Johannesburg Stock Exchange to start trading carbon credits

Photo credit: Climate Neutral Group South Africa

The Johannesburg Stock Exchange (JSE), Africa's largest bourse, is set to begin trading carbon credits within two months. In partnership with US-based Xpansiv, a provider of infrastructure for environmental markets, the JSE will enable participants to trade carbon credits and renewable energy certificates, on a voluntary basis, which can be registered locally or internationally. As the 12th highest emitter of carbon worldwide, South Africa faces a growing need for access to and supply of carbon credits. This move is expected to expedite the creation of carbon offset projects, catering to the credit demand from entities seeking to neutralise their emissions. The JSE platform will initially trade credits linked to forestry and agriculture projects that absorb carbon from the atmosphere.

A voluntary carbon market offers a platform for individuals, companies, or governments to buy carbon credits to offset their greenhouse gas emissions. Unlike mandatory compliance markets, participation in voluntary markets is not legally required. One carbon credit equals one tonne of carbon dioxide or an equivalent amount of other greenhouse gases. These credits can be bought from a variety of projects that reduce, remove, or avoid greenhouse gas emissions, such as reforestation schemes or renewable energy installations.

Voluntary carbon markets have seen significant growth in recent years. In 2022 its valued soared to US$2bn– a fourfold increase from 2020. McKinsey estimates this demand could be worth about US$150 bn by 2030. Although Africa is currently producing only a small fraction relative to its total maximum annual potential, this is set to expand rapidly. African carbon credits have experienced an average annual growth of 36% over the past five years. The industry received a push with the launch of the African Carbon Markets Initiative (ACMI) in 2022. The aim of this endeavour is to generate 300 million new carbon credits per year and unlock US$6bn in revenue by 2030.

Carbon markets offer African countries a valuable opportunity to leverage their abundant natural resources – from forests to renewable energy alternatives like solar, wind, and geothermal – in order to generate economic benefits and accelerate sustainable development.

Singapore, which has its own ambitions to be a centre for global carbon trading, is actively engaging with Africa's carbon market. At COP28 in Dubai, it signed a memorandum of understanding with Rwanda to collaborate on carbon market initiatives, including the exchange of best practices and identifying carbon credit projects beneficial to both nations' climate goals. The city-state has signed similar agreements with Kenya and Ghana. JSE could prove to be formidable competitor to SGX, its carbon credit trading scheme attains momentum.  

Singaporean private sector involvement in African emissions offset industry is also on an upswing. In 2022, carbon credit trading platform ACX joined forces with the Nairobi International Financial Centre and the Nairobi Securities Exchange to launch Kenya’s first carbon offset exchange. Last year, GenZero, a Singaporean decarbonisation investment platform backed by Temasek, announced an investment in a landscape restoration project in Ghana. This project is intended to produce carbon credits that Singapore-based businesses could potentially use to offset some of their carbon tax. Furthermore, Singapore-based fund manager Impact Capital Asset Management (ICAM), announced a partnership with Indian carbon credit developer EKI Energy Services to launch a new fund that will invest in the manufacturing and distribution of energy-efficient cookstoves in Africa and India. The EKI ICAM Clean Cooking Fund aims to generate returns for investors by selling carbon credits.

 

References

‘AirCarbon exchange signs collaboration agreement with the Nairobi International Financial Centre and the Nairobi Securities Exchange’, ACX, 06 July 2022

‘Climate change: Africa has a major new carbon market initiative - what you need to know’, The Conversation Africa, 23 January 2023

‘Making carbon markets work for Africa’, United Nations Economic Commission for Africa, 14 February 2023

‘Singapore firm launches fund for energy-efficient cookstoves in Africa’, NTU-SBF Centre for African Studies, 23 March 2023

‘Through carbon markets, corporations have a role to play in Africa’s development. They should take it seriously’, Atlantic Council, 02 June 2023

‘GenZero invests in restoration project in Ghana aiming to generate carbon credits with corresponding adjustments’, GenZero, 8 June 2023

‘JSE collaborates with Xpansiv to launch voluntary carbon market to advance South Africa’s carbon credit capabilities’, JSE, 12 October 2023

‘Can Singapore unlock finance for Africa through carbon credit?’, NTU-SBF Centre for African Studies, 20 November 2023

‘Singapore and Rwanda sign memorandum of understanding to collaborate on carbon credits to accelerate climate action’, Ministry of Trade and Industry Singapore, 02 December 2023

‘Africa’s top exchange to trade carbon offsets within two months’, Bloomberg, 20 March 2024