الهيئة العامة للرقابة المالية

FRA has adopted an ambitious plan to establish the first African voluntary carbon market (VCM).

The VCM is part of FRA’s continuous efforts to support the government’s effective policies and procedures to achieve carbon neutrality. This in turn contributes to reducing the Earth’s temperature, which is the main cause of natural disasters such as floods and fires that pose grave threats to lives and livelihoods of millions of people around the world.

Accordingly, FRA has set out and implemented an ambitious action plan to develop a comprehensive regulatory framework for establishing and introducing the first VCM in Africa for trading carbon credits. FRA’s initiative reflects the important role of capital markets in supporting the government’s efforts to achieve carbon neutrality and encourage economic entities operating in various production activities to engage in carbon emission reduction activities.

As a first step toward establishing the VCM in Egypt, Prime Minister issued Decree No. 4664/2022 amending some provisions of the Executive Regulations of the Capital Market Law issued by Law No. 95/1992 to consider carbon credits as a financial instrument.

Then, FRA Chairman issued Decrees No. 57/2023 and 58/2023 promulgating the formation of the Supervisory and Control Committee on Carbon Emissions Reduction Units and its terms of reference.

The committee is responsible for laying down rules and regulations of issuing carbon credits, namely the disclosure of carbon reduction projects and programs.

The committee also shall set the criteria for selecting the verification and validation bodies (VVBs) for carbon emission reduction projects and prepare special guiding rules with the standards of integrity and credibility of carbon emission reduction certificates.

To accelerate the activation of the VCM, FRA issued Decree No. 163/2023 promulgating the Standards of Registering Verification and Validation Bodies (VVBs) for Carbon Emission Reduction Projects with FRA

According to the decree, a registry shall be established by FRA to register the VVBs issuing carbon credits for carbon emission reduction projects.

The committee began receiving applications from entities wishing to be registered as VVBs. The committee interviewed the applicants to verify their capabilities and qualifications and approved the listing of three VVBs including a foreign entity.

FRA issued the rules of listing and delisting carbon credits on the EGX. The new rules stipulate all requirements to register carbon offset projects for the first time in Egypt in an effort to fast track the operationalization of the VCM.

As per the new rules, applications for registering carbon offset projects, to which carbon credits were or will be issued, shall be submitted on the form prepared for this purpose to FRA via the Carbon Offset Projects Database.

Then FRA shall issue a certificate indicating registration of the project in the database after presenting all of the required documents.

The VVB registries serve as central electronic recordkeeping systems that include records for the issuance, registration, and tracking of the transfer of ownership of carbon emission reduction certificates resulting from the implementation of the carbon emission reduction project according to the methodologies issued by the standard-setting bodies. FRA also supports the EGX’s efforts to issue trading and settlement rules for voluntary carbon certificates on the Egyptian exchanges.

The establishment of the first African VCM is a significant achievement for Egypt. It reflects its commitment to address climate change and its willingness to play a leading role in global efforts to achieve carbon neutrality. The VCM is expected to have a number of benefits, including:

·       Reducing carbon emissions

The VCM will provide a platform for companies to trade carbon emission reduction certificates, which will encourage them to reduce their emissions.

·       Encouraging investment in green projects 

The VCM will provide a source of funding for green projects, which will help to accelerate the transition to a low-carbon economy.

·       Creating jobs

The VCM will create new jobs in the areas of verification, validation, and trading of carbon emission reduction certificates.

The launch of the first African VCM is a positive step towards achieving carbon neutrality. It is a sign of Egypt’s commitment to sustainability and its willingness to lead the way in combating climate change.