includes a mechanism whereby tax payers can reduce their tax obligation by using carbon offsets.
The tax is introduced at a time that the country faces an energy crisis in the form a severely
constrained electricity generation network. Within the context of both the proposed carbon tax
as well as the energy security crisis there is potential to maximise existing mechanisms to alleviate
the energy crisis and reduce emissions as per the objectives of the carbon tax.
This can be done in line with the growing need for localized, small-scale energy solutions which
is supported by South Africa’s Renewable Energy Certificate (REC) platform. RECs is an ideal
tool to significantly support and diversify the South African green economy. The same is true for
The context of this report relates to the documentation that is in the public domain mid-2015,
especially the National Treasury Carbon Offsets Paper April 2014 which specifically mentions a
“The development of a South African‐specific carbon offsets standard could be considered in the
medium term to facilitate cost‐effective development of domestic carbon offsets. “
Both the South African REC market and the potential carbon offset market face unique
challenges. The challenge in the REC market is the lack of demand that leads to low volume and
low prices. The challenge in the carbon offset market is the high transaction cost that makes it
impossible for small projects to access the market.
This report analyses the possibility of converting RECs to carbon offsets in a system that
maintains the integrity of the carbon offsets.
The proposed tax offset design already includes CDM, VCS and Gold Standards credits and
adding converted RECs would add value and strengthen the proposed system. The RECs is a
scheme that incentivises renewable energy installers. If RECs can be converted into a credible
carbon offset credit the current REC initiative can be scaled up, thereby supporting green
By selecting small scale renewable energy projects types with no project emissions or leakage
calculations (automatic additionality under the CDM) these RECs could be converted through
the application of the standardised grid emission factor (UNFCCC approved standardised grid
emissions factors) into a credible carbon offset credit.
In theory it is possible and a pilot would demonstrate the practicality thereof. Stakeholders for
such a pilot have already been identified.
This report was made possible with the financial support of the British High Commission in South Africa Contributors to this report were Robbie Louw; Harmke Immink and Karien Erasmus from Promethium Carbon, Jason Schäffler from Nano Technology and Daniel Arnesson a PhD student from the Scandinavian Institute of maritime Law.