The final carbon offset regulations, gazetted 29 November 2019, favour small scale renewables,
applying a blanket eligibility to projects below 15MW. 

Due to concerns from stakeholders regarding the environmental and financial additionality, larger projects will only be eligible for generating offsets to be used under the carbon tax, when the cost of purchasing the power from
these projects is higher than R1.09 per kWh. Similar restrictions apply to projects in respect of the IPP bid programme for which power purchase agreements have been signed on or before 9 May 2013.
Lodewijk Nell, partner at EcoMetrix Africa, comments that National Treasury has struck a good balance, by on the one hand lowering the 50MW eligibility threshold to a more stringent 15MW, while on the other hand providing relief for projects which remain
eligible if the cost price exceeds R1.09 per kWh.
Further technical amendments compared to the draft regulations include declaring temporary
credits ineligible and additional requirements regarding offset certificates issued. Offset
certificates issued for the purpose of utilising offsets shall specify the tax period to which the
offsets will be applied and state that certificates are not transferable. The certificates need to be
retained for a minimum of 15 years.

Although various sections of the offset regulation need further in-depth analysis regarding the
exact meaning and impact, we are happy with the amendments and look forward to supplying the
local offset market with credits from various projects we have in our portfolio, says Henk Sa,
partner and offset trading executive at EcoMetrix Africa. Our preliminary supply and demand
calculations adjusted to the new regulations, shows an undersupply and currently we envisage a
carbon price to establish in the range of 60 to 90 Rand.

For any enquiries regarding this article please contact:
Lodewijk Nell
Partner at EcoMetrix Africa
078 704 2678
lodewijk.nell@ecometrix.co.za

The South African Government proposes a unique carbon tax and offset scheme. This tax
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
carbon offsets.
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
growth.
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.

More info..... 

We are pleased to invite you to the webinar "Trends of Carbon Pricing 2014" organised by Leonardo ENERGY and Ecofys:

Date: 2014-10-01
Time: 15h00 - 16h00 Europe Standard Time (Brussels, Paris, Berlin)
Check your local time for the webinar.

http://get.leonardo-energy.org/o01bC00cC000IU007CVazN0

We hope you can join us for this webinar, and look forward to your questions and feedback.

South African banking group Nedbank, in partnership with the Sustainability Institute (Stellenbosch University) has launched a practical book aimed at advancing the control, minimisation and measurement of carbon footprints in the country. With the South African National Treasury proposing the phasing-in of a domestic carbon tax from in early 2015, this book explores how South African companies can monitor their tax compliance by calculating their own carbon footprint ahead of the introduction of this new tax legislation.

The book “Carbon footprinting: A practical calculation guide focusing on measuring, monitoring, reporting and verification” will provide a guide for companies and other organisations to better understand their carbon impact and then implement effective carbon reduction programmes throughout their operations and activities.

The book will assist readers to be:

• Better placed to reduce operational expenditures associated with the use of energy.
• Better geared for the looming domestic and international financial penalties that will be associated with Green House Gases (GHG) pollution.
• Able to make informed operational choices.
• Able to think strategically about developing products and services for an increasingly complex world with environmental limitations.

“We have partnered with Nedbank to create what we believe is a valuable addition to the knowledge that currently exists on carbon footprinting in the South African context, that we intend to share with many other academic institutions in the near future. We fully endorse it as a useful contribution to the sustainability debate,” Alan Brent, professor and associate director at the Sustainability Institute and co-author of the guide, says.

Despite numerous reputable sources of information freely available on internet relating to climate change and carbon footprinting, Nedbank and the Sustainability Institute firmly believe there is a need for such content. “The sources that currently exist are geared towards people who are already experts of carbon. This book is not. It takes the reader by the hand and explains in a step-by-step manner the nuances of carbon calculations by using day-to-day examples and investigates the challenges faced in the South African GHG reporting context in a conversational style,” says Dr Marco Lotz, co-author of the book and Nedbank sustainability carbon specialist.

The first section of the book consists of the conversational theory by example “how to” that explains international conventions and local applications of carbon footprinting. The second section consists of a selection of case studies. The reader is exposed to real carbon footprint case studies and Green House Gas (GHG) information of predominantly South African companies. Nedbank’s intention is that the book be distributed free of charge, in both hard copy and as a downloadable file.

Promethium Carbon developed a framework for the trading of offsets against the proposed South African Carbon Tax.  The project evaluated the existing infrastructure and how the offset system could be operational by 2015.  The supply and demand volumes indicated that a viable market of around 20 million ton of CO2 can be created.  A range of supply options were modelled based on the project types that might be allowed.  This work was funded by the Prosperity Fund of the British High Commission.
 
The report named “Carbon Trading In South Africa” can be downloaded from Promethium’s website by clicking here

We appreciate your comments. Please e-mail us at admin@promethium.co.za