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Thursday, 10 November 2022

EGX announces Africa carbon market

The EGX yesterday announced it would set up Africa’s first voluntary carbon market on the sidelines of COP27. The market will allow companies in Egypt and Africa working on emissions-reducing projects to sell certified carbon credits, which can then be bought by other companies wanting to offset their emissions, the bourse said in a statement (pdf).

SOUND SMART- There are two primary types of carbon markets: compliance (which are created as part of a policy or regulatory requirement) and voluntary (where carbon credits are issued, bought, and sold on a voluntary basis).

The structure and regs are still pending: The EGX and Financial Regulatory Authority are still working on the framework, business model, and structure of the VCM. Among the key issues will be governance of certificate creation and registration. Look for an announcement later from Egypt’s prime minister, the statement says, without specifying a timeline.

What we still don’t know: The statement didn’t tell us whether participation in the VCM would be limited to specific industries and — if so — how eligibility would be determined. Also TBD is guidance on the pricing, size or time for first issuances and how the EGX sees marketing to buyers (local, regional or global) unfolding. The EGX was unable to reply to requests for comment by dispatch time.

We do know that newly-established Libra Carbon will supply the carbon offsets: A subsidiary of the EGX recently signed an agreement with the Agricultural Bank of Egypt and Enara Group’s Libra Capital to establish the Egyptian company Libra Carbon, which “will supply high-quality carbon offsets to the market,” head of project development Omar El Nemr told Enterprise Climate. As of now, the supply of carbon offsets being issued in the Egyptian market is relatively low, he said. “As Libra Carbon, we’ll work towards providing sufficient volume in the new market to kickstart trading operations.”

BACKGROUND- Voluntary carbon markets are gathering steam across the region. Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF) last month set up a regional voluntary carbon market company, which auctioned 1.4 mn tons of carbon credits at Davos in the Desert. Singapore is also said to be eyeing the purchase of carbon credits from Morocco, we noted.

ALSO YESTERDAY- US climate envoy John Kerry also announced a plan to unlock US capital for clean energy and other climate projects in emerging markets. Enterprise Climate has the rundown on that and more in this morning’s edition here.

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