CARBON OFFSETS IN SOUTH AFRICA
29 February 2016
Agenda
1. Background
2. Eligible project types
3. Development of offsets market
Background
• Carbon offsetting is used globally to give emitters
of greenhouse gasses access to low cost
mitigation options
– It allows companies with emission reduction
obligations to invest in GHG mitigation where it
is the cheapest
– It supports the economy by ensuring that the
burden of GHG reduction cost is the least
• Offsetting is used in:
– Cap and trade schemes such as the European
Union Emission Trading Scheme and the
Californian Scheme
– Proposed to be used in the South African
carbon tax
Current state of development
•
•
•
•
Carbon Offset Paper published in April 2014
Draft Carbon Tax Bill published in November 2015
Draft Offset Regulations expected soon
Carbon Offset Administration System under
development - to be completed in second half of
2016
10 R120/ton x 30
tons tons = R3,600
Offsets
surrendered
Offsets purchased =
10 tons @ R 80/ton
R120/ton x 40 tons =
R4,800
Tax
Payable
Taxable = 40 tons
Application
of tax free
threshold
Tax free emissions = 60 tons
Total GHG Emissions = 100 tons
Offsetting carbon tax - How it works
Tax liability
before offset
= R4,800
Total cost
after offset
= R4,400
Saving due to offsets = R 400
Tax paid =
R3,600
Payment for
offsets
= R 800
Projects eligible to use in SA carbon tax
• Standards
– Clean Development mechanism (CDM)
– Verified Carbon Standard (VCS)
– Gold Standard (GS)
• Criteria
– Projects located inside borders of SA
– Projects outside of taxable activities of carbon
tax paying entities
– Excluded projects
• Activities with Section 12L benefit
• Projects under the REIPPP
Mechanism for listing of SA credits
Environmental
Integrity
National
Appropriateness
Economic
Integrity
• Registration
• Verification
• Issuance
International
Registry
(CDM, Markit, APX)
• Project
eligibility
• Extended
Letter of
Approval
• Attestation of
voluntary
cancelation
South African
Carbon Offset
Administration
System
Offset Trading
• Validation
RSA Listing Process
CDM, VCS, GS, etc
Emission Reduction
Project
• Listing
• Trading
• Clearing
• Settlement
Offsets used in
carbon tax system
Potential functioning of the market
Cost of project implementation
Offset Provider
(seller of offset credits)
Emission Reduction
Project
1
6
Credits brought to market
Standards
CDM/VCS/GS
Payment
for credits
Trading
Platform
Market
Registry
Clearing &
settlement
Payment
for credits
Buyer
Seller
SARS
7
Credits delivered
8
5
RSA eligibility
4
EligibilityR
ules
Credits
surrendered to SARS
Taxpayer
(buyer of offset credits)
SARS
9
Reduction in tax
payment
2
Validation
&
verification
3
International
Registry
(CDM, Markit,
APX)
www.promethium.co.za