Carbon Trade Exchange: Where \\\'being poor\\\' is a virtue

Bangladesh is a poor country. But the question is how it has been so described? By standard definition, 'being poor' means  running out of resources. It is true our country has 'lots of mouths to feed' but do we really know that we are in scarcity of resources? So putting a tag of 'poor' to our country, we have to actually know how much resources we do really have. If this measurement is not done properly, assessing our poverty would not be just fair.  
Moreover, identifying resources is also tricky with respect to time, need and technology. Silicon, 'the main element of sand', has been abandoned all over the globe. Modern technology is now using this and producing 'micro chip', the greatest invention of human beings so far. Before we came out with the process of using sand to make this, it was never been considered as a resource for thousands of years.  So the point is let's know first the resources we do have to make a wise assessment whether Bangladesh is poor or not.  Let us try to recognise such a hidden resource which may be extracted and utilised to make money.
All it starts in rich countries where lots of heavy industries emit CO2, a gas we all know to be responsible for global warming that eventually results in unpredictable weather pattern we've been experiencing since the last decade. To prevent this 'awakening disaster', a law has been enacted to limit carbon emission. Under the law, the industry sectors either reduce its emissions to its allocated limit or are required to purchase carbon credits. It means they have to compensate their carbon footprint.  Carbon footprint is actually the amount of CO2 gas that one emits to do day-to-day works. If you go to your office by car, then the car will be burning fuel and emitting CO2 to the environment. We are emitting more CO2 as much as we are using mechanised process. We, the people of the least developed countries (LDCs), are emitting less CO2 than that in rich countries though.
Under the pressure of environment-concerned community, the industrialist community may decide that it is uneconomical or not feasible to invest in new machinery to cut CO2 emission. Instead, they agree to compensate by buying certificate issued against all other activities that will prevent CO2 emission e.g. replacement of existing plants and equipment of small industries, plantation, afforestation, green investment etc. In a nutshell, they will give you money for not producing CO2 and also to do something which will prevent the same. Fair enough! They then come to least developed country that does not have heavy industries and is not emitting CO2 in excess and offer funding to convert small industries into environment friendly plants.
In the process of this, one can issue a certificate against 'not emitting CO2' and/or 'reducing carbon emission' by a process which has to be approved under legitimate carbon credit-certifying organisation which would represent how much carbon is being reduced. So buyer-meet-seller trade happens. Very smart idea!
The following example would make the process even simpler to understand. There are 100 brick fields at Amin Bazaar, Savar near Dhaka. The owners said if they could replace their conventional brick furnace with auto-brick-field (so that the automatic system would not produce CO2), they will be given facility of very low-cost fund. Now as per the standard data base, 2,500 bricks produced would save 1 ton of CO2 to emit in environment if they use auto brick plants. Total production in Bangladesh is estimated to be about 8.7 billion bricks annually with an estimated sale value of around US$450 million, almost 1 per cent of the country's gross domestic product (GDP).
Now using little bit of statistics, we can see how big the market is. As per the International Energy Agency, per capita carbon emission of Bangladesh is 0.25 (CO2/person/year) whereas for Australia this figure is 18, and that is why the Australian government was all set to introduce a carbon tax scheme in 2012, which would have forced the big polluters to pay an estimated $20 for each ton of carbon they emitted. This eventually leaves a huge market for carbon for sale e.g. for us the potential per capita market is estimated to be 72 units which are equivalent to $1,440/person.
Carbon credits are generated by projects that operate under one of the United Nations Framework Convention on Climate Change (UNFCCC) approved mechanisms called Clean Development Mechanism (CDM). Credits generated under this mechanism are known as Certified Emission Reductions (CERs). This certificate can be traded at the Carbon Trade Exchange. Each of the projects has to go through an eligibility criterion called Kyoto Protocol's project-based mechanisms. Once a carbon project is issued with credits, the registry gives each one a unique serial number so that it can be tracked through its entire life-cycle, which makes it even safer instrument for trading.
Emissions Trading (ET) is a mechanism that enables traders to buy and sell spot and future contracts in carbon credits. In fact, many companies actively participate in the futures market to manage the price risks associated with trading in carbon credits and other related risks such as project risk, policy risk, etc.
One of the renowned carbon trading platforms is CTX (Carbon Trade Exchange) which operates spot exchanges in multiple global environmental commodity markets, including carbon, renewable energy certificates (RECs) and water. They have their trading platforms in Australia, the UK and the USA.
In India, MCX is playing a major role on its extended platform to add carbon credits to its existing basket of commodities with regard to commodities futures trading. The existing and potential suppliers of carbon credits in India have been geared up to generate more carbon credits from their existing and ongoing projects to be sold in the international markets.
Besides the industrial sector, our greatest heritage Sundarbans is also showing huge potentiality by reducing CO2 from its environment using its massive vegetation. According to the Forest Department of Bangladesh with assistance from the USDA Forest Service, the USAID, the Sundarbans can capture 56 million tons of carbon and its price is at least Tk 150 billion in the international markets. As per Governor of Bangladesh Bank Dr Atiur Rahman, Bangladesh has the prospect to earn US$ 70 million every year by trading carbon in global carbon credit market.
Sometimes we have to appreciate these smart people who develop such a spectacular idea to solve a complex problem. And there is the main catch that we can earn money from such a system that has originated from 'our being poor'.
The writer is Financial and Investment Analyst, Executive Director of Idol Group. Email: rahman.habib.investment.analyst@gmail.com