Pressing ahead with its plans for a carbon tax South Africa has published proposals for its carbon offset scheme that begins in two year.
The carbon offset scheme is aimed at helping companies lower their liabilities in a carbon tax due to be imposed in two years that is designed to reduce South Africa’s greenhouse gas emissions.
Reuters Newsagency reports carbon offsets are a measurable avoidance, reduction, or sequestration of carbon dioxide or other greenhouse gas (GHG) emissions.
South Africa has committed to reduce its greenhouse gas emissions by 34 per cent by 2020 and 42 per cent by 2025.
“Carbon offsets will enable firms to cost-effectively lower their carbon tax liability,” the Treasury announcement said.
“They will also incentivise investment in least-cost mitigation options in the country, driving investment in GHG-mitigation projects that deliver carbon emissions reduction at a cost lower than the carbon tax.”
The carbon tax, expected to be phased in from 2016, is one of several environmental initiatives that include a bio-fuels production incentive and greater vehicle emission taxes.
“Such projects can generate considerable sustainable development benefits in South Africa, including channelling capital to rural development projects, creating employment, restoring landscapes, reducing land degradation, protecting biodiversity, and encouraging energy efficiency and low carbon growth.”
“To ensure a relatively smooth transition to a low-carbon economy, the carbon tax design incorporates a number of relief measures and a gradual phased-in approach to protect households and the international competiveness of local businesses,” the Treasury said.
The proposed carbon tax policy includes a basic tax-free threshold of 60 per cent below which the tax will initially not be payable; a factor formula to adjust basic tax-free threshold to reward companies that have taken voluntary actions to reduce their emissions before the introduction of the carbon tax; and additional tax-free allowances for sectors with limited potential for emissions reduction, such as industrial process emissions.
The draft policy also proposes additional graduated relief for trade-exposed and emissions-intensive sectors, and carbon offsets that businesses can use to reduce their carbon tax liability.
The overall maximum tax-free threshold is limited to 90 per cent.
