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A locally-developed online marketplace to trade environmental assets has launched in South Africa in the Green Asset Exchange.
The marketplace connects buyer to seller through an online platform that should allow a transparent and efficient way to get economic value from Africa’s green economy.
The marketplace is for Renewable Energy Certificates (RECs), Voluntary Carbon Credits and South African Tax Compliant Credits.
While the exchange of green assets is already present on global markets this online platform is the first of its kind to be developed in Africa. The launch comes after three years of collaborations between the company founders and various market participants, brokers, developers, environmental lawyers and carbon registries.
Speaking to ESI Africa, Green Asset Exchange Founder and Manager Director Nicholas Rowley said anyone can trade in this market currently, but they do encourage the green asset market to seek more regulation.
“As the Green Asset Exchange, we continue to have an open and collaborative dialogue with all stakeholders and regulators regulators so that the green asset market can further mature and benefit in the long run.”
Developing green asset exchange online
While there is no restriction on who can trade on the platform, Rowley said: “There is obviously a specific type of customer who would use these assets.
“These assets are bought for specific offsetting requirements and are not designed for speculators.”
His company identified the development of green assets as a mechanism to create economic value on the environment at a time when South Africa was introducing its carbon tax legislation.
He described the legislation as incorporating “one of the most forward-thinking policies on carbon pricing and inclusion of carbon credits in the world”, another motivator for creating the Exchange.
The asset exchange is meant to function as a tool to accelerate the green economy. Green assets such as carbon credits and RECs already exist and have an economic value because of their potential positive impact on the environment.
The producer of the asset wants to get the highest possible price for them, and the buyer wants to buy them at the best price they can get.
“Capitalism doesn’t consider the environmental impact when it searches for profit. For example, a forest can get chopped down and sold, but this does not include the value of the forest to produce oxygen, support biodiversity and store carbon.
“A carbon credit can give those things an economic value, and marketplaces like the Green Asset Exchange then allows buyers and sellers to make rational choices based on supply and demand and price.”
Where does marketplace fit into African carbon market?
Rowley said they are receiving positive feedback from carbon projects and RECs developers across Africa, as well as interest from African governments. “The carbon market has gradually matured over the last 20 years and hit a slump in the 2008 financial crash, which took some time to recover.
“As the market picked up and grew over the last 15 years it evolved to include exchanges such as CBL (owned by Xpansiv) from the USA. But as Africa has caught up and many developers and investors have seen the opportunity that lies in store for Africa, we thought it would be good for the Green Asset Exchange to be the first in Africa and to then be positioned to grow into one of the leading marketplaces in the world.”
In South Africa, the Johannesburg Stock Exchange is planning to partner with US-based CBL to allow their clients to trade on that American platform.
“From our research with many stakeholders we believe that a platform from the USA is not suited to the specifics of the carbon market in Africa and we have designed the Green Asset Exchange to fit that purpose and to work with African stakeholders to evolve the Green Asset Exchange as the market here in Africa evolves in its own way with its own specifics.”
Rowley thinks that what sets them apart from foreign competition is that they work with local African registries and offer the trading of carbon-credits linked to tax incentives in African countries, such as Carbon Credits for SA tax liabilities.”
While some exchanges are designed around a traditional trading approach based on other markets such as equity trading or commodity trading – and often require an advanced trade familiar with complicated platforms and basket-type producers – Rowley says they tried to stick to a simple product offering for the type of assets that are relevant to the African market right now. He posits that as the market evolves in Africa, the company willhave to evolve its product offering.
“Furthermore we are the only exchange that provides local support and is committed to evolving the platform in line with the needs and priorities of the African market, something that foreign exchanges don’t do.
“However, the Green Asset Exchange looks to partner with foreign platforms which would help even further to internationalise the African carbon market.”
