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Trading demo showcases readiness to exchange carbon offsets in SA

Trading demo showcases readiness to exchange carbon offsets in SA

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29th January 2015

  

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A trading demonstration has showcased the applicability, functionality, utility and readiness of the well-established, commercial and financial electronic infrastructure provided by private-sector commodity registry Silocerts and the JSE as a potential platform for the exchange of carbon offsets in South Africa.

Carbon offset company Promethium Carbon, in cooperation with the JSE, Silocerts and Johannesburg-based technology company Done Technologies, introduced the system on Thursday at the JSE.

The system was created within the context of the proposed carbon tax and carbon budgeting systems contained in the draft Carbon Offsets Paper of April 2014 and was the culmination of three years of work by the three organisations, funded by the British High Commission in Pretoria.

Promethium Carbon director Robbie Louw said the demonstration showed that the required infrastructure to trade carbon existed in the country.

“I’m delighted that our Prosperity Fund project with Promethium Carbon and the JSE has resulted in [the] successful demonstration of carbon offset trading,” British High Commissioner to South Africa Judith Macgregor noted.

National Treasury indicated in the draft Carbon Offsets Paper that credits from various internationally accepted standards would be eligible under the carbon tax regime.

These standards included the Clean Development Mechanism, the Verified Carbon Standard, the Gold Standard and the Climate, Community and Biodiversity Alliance.

Carbon offset credits that had already been issued by the eligible standards and come from projects implemented inside of South Africa were traded as part of the demonstration.

The trades were executed on an over-the-counter basis and the credits were used for the voluntary offset of carbon emissions by participating corporate entities. All trades were then mirrored in a testing environment on Silocerts and the JSE, indicating how these trades would look in the event of them being performed live on these two platforms.

“Our experience in operating a number of markets providing trading and clearing services gave us the opportunity to test what it would take to include carbon credits into our diversified product range.

“I am pleased with the flexibility of our systems to deliver this. We do recognise, however, that as this is a new product, we require support from our Registrar in terms of defining carbon credits within the Financial Markets Act,” JSE CEO Nicky Newton-King commented.

Louw added that the outcome of this research confirmed that a trading system could be made operational within the same timeframes as the proposed carbon tax.

The required infrastructure was already available and sufficient to guarantee the environmental integrity of the offset system, guarantee the national appropriateness of the offsets within the context of the proposed South African carbon tax system and assure the financial integrity of the trading system.

“Market readiness for carbon trading is relevant within the South African context as developing government policy, with respect to both carbon tax and carbon budgets, allow for the potential use of offsets to mitigate the carbon liability of emitters.

“The successful development of a carbon market will result in significant benefits to the domestic economy with respect to green growth, green job creation and climate change mitigation,” Louw advised.

Further, Macgregor pointed out that the demonstration was an important step toward government’s goal to reduce carbon emissions. “Building on the UK’s experience in carbon offset trading, we look forward to continuing our partnership with government, business and civil society to help South Africa develop a sustainable and prosperous economy, and contribute to global action against climate change.”

Edited by Tracy Hancock
Creamer Media Contributing Editor

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