Egypt’s first carbon pricing draft law nears completion: As Egypt looks to keep up with global developments addressing climate change and carbon emissions, the Madbouly cabinet has been working on Egypt’s first ever carbon pricing draft law — and is now in the final stages of drafting the new legislation, a source in the renewable energy sector told Enterprise.

When to expect the law: The law is set to be finalized before the end of the year, and will be discussed with several key players in the highest carbon-emitting industries before a comprehensive bill is submitted to the House of Representatives, the source said.

The government currently imposes a tax on carbon emissions from petroleum products based on quantity, with a fee of EGP 0.25 per liter on fuel, but there is no explicit tax on carbon emissions.

Global carbon pricing revenues hit a new record in 2023: Revenues from carbon taxes worldwide reached a record USD 104 bn in 2023, half of which has been used to fund climate-related programs, according to a recent World Bank report. The report also emphasized the need for integrating more sectors under carbon pricing mechanisms, including international aviation and shipping. There are currently 75 carbon pricing instruments in operation worldwide, according to the report.

Where Egypt stands: Attempts to implement carbon pricing mechanisms in Egypt have been uneven so far. Carbon credits from the Benban solar power plant have been sold below global prices due to the lack of clear pricing mechanisms. However, Egypt has been working on setting standardized pricing as it looks to adapt carbon pricing instruments currently in use worldwide.

The voluntary carbon market is also set to be launched soon: The trading rules for the soon-to-be-established voluntary carbon market are set to be released within “the next few weeks,” Financial Regulatory Authority head Mohamed Farid said in May. The new market will effectively prohibit any entity other than designated bodies from verifying carbon emission reduction projects for registration and trading on Egypt’s carbon credit exchanges. Once launched, the market will be the first voluntary carbon market in Africa, and will allow companies in Egypt and Africa working on emissions-reducing projects to sell certified carbon credits, which can then be bought by other companies wanting to offset their emissions.

Egypt stands to benefit from global developments in carbon pricing mechanisms, especially as the EU’s Carbon Border Adjustment Mechanism (CBAM) goes into full effect in 2026, a source from the Finance Ministry told Enterprise. The carbon border tax will make up the difference between the local carbon price — if there is one — and the EU’s carbon price, meaning that if Egypt doesn’t tax the carbon on EU-bound imports, the EU will.

EU requirements are already pushing the private sector toward reducing carbon emissions: The Chamber of Building Materials Industries (CBMI) has been backing the shift toward greater sustainability in the construction materials sector to reduce the industry’s carbon footprint, CBMI head Ahmed Abdel Hamid told Enterprise. The chamber’s efforts include a plan to form joint committees to inspect construction materials factories and implement environmental compliance and recycling measures.

It’s about reducing emissions, not about increasing income: The goal, our source said, is not to achieve higher incomes — it’s to reduce emissions. Income is expected to decrease as companies successfully reduce harmful emissions or purchase equivalent carbon credits, the source added, saying that a financial impact study projects the collection of roughly EGP 10 bn in the first year of implementing the tax.

We’re still far from reaching global climate goals — as well as our own: The Finance Ministry thinks our current approach to climate-related taxation is far off what is needed to reach both global climate goals and Egypt’s goals for 2030, with the current fee insufficient to effect a significant change in our level of emissions, the source said. As a result, restructuring environmental taxes is one of the key elements of the government’s new tax policy and income tax law.

Local brick manufacturers have come a long way: Around 400 of the 500 brick factories currently in operation in Egypt have switched to gas power, with some able to sell carbon credits, Ali Singer, head of the refractories division at the CBMI, previously told Enterprise. The transition to greener production facilities was initiated in 2005 with an EGP 700 mn program — half of which was funded via a Canadian grant — to convert 50 factories to gas power, and helped cut emissions by 90%, Singer explained.

Industries with high consumption are moving toward implementing solar solutions: A key driver behind manufacturers shifting to solar energy are efforts to comply with ESG standards and the ability to market their products as green, with CBAM providing particular motivation for manufacturers, said Romany Hakeem, the chairman of Beneshty Solar and vice chairman of Sustainable Energy Development Association. In the near future, cutting emissions will also help local manufacturers make money through carbon credits and tradable certificates representing verified greenhouse gas reductions, he added.

Your top green economy stories for the week:

  • A fresh renewables target: The Electricity Ministry wants renewables to make up 58% of Egypt’s total energy mix by 2040, up from its current target of 42% by 2030.
  • Egypt-EU Investment Conference sees a flurry of green agreements: We inked a number of green hydrogen agreements during the two-day Egypt-EU Investment Conference earlier this week, including a US 15 bn green hydrogen project in the Suez Canal Economic Zone and a EUR 24 bn green hydrogen facility in Gargoub.
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