SA is the twelfth-highest emitter of carbon globally and is also party signature to the Paris Agreement, which seeks to mitigate the threat of climate change. This is one of the reasons why the JSE has established a voluntary carbon market – JSE Ventures – that will help accelerate the creation of carbon offset projects; help meet the demand for credits by emitters seeking to offset their emissions; increase investment interest in the country; and contribute meaningfully to helping grow the economy and improve sustainability practices.

‘JSE Ventures has partnered with the global platform Xpansiv to enable quick and instant access to the global carbon markets,’ says Anelisa Matutu, the JSE’s Head of Commodities: Capital Markets. ‘The JSE made a conscious decision not to try build a carbon market from scratch, with all the traditional challenges of building the network of participants to ensure a liquid and active market place, but rather to integrate into an existing marketplace that already has over 90% of the global spot market activity for environmental markets. This means sellers of South African credits already have reach into international buyers and vice versa. We do acknowledge that the standards accepted by the global market does present cost and administrative challenges for South Africans to develop carbon projects; that said we are set to see innovation in this space that will ensure credible and robust local standards with integrity in the not-too-distant future. There are already a few in the SA market gaining traction.’

She says the JSE is encouraging project developers to create a more robust pipeline of carbon-offsetting projects in SA as there is a big gap between demand and supply of eligible carbon tax offset projects.

‘The JSE – through its extensive network in the financial markets – has a prime opportunity to connect project developers with multifaceted participants, be it through its JPP platform – connecting project developers with possible financiers – or specialised carbon standards operators to assist project developers secure renewable energy certificates [RECs] or carbon credits, or through the connectivity with Xpansiv to provide those participants who have RECs or carbon credits access to a global platform of potential buyers or sellers of environmental credits. All three of these activities add to building a deeper and more robust supply of carbon-offsetting programmes for the region.’

Matutu says it is admirable that so many corporates have already started with their net zero journey. ‘The JSE sees itself playing a complementary role. Through the Xpansiv platform we are able to provide corporate access to indicative carbon, as well as IREC [International Renewable Energy Certificates], prices and supply, to assist corporates with their future planning. As the JSE is able to expand its own reach amongst suppliers of IRECs and carbon credits, this simplifies the route to market for many corporates that are looking to secure offsets but not sure who to approach. The JSE, through its subsidiary JSE Ventures, is perfectly positioned to assist in this space.’

She says technological advancements to support the smooth and safe operation of the carbon trading platform are in place. ‘A key innovation is to ensure the platform connects to as many registry operators globally, thereby increasing the number of standards that can be either bought or sold. For this reason we also connected Xpansiv to the COAS [Carbon Offset Administration System] register to help facilitate transactions. Here SA corporates looking to buy offsets against SA carbon tax will have the peace of mind of secure settlement using the platform.’

Another benefit is that the JSE has taken measures to ensure that SMEs can access and benefit from the carbon market. ‘JSE Ventures is available to assist any size enterprise access and buy carbon offsets, since the smallest trade size could be equivalent to 1 ton of carbon,’ says Matutu. ‘That said, for the smaller project developers looking to sell carbon credits, JSE Ventures is able to connect these entities to larger developers, as in most instances a minimum size threshold has to be met due to the costs of developing a project to recognise the carbon offsets.

‘Participants should understand that registering a household solar installation for IRECs, for example, does not justify the costs, but consolidating a portfolio of these projects, financed by a banking institution, will make commercial sense.’

By Patrick Farrell
Image: Gallo/Getty Images