{"id":120772,"date":"2026-04-29T16:27:07","date_gmt":"2026-04-29T16:27:07","guid":{"rendered":"https:\/\/www.climatepolicyinitiative.org\/?post_type=cpi_publications&#038;p=120772"},"modified":"2026-05-26T13:33:44","modified_gmt":"2026-05-26T13:33:44","slug":"dbsa-financial-instrument-design-for-an-effective-carbon-market-in-south-africa","status":"publish","type":"cpi_publications","link":"https:\/\/www.climatepolicyinitiative.org\/pt-br\/publication\/dbsa-financial-instrument-design-for-an-effective-carbon-market-in-south-africa\/","title":{"rendered":"DBSA:\u00a0Financial instrument design for an effective carbon market in South Africa"},"content":{"rendered":"\n<p><\/p>\n\n\n\n<p>South Africa\u2019s national carbon tax&nbsp;has been a&nbsp;major turning point for domestic carbon markets, creating an increased demand for carbon credits.&nbsp;As the&nbsp;tax&nbsp;enters&nbsp;phase&nbsp;two, the country&nbsp;is likely to see&nbsp;surging&nbsp;demand. However,&nbsp;limited access to&nbsp;early-stage investments and high capital stall momentum&nbsp;for domestic&nbsp;carbon mitigation projects.&nbsp;&nbsp;<br><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Built on key design principles<\/strong>&nbsp;<\/h2>\n\n\n\n<p>The\u00a0<a href=\"https:\/\/www.dbsa.org\/\" target=\"_blank\" rel=\"noreferrer noopener\">Development Bank of Southern Africa<\/a>\u00a0(DBSA), in partnership with the\u00a0<a href=\"https:\/\/financeincommon.org\/fics-innovation-lab\" target=\"_blank\" rel=\"noreferrer noopener\">FiCS\u00a0Innovation\u00a0Lab\u00a0Incubator<\/a>,\u00a0Climate Policy Initiative, and\u00a0<a href=\"https:\/\/www.promethium.co.za\/\" target=\"_blank\" rel=\"noreferrer noopener\">Promethium Carbon<\/a>, has developed two novel financial instruments designed to transform carbon credits from complex assets into de-risked, bankable products.\u00a0The\u00a0two\u00a0instruments are:\u00a0\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>A&nbsp;<\/strong><strong>Carbon Repo Facility<\/strong><strong>,<\/strong><strong>&nbsp;<\/strong>designed to provide&nbsp;liquidity&nbsp;to&nbsp;borrowers selling&nbsp;carbon credits to the facility for immediate cash, with an&nbsp;agreement to repurchase the&nbsp;credits&nbsp;later at a pre-determined price.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>The Carbon Bond<\/strong>&nbsp;could be issued by the DBSA as a senior unsecured note, with proceeds&nbsp;used to fund&nbsp;loans for&nbsp;carbon projects. Borrowers&nbsp;would&nbsp;repay via a mix of cash interest and the actual carbon credits generated by underlying projects.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key&nbsp;insights&nbsp;<\/strong>&nbsp;<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>South Africa is expected to see an increase in structural demand for carbon credits as its carbon tax tightens. However, a lack of early-stage capital for carbon projects limits supply.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>In addition, illiquidity and weak pricing in secondary markets reduce the attractiveness of carbon credits as financial assets.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>PDBs can enable carbon markets by introducing well-structured financial instruments that mobilize private financing from commercial banks into carbon projects.&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Market credibility is a prerequisite for mobilizing capital into carbon markets at scale.&nbsp;Trust in carbon-linked instruments requires robust governance and registry transparency, underpinned by independent verification.&nbsp;<br>&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Leveraging financial innovation for effective carbon markets<\/strong>&nbsp;<\/h2>\n\n\n\n<p>These innovative instruments align&nbsp;with&nbsp;the&nbsp;DBSA\u2019s&nbsp;mandate to catalyze infrastructure that drives sustainable growth while accelerating South Africa\u2019s transition to a low-carbon economy.&nbsp;If&nbsp;approved, they would&nbsp;position&nbsp;the bank as a&nbsp;key&nbsp;intermediary in mobilizing the public and private finance required for high-impact climate action.&nbsp;<\/p>\n\n\n\n<p>The&nbsp;instrument design&nbsp;can also&nbsp;offer&nbsp;a groundbreaking blueprint for&nbsp;public&nbsp;development&nbsp;banks in other&nbsp;emerging economies to&nbsp;leverage&nbsp;financial innovation&nbsp;to&nbsp;support&nbsp;carbon&nbsp;markets.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Access the report to learn more about&nbsp;the&nbsp;instruments\u2019&nbsp;development&nbsp;and&nbsp;the&nbsp;insights that&nbsp;emerged&nbsp;during the process. <\/p>\n\n\n\n<p><span class=\"button\"><a href=\"https:\/\/www.climatepolicyinitiative.org\/wp-content\/uploads\/2026\/04\/DBSA_FiCS-Incubator-Report.pdf\" type=\"link\" id=\"https:\/\/www.climatepolicyinitiative.org\/wp-content\/uploads\/2026\/04\/DBSA_FiCS-Incubator-Report.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Explore the report<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Development Bank of Southern Africa, in partnership with the FiCS Innovation Lab Incubator, has developed two novel financial instruments designed to transform carbon credits from complex assets into de-risked, bankable products. <\/p>\n","protected":false},"author":235,"featured_media":120768,"template":"","format":"standard","meta":{"_acf_changed":false},"programs":[1827],"regions":[5,397],"topics":[690,1894,1199,842],"collaborations":[],"class_list":["post-120772","cpi_publications","type-cpi_publications","status-publish","format-standard","has-post-thumbnail","hentry","programs-finance-in-common-innovation-lab","regions-africa","regions-south-africa","topics-carbon-markets","topics-climate-finance","topics-finance","topics-financial-innovation"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>DBSA:\u00a0Financial instrument design for an effective carbon market in South Africa - CPI<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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