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Monday, 7 November 2022

Egypt’s stock exchange sets up company to manage carbon credit exchange

Egypt’s bourse forms carbon credit company: A subsidiary of the Egyptian Exchange (EGX) has signed an agreement with the Agricultural Bank of Egypt and Enara Group’s Libra Capital to establish Libra Carbon, the first Egyptian company to develop, manage, and issue carbon certificates, according to a joint statement.

How will it work? The company will serve as the building block for “an organized market for the trading of carbon certificates, which includes all the necessary components not only for trading but also for issuance,” Egypt’s Financial Regulatory Authority chief Mohamed Farid said. There are still no details on how the company plans to value, issue, and allow the trading of carbon credits.

Explainer: Read more about what Egypt’s local carbon exchange could look like in EnterpriseAM’s recent Going Green vertical.

Expect a regional carbon exchange to follow: The move is a first step towards developing a voluntary, Africa-wide carbon credit exchange to encourage and diversify investment in the continent’s green economy, Egypt’s EGX head Rami El Dokany said in the statement. Egypt’s Environment Minister Yasmine Fouad said Egypt would launch the exchange — which has been in the works since 2018 — at COP27.

There’s a growing market for carbon credits — but it needs standardizing: “The volume of transactions associated with carbon certificates is growing at 20x annually,” Bloomberg Asharq quotes COP climate czar Mahmoud Mohieldin, who attended the signing ceremony, as saying. But trading prices vary widely, with a certificate for one ton of carbon emissions selling for anything from USD 2 to USD 100 across the continent, he added. The regional exchange will look to standardize prices.

Carbon markets have also been picking up steam across the region, with Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF) setting up a regional voluntary carbon market company last month. The company kicked off the world’s largest credit auction, facilitating an auction of 1 mn tons of carbon credits. Meanwhile, Singapore is looking to buy carbon credits from Morocco and other countries outside the region as the Asian country looks to reduce its emissions.

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