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The 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 the 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. The FRA’s
initiative reflects the vital 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, the
Prime Minister issued Decree No. 4664 of 2022, amending some provisions of the
Executive Regulations of the Capital Market Law issued by Law No. 95 of 1992 to
consider carbon credits as a financial instrument. Then, the FRA Chairman issued Decrees Nos. 57 and 58 of
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 establishing rules and
regulations for issuing carbon credits and for disclosing 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 of 2023, promulgating the Standards of Registering Verification and
Validation Bodies (VVBs) for Carbon Emission Reduction Projects with FRA. According to the decree, FRA will establish a registry to
register the VVBs issuing carbon credits for carbon emission reduction
projects. The committee began receiving applications from entities
wishing to register 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 for listing and delisting carbon
credits on the EGX. The new rules stipulate all requirements for registering
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 to FRA via the Carbon Offset Projects Database on the form prepared
for this purpose. Then, after presenting all required documents, the FRA shall
issue a certificate indicating the project’s registration in the database. The VVB registries serve as central electronic recordkeeping
systems that include records for issuing, registering, and tracking the
transfer of ownership of carbon emission reduction certificates resulting from
implementing 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 addressing climate change
and willingness to lead global efforts to achieve carbon neutrality. The VCM is
expected to have several benefits, including: · Reducing carbon
emissions The VCM will provide a platform for companies to trade
carbon emission reduction certificates, encouraging them to reduce their
emissions. · Encouraging investment
in green projects The VCM will provide funding for green projects, helping 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.
Launching 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. |
