The National Treasury has published the Carbon Offsets Paper for public comment. The paper outlines proposals for a carbon offset scheme that will enable businesses to lower their carbon tax liability and make investments that will reduce greenhouse gas (GHG) emissions.

The carbon offsets scheme is meant to complement the carbon tax that South Africa plans to introduce from 2016.

Carbon tax

The proposed design of the carbon tax policy is outlined in the ‘Carbon Tax Policy Paper: Reducing greenhouse gas emissions and facilitating the transition to a green economy’ that was released for public comment in May 2013.

To ensure a relatively smooth transition to a low-carbon economy, the carbon tax design incorporates a number of relief measures and a gradual phased-in approach to protect households and the international competiveness of local businesses.

Addressing climate change

At the 2009 UN Climate Change Conference in Copenhagen, South Africa voluntarily committed to reduce greenhouse gas emissions by 34% in 2020 and 42% in 2025. In 2011, SA adopted the national climate-change response policy which comprises a comprehensive package of measures to deal with both mitigation and adaptation.

The carbon tax will be one of the key measures to mitigate climate change.

Carbon offset scheme

According to the National Treasury, a number of principles must be fulfilled for a project to be awarded a tradable emissions reduction credit under a specific standard. The principles of additionality, real and permanence are pivotal to ensure the credibility of carbon offset projects.

• additionality – GHG emissions reductions are additional if they would not have occurred under a ‘business- as- usual’ scenario.
• permanence – GHG emissions are permanent and unlikely to be reversed
• real – GHG emission offsets originate within tangible physical projects with proof that they have occurred or will occur at a specific point in time.

The following eligibility criteria for carbon offset projects are proposed:

• 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 timeframe.

Initial analysis shows that the development and adoption of an eligible project methodology could focus on the areas of energy and efficiency, transport, waste and agriculture, forestry and other land uses.

Projects in South Africahave been developedunder four different carbon offset standards: 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. It is envisaged that the initial focus will be for projects approved along the lines of the Clean Development Mechanism (CDM).

Click here to read the Carbon Offsets Paper.