South Africa's National Treasury has requested the public to comment on proposals for the Carbon Offset Scheme that aims to enable businesses to cut their carbon tax liabilities and make investments to bring down the levels of greenhouse gas (GHG) emissions.
The carbon offsets scheme is meant to complement the carbon tax that South Africa plans to introduce from 2016. South Africa aims to reduce its greenhouse gas emissions by 34 per cent and 42 per cent by 2020 and 2025, respectively.
The overall national potential demand for carbon offsets within South Africa, could be between 25 and 30 million tonnes of CO2e per annum (or 25 to 30 million carbon offsets) as per estimates. This calculation is based on the assumption that all entities covered under the tax would choose to purchase the maximum number of offsets they are allowed under the carbon tax.
The recently published Carbon Offsets Paper is part of a set of government measures to fight back climate change. The government describes a carbon offset as a measurable avoidance, reduction or impounding of CO2 or other GHG emissions.
Carbon offsets will enable firms to cost-effectively lower their carbon tax liability. They will also incentivise investment in least-cost mitigation options in the country, driving investment in GHG-mitigation projects that deliver carbon emissions reduction at a cost lower than the carbon tax. Such projects can generate considerable sustainable development benefits in South Africa, including channelling capital to rural development projects, creating employment, restoring landscapes, reducing land degradation, protecting biodiversity, and encouraging energy efficiency and low carbon growth.
Projects that generate carbon offset credits must occur outside the scope of activities of the entity subject to the carbon tax. Only South African based credits will be eligible for use within the carbon offset scheme. Carbon offset projects registered and / or implemented before the introduction of the carbon tax regime will be accepted subject to certain conditions and within a specific time frame.
Projects under four different carbon offset standards have been developed in South Africa, including the Clean Development Mechanism (CDM), Verified Carbon Standard (VCS), Gold Standard (GS) and Climate, Community and Biodiversity Standard (CCBS). In order to facilitate the introduction of the carbon offset scheme, it is proposed that carbon offsets developed under these standards will be considered for eligibility if they fulfil specific criteria.