Sumaiya Meem

Carbon credits are a transparent, measurable, and results-based way for companies to support activities,

such as protecting and restoring irrecoverable natural carbon sinks, like forests or marine ecosystems, and scaling nascent carbon removal technology, that keep global climate goals within reach. Carbon credits are generated by projects that have avoided or removed greenhouse gas emissions. Each credit represents one fewer tonne of carbon dioxide, or another greenhouse gas equivalent, (CO2e) in the atmosphere.

Carbon Credit Impact

Carbon credits provides various co-benefits to local communities where the projects are hosted, such as sustainable development through the creation of green jobs, sustainable energy, environmental and biodiversity protection, and climate adaptation and resilience. Carbon credits may result in emissions

reductions at a project level. But even if you assume all carbon credits are perfect (spoiler; they’re not), when they’re used as offsets they, at best, only maintain the status quo. They simply mean emissions are being theoretically moved from one sector to another.

How It Creates?

Carbon credits and offsets are created through various projects and activities aimed at reducing emissions. These projects can include renewable energy generation, energy efficiency improvements, reforestation, and methane capture from landfills. Carbon credits can be generated by two main types of

projects: Carbon sequestration projects: These projects focus on capturing and storing CO₂. Emission avoidance projects: These initiatives aim to prevent CO₂ emissions before they occur.

How do carbon credits make money?

Companies receive a set number of carbon credits under the system that decline over time. They can sell any excess to other companies. Carbon credits create a monetary incentive for companies to reduce their carbon emissions. Those that can’t easily reduce emissions can still operate but at a higher financial cost.

Carbon Credit In Bangladesh

Bangladesh does not levy an explicit carbon price. No fuel excise taxes are levied in 2023. Fossil fuel subsidies cover 24.2% of emissions. Note: Percentages are rounded to the first decimal place. Bangladesh earned its first-ever revenue from carbon credits – permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases – way back in 2006, when the Infrastructure Development Company Limited (Idcol) registered its maiden clean development mechanism project with the United

Nations Framework Convention on Climate Change. Since then, Idcol has sold a whopping 2.53 million carbon credits, raking in $16.25 million, equivalent to Tk170 crore at current exchange rates.

Carbon Credit In World wide

According to Abatable’s VCM Investment Attractiveness Index, Colombia, Kenya, Cambodia, Mexico, and Peru are the top five countries for carbon credit investors in 2024. The Index, released during Climate Week NYC, ranks countries based on their attractiveness for voluntary carbon market (VCM) investments. The ranking considers factors such as regulatory advances, market readiness, project opportunities, and ability to shape future carbon markets.

Abatable is a top provider of carbon market solutions, offering tools to help businesses navigate carbon markets, find the right partners, assess market risks, and boost environmental impact.

Abatable co-founder Maria Eugenia Filmanovic explained that their approach also considers a country’s potential for impact on climate, nature, and people. Valerio Magliulo, Abatable’s CEO and co-founder

emphasized that as the carbon market landscape evolves, access to reliable data is essential for making informed investment decisions. He further noted that:

“The VCM Investment Attractiveness Index is a critical tool that helps democratize carbon market data for the benefit of participants across the market, enabling them to make informed decisions and navigate the VCM, ultimately helping to scale the market as a whole.

Some Ideas For Future

Well here I am sharing some of my opinion for future-

1. Blockchain-Based Carbon Credit Trading

• Using blockchain technology for carbon credit transactions can ensure transparency, prevent fraud, and make trading more efficient.
• Smart contracts can automate the verification and transfer of credits

4. Decentralized Carbon Markets

• Create decentralized platforms where individuals and small businesses can buy, sell, or trade carbon credits without intermediaries.
• This can make carbon markets more accessible and inclusive.

3. Personal Carbon Credit Systems

• Introduce a system where individuals earn carbon credits for sustainable behaviors like using public transport, cycling, or adopting renewable energy at home.
• These credits could be used for discounts on eco-friendly products or services.

Author: Sumaiya Meem, Environmental Science & Disaster Management Student, Daffodil International University