Corporates are likely to take up National Treasury’s new carbon offset proposal “in a big way”, GCX Africa lead strategist Kevin James argued, following the publication of the ‘Carbon Offsets Paper’ for public comment. The paper outlines a carbon off- set scheme to complement South Africa’s planned carbon tax, effec-tive from 2016.

In response to the “late”, but much expected, carbon offset proposal, James said it provided larger corporate firms the opportunity to invest a good portion of their carbon tax liability into carbon offsets.

“The carbon tax [was set at an] initial price of R120/t [of] carbon dioxide emissions. “Carbon offsets will have to come in at under R120/t [to provide] an opportunity for a discount or an arbitrage opportunity, where com-panies can actually reduce their carbon tax liability,” he noted.

National Treasury proposed that firms could reduce their carbon tax liability by between 5% and 10% of their actual emissions through carbon offsets.

Further, James pointed out that companies would also be able to see “exactly” where their funds went, while a portion of the firms’ carbon tax liability could be invested in a qualifying project, such as waste-to-energy, municipal landfill-to-energy or reforestation.

“I do believe this is the right thing for South Africa. “The hybrid between a carbon tax and a carbon offset scheme is quite smart as it allows companies the flexibility to choose where they want to invest,” James said.

And this would likely stimulate a local carbon-trading scheme, lead- ing to carbon project development and taking projects through the whole development life cycle of generating carbon credits.

“This is a really good thing because companies will be able to align their investments and off-sets with their corporate social responsibility strategy, and that is a great opportunity,” James added.

He concluded that the new proposal would have “some positive impacts”, as implementing the car- bon tax without the carbon offset scheme “could become quite per-verse” and lead to funds collected through the carbon tax being invested in coal-fired power stations, for example, where South Africa was currently under extreme strain and needed a boost.

“[This] would be absolutely against the whole objective of this scheme in the first place,” noted James.