Carbon Offset Regulations Published on the 29th of November 2019

The long-awaited carbon offset regulations were published by the National Treasury on the 29th of November 2019.

Based on the regulations, we suggest that the general rule for claiming the carbon offset allowance is as follows:

A offset allowance must be conceded to a taxpayer resulting from the pursuit of an approved project that has been carried on from the 1st of June 2019, that is undertaken in SA, and that is not subject to the carbon tax.

The exception to this rule is as follows:

For an approved project which was in existence prior to the 1st of June 2019, and for which the activities become subject to the carbon tax, carbon credits up to the 31st of May 2019 can be used for the carbon offset allowance before the 31st of December 2022.

For an approved project in existence prior to the 1st of June, where the activities are not subject to the carbon tax, carbon credits can be used until the end of the project’s crediting period (subject to the accreditation standard’s period).

The most significant changes to the regulation include the limitation of the allowance or non-eligible project list.

These include:

The regulations limit the eligibility for the use of carbon offsets from the renewable IPP programme signed on or before 9 May 2013 with a contracted capacity exceeding 15 MW, with a cost equal to, or lower than, R1.09/kWh.

The regulations limit the eligibility for the use of carbon offsets in respect of a technology with an installed capacity exceeding 15 MW with a cost equal to, or lower than, R1.09 / kWh.

A temporary CDM-certified emission reduction (these are credits issued to afforestation and reforestation projects).

“A carbon credit issued to a forestation or reforestation project is termed a temporary carbon credit due to the potential reversibility of

carbon stored in trees as a result of natural disturbances such as wild fires or droughts”

Other changes in the regulation include provisions for the following:

A provision has been included which states that the attestation of carbon credits must specify that the cancellation has been made for the purpose of claiming a carbon offset allowance;

The content of the certificate must include a statement that the certificate issued is non-transferrable, and must include the tax period
in respect of which the certificate is issued.

The certificate must remain valid and can be used for no longer than the tax period in respect of which the certificate is issued.

Should you have any questions, please feel free to contact us:

Zelda Burchell, Carbon and Energy Manager

+27 11 568 3341

+27 82 410 0750

ZBurchell@cova-advisory.co.za