Bangladesh eyes $1 billion opportunity in carbon credits and green insurance

Staff Correspondent: As the global economy adapts to the accelerating impacts of climate change, new financial opportunities are emerging alongside environmental responsibilities. For Bangladesh, one such opportunity lies in the growing markets for carbon credits and green insurance, sectors that experts say could generate nearly $1 billion in annual foreign currency earnings if strategically developed.

Carbon credits have become a cornerstone of global climate action. Under this system, reducing one metric ton of carbon emissions generates a tradable credit that can be sold in international markets. Developed nations and large corporations purchase these credits to offset their own emissions and meet regulatory targets.

Bangladesh has already taken initial steps into this market. Since entering the carbon trading space in 2006 through the Infrastructure Development Company Limited, the country has sold approximately 2.53 million carbon credits, earning around $17 million. While this marks a promising start, experts argue that the current scale falls far short of the country’s full potential.

Globally, the carbon credit market is expanding rapidly. Estimates suggest it could reach a staggering $4.7 trillion by 2030, offering Bangladesh significant scope to increase its participation and revenue.

Bangladesh has already positioned itself as a global leader in environmentally sustainable manufacturing, particularly in the ready-made garment sector. The country is home to more than 280 LEED-certified green factories, including many with platinum and gold ratings.

Remarkably, 69 of the world’s top 100 green factories are set in Bangladesh, an achievement that underscores the country’s commitment to sustainable industrial practices. This strong foundation enhances Bangladesh’s competitiveness in the carbon credit market, as environmentally efficient production directly contributes to lower emissions.

As Bangladesh expands its renewable energy sector, green insurance is becoming increasingly important. These insurance products are designed to mitigate risks associated with environmentally friendly projects such as solar and wind energy installations.

Currently, Bangladesh has a renewable energy generation capacity of around 1,315 megawatts, with approximately 77% derived from solar power. To meet its 2030 targets, the country is expected to require about $1 billion in annual investment in this sector.

However, renewable energy projects often face risks ranging from natural disasters to technological failures and market uncertainties. A well-structured green insurance framework can play a crucial role in attracting investors by ensuring financial protection and stability.

A significant external factor shaping Bangladesh’s climate strategy is the upcoming implementation of the European Union’s Carbon Border Adjustment Mechanism (CBAM) in 2026. This policy will impose additional tariffs on imports with high carbon footprints.

Given that nearly half of Bangladesh’s exports are destined for European markets, the implications are substantial. To remain competitive, industries must reduce emissions and adopt greener production methods. Failure to do so could result in higher costs and reduced market access.

Despite the robust potential, Bangladesh faces several challenges in fully capitalising on these opportunities. The country currently lacks a comprehensive national carbon registry, as well as clear regulatory and legal frameworks to support carbon trading.

Additionally, there is a shortage of globally accredited carbon auditing and verification institutions. In the insurance sector, determining appropriate premium structures for green projects remains complex due to limited data and expertise in risk assessment.

Experts emphasise that coordinated action is key. Developing a robust policy framework, investing in human capital and strengthening international partnerships will be essential for unlocking the full potential of carbon credits and green insurance.