical condition of Bangladesh. The initially built kilns under this project faced various difficulties with the design & size of the dryer, nature of the local soil and scarcity of skilled firemen. But these issues have now been successfully addressed and many local entrepreneurs are coming forward to invest in this technology. This initiative of IIDFC not only helped to reduce Green House Gas (GHG) emissions but also helped to establish a new greener and sustainable technology in the country. It can be mentioned that every single sized HHK replaces 7 to 8 environment polluting and energy inefficient Fixed Chimney Kilns (FCK).

The Country has earned foreign exchange worth of USD 1.5 million from this agreement which IIDFC shared with the participating brick industries. It can be mentioned that IIDFC has also financed 4 of the very first HHK Brick factories of the country.

After the expiry of the agreement with the World Bank, IIDFC has entered into another similar agreement with the Asian Development Bank (ADB) to sell the emission reductions from the above project during the 2016-2020 period. IIDFC is expected to sell 160,000 tons of Emission Reductions to ADB.

Apart from the environmental issues the projects implemented under this CDM has been playing a great role in improving the workers’ Social and Occupational Health & Safety issues. All these Sustainable Development co-benefits provide necessary Safety Gears, safety signs & barriers with adequate fire-fighting equipment in the workplace. Proper sanitation facilities have been built separately for both male & female workers along with washing areas. Male & female workers have separate resting cum dining areas inside the factories. To check the health condition of the workers, a physician visits the kilns every 15 days and provides them with free consultation with some primary medications. These measures have improved the working conditions of the factory which is otherwise absent in the traditional Brick kilns.

These Sustainable Development co-benefits of the project have been appreciated and highlighted several times in several International Forums, such as- COP15 in Denmark, Carbon Expo 2016 in Germany etc. and in several international and national publications. IIDFC has also been awarded the HSBC-Daily Star Climate Award for this project.

Source: Website >> Industrial and Infrastructure Development Finance Company (IIDFC) PLC.

Related Post