South Africa’s National Treasury plans to lay out its proposals for how to regulate carbon markets in the country in the next few months.
The government department said it plans to publish a consultation paper on the industry around the time it presents its Medium-Term Budget Policy Statement in October.
While African countries from Zimbabwe to Ghana have been rushing to regulate the production and trade in carbon credits, which can be sold to companies or countries to compensate for their emissions of climate-warming gases, to garner more income for the governments, South Africa is both a producer and a consumer of the offsets.
Even though South Africa has the potential to produce the credits from its renewable-energy activities and the restoration of carbon-absorbing ecosystems it’s the world’s fifteenth-biggest producer of greenhouse gases.
The bulk of those emissions are due to the reliance on coal to produce electricity and petrochemicals from plants operated by companies including Eskom Holdings and Sasol It has imposed a carbon tax on emissions that will gradually become more punitive.
A credit represents to a ton of carbon dioxide or its equivalent either permanently removed from the atmosphere or prevented from reaching it in the first place.
The Treasury, in the paper, will seek to define the legal nature and treatments of carbon credits in terms of whether they are a security, derivative or commodity. That definition will have implications on how the offsets are treated in terms of exchange controls, regulation ad reporting requirements.
It will also seek to ensure that the credits aren’t duplicated and once sold can’t be reissued. The rules will ensure that there are common approaches to how they are treated under the so-called voluntary carbon market, the United Nations’ Article 6 Policy Framework and Carbon Strategy and South Africa’s own carbon tax.
The voluntary market allows individuals or organizations to buy credits to offset their emissions and is subject to less oversight than under Article 6, a legally binding international treaty that allows countries to trade carbon credits between each other, alongside companies, to meet their climate goals.