Publication of the Draft Regulations on the Carbon Offset in terms of the draft Carbon Tax Bill for public comment
The National Treasury today publishes the Draft Regulations on the Carbon Offset for public comment and further consultation. This follows on the publication of the Carbon Offsets Paper in 2014 and the draft Carbon Tax Bill in November 2015.
The Carbon Offset Regulations was developed jointly by the National Treasury, the Department of Enegry and the Department of Environmental Affairs in terms of Sections 13 and 20 (b) of the Draft Carbon Tax Bill and sets out the procedure for the use of carbon offsets by taxpayers to reduce their carbon tax liability.
The Draft Carbon Tax Bill makes provision for the carbon offset allowance in terms of Section 13. This provides for firms to reduce their carbon tax liability by using offset credits of up to a maximum of 5 or 10 per cent of their total greenhouse gas (GHG) emissions, as specified in Schedule 2 of the draft Carbon Tax Bill.
Carbon offsets can be generated through investments outside of a taxable entity’s activities that results in quantifiable and verifiable GHG emission reductions. In addition such carbon offset projects should generate sustainable development co-benefits and employment opportunities in South Africa by encouraging investments in energy efficiency, rural development projects, and initiatives aimed at restoring landscapes, reducing land degradation and biodiversity protection.
The carbon offset mechanism is in line with the proposals contained in the National Climate Change Response White Paper of 2011 and efforts to transition to a low carbon, greener economy as pronounced in the National Development Plan.
Design of carbon offsets
The proposal to use carbon offsets in conjunction with the carbon tax has been widely supported by stakeholders as a cost-effective measure to incentivise GHG emission reductions. Carbon offsets involve specific projects or activities that reduce, avoid, or sequester emissions, and are developed and evaluated under specific methodologies and standards, which enable the issuance of carbon credits.
The carbon offset system seeks to encourage GHG emission reductions in sectors or activities that are not directly covered by the tax. Investments in public transport, agriculture, forestry and other land use (AFOLU) and waste sectors are likely to qualify.
The carbon offset scheme will rely primarily on existing international carbon offset standards namely, the Clean Development Mechanism (CDM), Verified Carbon Standard (VCS) and the Gold Standard (GS) and their associated institutional and market infrastructure. However, scope is also provided for the use of local standards/ methodologies where appropriate and independently verifiable. Read more [PDF]
