Egypt: Unleashing Opportunities – Explore Egypt’s New

brief

Since the landmark Climate Change Conference (COP 27) in Sharm el-Sheikh, Egypt has been committed to overhauling its carbon trading market. The journey began with Prime Minister’s Decree No. 4664 of 2022, which laid the foundation for a voluntary carbon market platform within the Egyptian Stock Exchange (EGX). Recently, the Financial Regulatory Authority of Egypt (FRA) introduced a series of groundbreaking regulations that established a strong framework for the certification, issuance, listing, delisting and trading of carbon emission reduction certificates (CERs). On August 13, 2024, the FRA officially launched the first regulated voluntary carbon market. These initiatives highlight Egypt’s dedication to sustainable development and its ambition to lead the carbon trading market in the Middle East and Africa. In this client alert, we provide an overview of CER trading regulations.

1. CER is listed on EGX

FRA Decree No. 31 of 2024 outlines the rules for listing, delisting and trading CERs on the EGX. The decree aims to promote a transparent and efficient market, ensuring that traded certificates represent real reductions in greenhouse gas emissions.

• qualified: CERs must come from projects registered with an FRA-approved carbon registry and verified by an accredited body.
• Application Process: Issuers need to submit a comprehensive application to EGX, including a verification report and registration details and evidence of CRE from a licensed clearing and settlement firm.
• Disclosure obligations: Issuers must disclose any significant changes or events that affect their CERs.

2. Trading Rules

• Market Operations: Trading on the Egyptian Stock Exchange will follow rules that ensure transparency and efficiency and be aligned with international standards.
• Clearing and Settlement: All transactions must be cleared and settled through a licensed entity.

3. Delisting Procedures

• Voluntary Delisting: Issuers may voluntarily delist their CERs under certain conditions.
• Forced delisting: EGX can force delisting of CERs with serious violations. If forced delisting occurs, the issuer or project financier must repurchase the CERs from the affected investors.

4. Forward Contract

The decree also allows for the signing of forward contracts tied to future CER issuance, detailing project terms, expected volumes and delivery obligations.

5. Certification of voluntary carbon emissions registries

Voluntary carbon emission registries are responsible for issuing, registering and tracking CERs. FRA Decree No. 30 of 2024 on the accreditation of voluntary carbon emission registries sets high standards in governance, data security and transparency, ensuring that every carbon reduction project and certificate is uniquely identifiable and fully traceable.

6. Verification and Validation Bodies

FRA Decree No. 163 of 2024 sets standards for entities that verify and validate carbon reduction projects. These bodies ensure that projects achieve real and measurable reductions in greenhouse gas emissions, which are then certified and made tradable. Accredited bodies ensure the legitimacy and validity of these projects.

7. Brokerage Company

Similar to securities, trading must be conducted through a licensed broker. French Tax Decree No. 1732 of 2024 outlines the conditions for brokerage firms to trade CERs, including capital requirements, technological infrastructure, record keeping, staff training and regulatory compliance.

The launch of the carbon market marks a major shift in Egypt’s financial, economic and environmental landscape, providing opportunities for carbon-intensive industries and businesses committed to sustainable development.

• Strategic Positioning: Companies should align their environmental strategies with the new regulatory framework. Early participation in carbon markets can bring competitive advantages, such as access to new investment opportunities and support for achieving sustainable development goals.
• Sustainable investment opportunities: Voluntary carbon markets provide new investment opportunities for green projects in multiple business sectors, including energy and logistics

The Baker McKenzie team is here to help you navigate these new regulations and seize the opportunities they present. If you have any questions or require further information, please do not hesitate to contact us. Our team is ready and eager to assist you with your compliance, certification or any other strategic needs.

* Intern Yara Yasser contributed to this legal update.

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