Some may question the timing as National Treasury released its draft carbon offset scheme in a bid to make South Africa a greener economy. This as the economy finds itself in the grips of a growth and jobs crisis, which could end up in junk and a recession come year end. Carbon footprints may not be top of mind in companies at present but one has to applaud the longer term aspirations of Treasury. The program enables companies to offset up to 10 percent of greenhouse gas emissions by investing in projects outside their normal scope, focusing on job creation or environmental conservation. The full draft of regulations is below and are open for comment until 29 July. – Stuart Lowman
by Mike Cohen
(Bloomberg) — South Africa unveiled proposals Monday that would enable companies to offset as much as 10 percent of their carbon emissions by investing in projects that help conserve the environment and create jobs.
An offset program is contained in draft laws published in November last year that provide for a tax on emissions. The government said the measure is needed to meet a target of reducing the discharge of greenhouse gases by 34 percent below a scenario of “business as usual” in five years and by 42 percent by 2025. The duty, which will probably come into effect next year, will start at 120 rand ($8.06) per metric ton of carbon dioxide-equivalent emissions.
“Carbon offsets can be generated through investments outside of a taxable entity’s activities that results in quantifiable and verifiable greenhouse emission reductions,” the National Treasury said in an e-mailed statement accompanying the draft offset rules. Projects should contribute to sustainable development and job creation “by encouraging investments in energy efficiency, rural development projects and initiatives aimed at restoring landscapes, reducing land degradation and biodiversity protection.”
The offset program will be administered by a unit within the Department of Energy and limited to initiatives within South Africa. Renewable electricity projects, many of which have attracted other incentives, won’t qualify, the Treasury said.
Interested parties have until July 29 to comment on the proposed regulations.
Carbon offsets will make SA economy greener – Treasury
By Eugenie du Preez
Cape Town – Government’s proposed carbon offset system is in line with efforts to help South Africa make the transition to a low carbon, greener economy, maintained National Treasury.
Companies that wish to reduce their carbon tax bill can do so by subscribing to the carbon offset scheme. National Treasury on Monday announced publication of the scheme’s draft regulations for public comment and further consultation.
The carbon offset regulations were developed jointly by the National Treasury, the Department of Energy and the Department of Environmental Affairs and set out the procedure for the use of carbon offsets by taxpayers to bring down their carbon tax costs. They can do this by using offset credits of up to 5% or 10% of their total greenhouse gas (GHG) emissions, as specified in the bill.
Companies can generate carbon offsets by investing in activities outside their normal scope which result in quantifiable and verifiable GHG emission reductions. These projects should also generate sustainable development co-benefits and employment opportunities in South Africa. This can be done by encouraging investment in energy efficiency, rural development projects and initiatives aimed at restoring landscapes, reducing land degradation and biodiversity protection.
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Treasury explained that the carbon offset system is in line with efforts to make the transition to a low carbon, greener economy as set out in the National Development Plan.
The carbon offset proposal has been supported by some stakeholders as a cost-effective way to bring down greenhouse gas usage. “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,” said Treasury.
However, civil rights body Outa believes South African consumers cannot afford the proposed carbon tax, which it says may not even achieve its goal of reducing GHG emissions.
“While government’s stated and noble intention is that the tax will help to reduce green house gas emissions in the medium to long term, Outa believes this will not necessarily be the case,” said an Outa spokesperson. “The carbon tax will not necessarily change business behaviour, who will in turn merely pass on the tax costs to the consumer.”
Outa is particularly concerned by the fact that the carbon tax will not be ringfenced, and that the government does not have a good track record in the way money is spent.
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“The tax is predicted to add R13.7bn to the fiscus and we don’t believe this economic impact will be sufficiently offset through revenue recycling or other initiatives expressed by Treasury,” said an Outa spokesperson.
How the carbon offset system will work
The carbon offset system aims to encourage reduction of GHG emissions in sectors or activities that are not directly covered by carbon tax. Investments in public transport, agriculture, forestry and other land use and waste sectors are likely to qualify, said Treasury.
The carbon offset scheme will be based primarily on existing international carbon offset standards. However, Treasury said scope is also provided for using independently verifiable local standards and methodologies. Eligibility criteria include that projects must be located in South Africa, and that they should occur outside the scope of activities subject to carbon tax to prevent double counting and tax relief.
As a rule, renewable energy projects have been excluded from the carbon offset scheme. This is to avoid the possibility of double counting benefits where these projects have already been incentivised, for example through the renewable energy independent power producer programme (REIPPPP).
Treasury said however that this blanket exclusion could be reconsidered. Discussions with the Department of Energy about current criteria used to evaluate REIPPPPs could identify specific renewable energy project types that might qualify as carbon offset projects, such as small and medium-sized renewable energy projects.
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Treasury specified that the technical infrastructure required for the development and implementation of carbon offset projects include a programme administrator, a registry and verification by accredited third party verifiers.
Outa last week made an urgent plea to big business and its respective industry associations to make a serious attempt to assess the real impact and burden of the carbon tax on businesses, and to question the need for what it terms “yet another regressive tax on society”.
The draft regulation on carbon offsets is published for public comments and is available on the National Treasury website. Written comments should be submitted to [email protected]. Any clarification questions can be directed to Dr Memory Machingambi, email: [email protected] by close of business on 29 July 2016.
Treasury expects to launch the draft carbon tax bill in August or September this year, with recent announcements indicating the tax will be implemented early in 2017. – Fin24
Source: http://www.fin24.com/Economy/carbon-offsets-will-make-sa-economy-greener-treasury-20160620
