Data and Insights: South Africa
VCS Quarterly Update
ISSUE #1 - Q3/2020
South Africa approved a national carbon tax in June 2019 — one of only a few African nations to do so, and the one where the tax has the broadest coverage. Under the associated Carbon Offset Regulation, liable entities can satisfy a portion of their tax obligations by using offsets certified to voluntary carbon standards. By implementing the regulation, the national government has 1) indicated that voluntary carbon offsetting efforts are now well-placed to provide reductions to the domestic market for the purpose of a carbon tax, and b) created a system/mechanism that can serve as a model for future project development.
Verra’s Verified Carbon Standard (VCS) Program is recognized as an accredited standard under the Carbon Offset Regulations for the Tax, and Verified Carbon Units (VCUs) from projects in South Africa can be used for purposes of the carbon tax. As a result, the South African carbon tax mechanism has the potential to drive finance to domestic projects that are delivering emission reductions and removals, protecting the environment and generating sustainable development benefits, such as reduced poverty and the promotion of sustainable cities and communities.
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VCS projects were first established in South Africa in 2009 and total issuances spiked in 2012 to 144,576 VCUs.
As of September 30, South African VCS projects issued 120,000 VCUs in 2020, surpassing the total number of VCUs issued in 2019 (fewer than 80,000 VCUs). This is likely driven by the increased demand for carbon credits due to the new carbon tax.
The number of retired credits being used for the purposes of the carbon tax during the first year after its implementation (June 2019 – June 2020) will be known after October 29, 2020 (the deadline for surrendering credits from Carbon Offset Administration System (COAS) to the South African Revenue Service and paying the tax).
To date, the majority of VCS projects in South Africa are in the energy and waste handling and disposal sectors. While this is expected to continue, new projects in sectors such as construction and manufacturing are also likely. Stakeholders have informed us that project development is beginning to increase in the land-use sector, which will yield development benefits beyond carbon.
| Project | Total |
|---|---|
| Under Development | 1 |
| Under Validation | 1 |
| Registration Requested | 3 |
| Registered | 14 |
| Transferred* | 5 |
| Project | Total |
|---|---|
| AFOLU* | 3 |
| Energy industries (renewable/non-renewable sources) | 11 |
| Waste handling and disposal | 6 |
| Transport | 1 |
| Chemical industry | 4 |
| Industrial processing | 1 |
*One VCU represents one tonne of carbon dioxide equivalent that was removed from the atmosphere or not emitted.
Greenhouse gas equivalencies for emission reductions and removals were calculated using the EPA Greenhouse Gas Equivalencies Calculator
| Project Type | VCUs |
|---|---|
| Energy industries | 275,639 |
| Waste handling and disposal | 422,176 |
| Chemical industry | 98,563 |
| Fugitive emissions | 9,643 |
The number of retired credits being used for purposes of the Carbon Tax is not yet known given that the date for surrendering credits from COAS to the South African Revenue System is October 29, 2020.
Verra looks forward to working alongside local organizations to increase the understanding of Verra’s standards-based frameworks among project developers, the private sector, and regulators. In addition, the VCS will support the development of new project types in South Africa through existing and emerging simplified rules and procedures that are useful to the local context (such as standardized approaches for baselines and additionality). The increased availability of well-designed, cost-effective carbon offset projects and auditing options are likely to drive national and international investment in climate mitigation, and sustainable development outcomes locally.