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What does it mean to trade carbon credits?

The Holding Company for the Development of Financial Markets affiliated to the Egyptian Stock Exchange, the Agricultural Bank, and the Libra Capital Group signed a framework agreement to establish the first Egyptian company concerned with the development, management, and issuance of carbon certificates.

The signing came without disclosing the financial and organizational details of the company, which aims to cooperate with all government and private projects, according to a statement issued by the Egyptian Stock Exchange.

But what does it mean to trade carbon credits?
It is a mechanism that aims to reduce corporate emissions, by setting a price for the resulting polluting activities, and allowing companies to buy and sell carbon credits linked to the size of their emissions, as the mechanism allows the company to issue a specific amount of emissions, represented in the form of credits, each equal to one ton of carbon dioxide, If they exceed this emission limit, they will be required to buy more credits. In return, companies that reduce emissions sell their available emissions credits for a profit, providing a financial incentive to reduce pollution.

The company’s framework agreement aims to create new horizons for cooperation at the continental and regional levels to encourage green investment and diversify investment options for investors, according to Rami El Dokani, Chairman of the Stock Exchange.

It will also enhance Egypt’s competitiveness as a major financial center for African markets for the trading of carbon certificates, which are among the important financial tools to help emerging countries finance their expansion plans in parallel with achieving their goals related to climate change issues, according to El Dokani.

“The establishment of the first entity to manage and develop the environmental and carbon products market in Egypt enhances the company’s efforts in the field of green energy, reducing emissions and preserving the environment,” said Sherif Magdy El Gabaly, Director of Libra Capital.

While Dr. Mahmoud Mohieldin, pioneer of the climate for the Egyptian presidency of the COP27 summit, believes that a number of institutions support the African Carbon Market initiative in order to set standards, rules and regulatory systems and adapt international rules in carbon markets to African needs so that there is a possibility to acquire the added value within African countries.

While he pointed out that Europe is the best in terms of standards and activity in the fields of carbon markets, and China has benefited from it and adapted it to its needs, and we hope that the market will be active in Africa and Egypt.

With regard to the carbon pricing process, Mohieldin explained that the current volume of carbon-related credit is increasing 20-fold, pointing to the need for a minimum carbon price in Africa to vary prices, as it ranges from $2 to $3 and sometimes between $80 and $100 per ton.



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