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The JSE is increasingly rolling out the use of tagging systems to mark credits as eligible for carbon tax compliance and other standards.

According to Anelisa Matutu, Head of Commodities at the JSE, this tagging system enables buyers to quickly identify the meaning and eligibility status of each credit, enhancing decision-making and improving interoperability across both local and global markets.

The African carbon market holds immense promise for climate and development objectives but faces critical challenges in liquidity, asset classification, and policy alignment that must be urgently addressed to unlock its full potential.

Speaking during the sponsored session by S&P Global Commodity Insights, at Africa Energy Week (AEW): Invest in African Energies 2025, Matutu emphasized these hurdles as fundamental impediments.

Liquidity remains "insufficient," explained Matutu, highlighting the slow emergence of a dependable, liquid trading platform. "We typically get the buyer from international markets...we are trying to build liquidity and not ringfence it to the South African context," she said. Lack of scale and diversity among buyers further hinders price discovery and undermines market confidence, limiting the inflow of capital necessary for vital projects.

Meanwhile, Heather McEwan, Head of Africa and Middle East at Verra, emphasized the lack of market transparency that fuels liquidity. She noted that while progress has been made in transparent credit auctions, challenges remain in tracking "where credits are going or what they are being sold for."

“Five years ago, governments and projects did not have the tools to communicate and track credits under Article 6 labels and UN Sustainable Development Goals labels. Now, registries are becoming more connected to support this,” she added.

Nick Rowley, Director at Green Asset Exchange, pointed to the absence of formal asset classification for carbon credits as "the biggest problem" stalling government regulation and broader financial market integration. "Carbon credits have not been classified as an asset yet," he said, adding that this intangible status complicates issues around money laundering and creates regulatory uncertainty.

A further significant barrier is policy misalignment with international frameworks, such as the Paris Agreement’s Article 6 and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA, which serves as a global mechanism for aviation emissions offsets, is driving an increasing demand for high-quality carbon credits, yet requires credits to meet strict standards and compliance protocols.

Financing remains a bottleneck for many projects. Describing partnerships with development banks and international organizations as critical to bridging gaps, especially for small and medium enterprises, Matutu explained, "We quickly realised we have to work hard to support the market with instruments to help with financing... traditional financiers want bankable, proven projects," she explained.

Rowley stressed the urgency of recognizing carbon pricing as a key economic lever. "Whether we like it or not, global warming is happening. We can price carbon into everything...this is a crisis, so we should value-add carbon to everything and inflate our way out of it."

The panel’s insights underscore that addressing these intertwined challenges requires coordinated public-private efforts, robust regulatory frameworks, and investment in digital market infrastructure. Only then can Africa’s carbon market scale effectively, attract global buyers through mechanisms like CORSIA, and deliver environmental integrity alongside socio-economic benefits.