The South African National Treasury has published proposals for a carbon offset scheme. The scheme aims to increase investments in projects that will reduce greenhouse gas (GHG) emissions. It will also enable business to reduce their liability to carbon tax (which is due to be introduced in 2016).

Objectives

Carbon offsets are a form of trade. Buying an offset helps to fund projects that reduce GHG emissions.

The government hopes that the scheme will drive investment in GHG-mitigation projects that reduce emissions at a lower cost than the carbon tax; and fund projects that will generate considerable sustainable development benefits in South Africa.

Examples

Projects that could generate carbon offsets include:

  • Solar and wind projects
  • Transportation projects (for example rapid rail or bus links)
  • Solar water heating
  • Sequestration of carbon through land-based projects (for example, reforestation)

Eligibility

The projects are subject to strict eligibility criteria. Only credits from South African-based projects will be eligible, and any projects registered or implemented prior to the introduction of the carbon tax regime will have to fulfil specified conditions to be accepted to the scheme.

The paper proposes to accept offsets from four established offset standards, all of which are already in use in South Africa:

  • Clean Development Mechanism (CDM)
  • Verified Carbon Standard
  • Gold Standard
  • Climate, Community and Biodiversity Standard

There are currently 111 registered carbon offset projects in South Africa, developed either under the CDM or one of the other standards above.

Reduce carbon tax liability

The proposals also suggest that carbon offsets can be used to reduce carbon-tax liability, by increasing the basic tax-free threshold from 60% to up to 90%. The use of carbon offsets to reduce carbon-tax liability reflects current global trends, where a number of countries have employed such measures.

Click here for full paper download on Carbon Offset and this is open for comment until 30 June 2014.