Sliced: Egypt Launches Africa’s First Voluntary Carbon Market

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Last week, Egypt became the first African nation to establish a domestic Voluntary Carbon Market (VCM). This achievement cannot be understated, especially given the growing interest in carbon markets across the continent.

Integrated within the Egyptian Stock Exchange (EGX), the new market facilitates the trading of Carbon Emission Reduction certificates (CERs), also known as carbon credits.

The VCM is part of Egypt’s commitment made at COP27 in November 2022 to create a domestic carbon market and encourage companies to reduce emissions in line with the Paris Agreement. The swift implementation of this market in less than two years is extremely admirable.

As it is in other voluntary carbon markets, companies in Egypt and across Africa can now issue and trade voluntary carbon certificates which gives businesses an avenue to pay to offset their emissions. This development is expected to enhance climate finance, support green projects, and advance climate action in the region.

To help maintain the market’s integrity, the Egyptian government mandates that all relevant authorities, including public and private sectors, notify the Financial Regulatory Authority (FRA) and the Ministry of Environment about any projects issuing CERs. Entities must also disclose any significant changes affecting the certificates’ approvals during their issuance period.

The FRA played a crucial role in establishing the market’s framework, including setting registration and authorization requirements for carbon credit verification and accreditation. A dedicated “CERs Supervisory and Monitoring Committee” has been established to oversee the issuance and trading of these certificates.

This new market aligns with Egypt’s Vision 2030 and the National Climate Change Strategy 2050, both emphasizing sustainable economic growth alongside environmental stewardship. The VCM is poised to play a vital role in achieving these objectives.

Although the market is currently voluntary, it lays the groundwork for a potential compliance (mandatory) carbon market in the future. This possibility is reinforced by the fact that several regulatory agencies inside Egypt have been involved with the development of the new market.

While voluntary carbon markets around the world are going through stages of growth and improvement, compliance carbon markets have regularly been proven to be impactful. They have shown to both force carbon emissions reductions inside the regulated sectors and help finance regional, green projects, so a potential transition from a voluntary carbon market to a compliance market could be even more important for the country.

As the Egyptian VCM evolves, key questions will center on its ability to expand and scale, the sectors contributing the most carbon credits, the level of engagement from the corporate sector, and where the money flows.

Regardless, Egypt’s VCM marks a massive step forward in addressing climate change and promoting sustainable development in Africa.

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