Egypt’s Financial Regulatory Authority (FRA) is working on a regulatory and technical framework to create the nation’s first credit rating agency dedicated to carbon reduction certificates, according to Tarek Seif, Executive Director of the FRA’s Financial Services Institute.
At a workshop on non-banking financial sector developments on 24 October, Seif announced that the initiative seeks to strengthen market trust and guarantee an accurate evaluation of the certificates’ environmental impact and financial worth.
Carbon reduction certificates, often known as carbon credits, represent verified reductions of greenhouse gas emissions, typically equal to one metric ton of Carbon Dioxide avoided or removed. Projects such as solar farms, wind energy, or reforestation can earn these certificates after independent verification. Companies can trade or purchase them to offset emissions, creating a market-based incentive for emission cuts.
A credit rating agency would assess the quality and reliability of financial or environmental instruments. Egypt’s proposed agency would evaluate how credible each carbon certificate is, verifying that the emissions cuts are real, measurable, and permanent, and assessing the financial stability of the issuing projects. This could boost investor trust and help prevent greenwashing or trading of low-quality certificates.
Seif explained that the FRA is also designing a comprehensive insurance policy for carbon reduction projects to cover operational, natural, credit, political, and pricing risks. This will help enhance project sustainability and investor confidence, key factors in developing Egypt’s emerging green finance sector.
The FRA has also finalized regulations governing renewable energy certificates (I-REC), enabling their trade as financial instruments following recent amendments to the Capital Market Law. In addition, the authority is developing a digital system for carbon certificate trading, which will set out guidelines for ownership transfers and off-exchange futures contracts.
According to Seif, the initiative aligns with Egypt’s Vision 2030, the national strategy to integrate environmental sustainability into all economic sectors and expand the country’s green finance ecosystem.
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