The JSE biggest securities exchange in Africa recently launched the first of its kind a voluntary carbon market trading platform formed in a joint venture between the JSE and Xpansiv, a trading platform systems developer.
The carbon trading market is the first of its kind in Africa. There are various carbon standards and carbon registries such as VERRA Standard, Gold Standard, American Carbon Registry, Climate Action Reserve standard, Plan VIVO, and now the ZAR global standards.
The JSE said in a statement in October that customers would be able to advance their sustainability goals as they would have full access to the functionality of the global Xpansiv platform for spot trading, auctions, or requests for quotes for both carbon offsets and renewable energy certificates.
According to the Atlantic Council, voluntary carbon markets increased four times from 2020 to 2022 surpassing $2 billion (R38bn) in value – and African credits have seen an average growth of 36% on average over the last five years.
At the time Leila Fourie, JSE Group CEO, said, “There is a heightened global focus on carbon markets and we saw this as an opportunity to bring an innovative solution to our market participants while positioning South Africa as a significant contributor to decarbonisation.”
South Africa is the 12th highest emitter of carbon globally and has an increasing need for access and supply of carbon credits.
What is carbon trading or carbon market? In a nutshell, the carbon market is a platform where carbon credits are registered and offered to be bought and sold in the public trading market using a carbon exchange trading platform system.
Now let's look at the differences between carbon trading and carbon offsets.
Carbon trading is all about buying and selling carbon securities. Carbon offsets are projects created and registered to earn carbon credits to offset atmospheric carbon man-made CO2 emissions.
First a carbon credit is created through a carbon mitigation project, process or a technology. Also credits can be created through environmental, geological and technological projects.
These projects are then registered in a carbon credit register/s and earn or are awarded an equivalent amount of carbon credits measured against the project.
Carbon securities are created through a process of identifying environmental compliant projects that qualify to earn carbon credits such as using renewable energy solutions to reduce carbon emission into the environment.
To date, there are not enough projects available that can be financed and used as a mechanism to earn carbon credits and thus qualify as carbon mitigation projects.
Carbon projects can range in scale and industry or sector diversity - the only requirement is that the project should qualify as a carbon reduction and lower emissions solution.
The carbon project has a commercial value in terms of rands traded as credits. Those credits are easily exchanged and tradeable in any recognised carbon market.
There are also renewables energy certificates. Every renewables energy project earns carbon credits and once developed carbon credits are used as either project capital, collateral or security against the projects.
The carbon exchange and trading market is fast becoming the key commodity traded across the globe. The market share is growing at a rapid pace and soon it will far surpass many other commodities traded today on the securities exchange market.
Furthermore, a growing area in the carbon credit markets globally is the carbon sequestration or carbon storage technology space. This is whereby carbon dioxide is captured in the environment and stored into a liquid form or a solid form.
The various global registries offering carbon certificates vary in their focus, but mainly all aim to achieve a similar end goal. To create and register carbon credits and offer them for buy and sell market exchange traded publicly through a verified carbon exchange market platform.
South Africa
South Africa offered in the early years one of the leading carbon capture technology solutions, by using automobile catalytic converter technology to reduce the amounts of carbon dioxide vehicle emissions.
South Africa was in the early years one of the leading carbon capture technology solutions developers through the use of automotive catalytic converter technology to reduce the amounts of CO2 emitted through vehicle emissions.
The automotive catalytic converter technology revolutionised the entire automotive industry with a simple home-grown South African application technology such as an exhaust pipe catalytic converter.
Our coal and platinum was used to pioneer a technology revolution that changed the world over and gave birth to platinum catalytic converters. The green and blue hydrogen market opportunities are in their infancy stages and soon about to explode.
There are many other technologies available, some easy to do and more complex ones are under research and development stages as the frontier of science has been explored to mitigate and capture CO2 emissions and reduce global carbon footprint.
Carbon Sequestration is a process to capture CO2 emissions and greenhouse gases by preventing them from causing global warming if allowed to enter into the earth's atmosphere.
However, the South African government is still moving at a snail’s pace, department heads and policy makers are still in the dark and know very little about this fast growing trading market.
Eskom, as an energy player, is missing a great window of opportunity in reducing its carbon footprint and earning carbon credits to exchange against its own emissions. Why is it sleeping on the job and not taking advantage of this? Who knows.
In the race to reduce emissions and create carbon credits this is the lowest hanging fruit that Eskom should have been exploring as a means to reducing its emission as a mitigation solution against its carbon footprint.
Instead, Eskom, Department of Public Enterprises, Department of Mineral Resources and the Electricity Minister are all deliberately refusing to implement the IRP19 section of the policy that says Eskom must retrofit and convert all its coal power stations fleet with High Efficiency Low Emissions (HELE) technology stacks.
But in being slow to get in on the carbon credit market, the government is losing a money making opportunity.
These carbon markets create business opportunities not only for established players, but for others. You can play the carbon market as a CO2 mitigator, trader, buyer and seller or investor etc.
Savvy entrepreneurs and communities using innovation and technology should grab the opportunity and leap frog out of poverty and end the current economic slowdown by creating jobs and incomes earning and using carbon credits.
Be innovative and creative, enter the carbon space, create a transformation revolutionary. Forget politics or need to have connections, no need to bribe anyone. For, the CO2 emissions, the sky's the limit. Go start a revolution.
Crown Prince Adil Nchabeleng is president of Transform RSA and an independent energy expert.
* The views in this column are independent of Business Report and Independent Media.
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