There are two ways in which the global problem of human-induced climate change can be tackled. The first is by mitigation, which means reducing the emissions of greenhouse gases that are causing the problem, and the second is to adapt to the adverse impacts of climate change such as floods, droughts, cyclones, sea-level rise, saltwater intrusion, etc.
Mitigation measures generally include, but are not limited to, replacing the use of fossil fuels such as coal, petroleum and natural gas with sustainable and renewable sources of energy such as solar, wind and so on.
The private sector around the world is already making profits by delivering renewable energy which is fast becoming cost-competitive compared to fossil fuels. This is also true for Bangladesh where we already have the world's biggest solar power programme with over four million households with photovoltaic (PV) systems, providing electricity to nearly 20 million people who used to be dependent on kerosene lamps before.
There are many private sector companies now operating in this sector and making profits from mitigation to climate change. However, this did not happen all by itself. It took considerable nurturing, both financial as well as technical, by the public-private-partnership entity called Infrastructure Development Company Limited (IDCOL) for a number of years before the private companies were able to run with the products on a profit-making basis.
It also requires considerable policy support from the government to enable the programme to be a success.
The next phase is to expand the solar-power-system beyond household and lighting purposes only, and make it useful for commercial and even industrial purposes also. A number of private companies are pursuing such projects.
However, when it comes to making profits from adaptation, there has been little progress so far, as managing climate change impacts is still largely seen as a matter of managing an extra risk that adds to a company's costs, but not to its profits.
Hence, most corporate companies that have done anything as regards to adaptation have done so as part of their Corporate Social Responsibility (CSR) rather than as a core business initiative. However, it is not impossible to find ways to make profits from adaptation to climate change, some of which I will discuss below.
The first sector to realise the importance of climate change impacts to their business model was the weather insurance companies, particularly the big global reinsurance companies. These reinsurance companies have realised that they could not possibly reinsure against effects of global climate change if nothing was done to prevent it from happening. Hence, they have been supporting action to tackle climate change as well as developing index-based insurance (IBI) instruments to tackle climate change impacts like floods, droughts and hurricanes.
The second sector to understand the importance of adaptation products that can generate profits for companies is in the agriculture supply chain, coming up with products such as salt-tolerant varieties of crops such as rice that can be grown in the coastal areas which are already suffering from sea-level rise. Other such agriculture products can also be part of such profit-making opportunities.
The third sector is in managing both too much water when floods occur, as well as water quality such as saline water in the coastal regions, where supplying fresh drinking water is already a profit-making business.
Finally, and perhaps most importantly, the sector that has great potential is the knowledge sector where companies who come up with adaptation solutions can sell and even export their adaptation knowledge to other countries. Already, leading consulting companies are making significant profits by selling their knowledge of adaptation mainly to public sector bilateral and multilateral donors funding adaptation projects.
International consulting companies have already earned hundreds of millions of dollars from selling adaptation knowledge and this is a sector that Bangladesh can also develop as we have the problem on our doorstep. We can come up with solutions that can then be shared profitably with others.
So, despite the difficulty of making profits from adaptation to climate change, it is nevertheless possible to think about doing so and, once successful, to sell that adaptive knowledge.
Saleemul Huq is Director, International Centre for Climate Change and Development at the Independent University, Bangladesh.