Capital Market Authority considers green securities to fund climate initiatives
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The Ethiopian Capital Market Authority (ECMA) is exploring the introduction of green financing instruments to support climate resilience programs. A feasibility study conducted with FSD Ethiopia highlights the country’s vulnerability to climate risks, costing up to 1.5% of GDP annually. With Ethiopia requiring $316 billion for its climate action goals by 2030, the proposed green financing market aims to mobilize $2 billion through initiatives like green bonds and carbon credits.
Ethiopia Explores Green Financing to Boost Climate Resilience
The Ethiopian Capital Market Authority (ECMA) is considering the introduction of green financing instruments to raise funding for climate resilience programs.
Feasibility Study on Green Financing
Experts from ECMA and Financial Sector Deepening (FSD) Ethiopia have conducted a feasibility study assessing the viability of such a market in Ethiopia.
During a Friday presentation, experts highlighted that Ethiopia’s agriculture-based economy is highly vulnerable to climate risks, costing:
- 1 – 1.5% of GDP annually (≈ USD 2 billion)
- Projected to increase to 5% of GDP by the 2040s
Urgent Need for Climate Finance
Key Climate and Financial Challenges:
- Ethiopia’s Nationally Determined Contribution (NDC) for climate action requires USD 316 billion to achieve a 68.8% emission reduction target by 2030.
- 20% of Ethiopia’s land is degraded, costing over USD 4.3 billion annually, underscoring the need for sustainable land management.
- Ethiopia ranks 38th on the Global Climate Vulnerability Index.
Green Financing Market Goals
The proposed green financing market aims to mobilize USD 2 billion in financing by 2030 through:
- Green bonds
- Carbon credits
Current Climate Finance Efforts
- Ethiopia accessed USD 1.9 billion in climate finance (2021-2022), with nearly 50% allocated to climate policy adoption.
- The government secured only USD 300 million this year, significantly below the estimated USD 300 billion required to limit greenhouse gas emissions to 150 tons by 2030.
- 90%+ of climate funding comes from international sources.
Carbon Credits: A Growing Market
Ethiopia has strong carbon sequestration potential, making carbon credits a promising financing tool.
- Carbon credit prices range from USD 5 – 10 per ton.
- Increased adoption could drive significant environmental and economic benefits.
