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Treasury Shines Light on Carbon Tax Offsets Regulations

July 22, 2021

National Treasury

The Carbon Tax Offsets Regulations were amended to clarify that carbon credits from approved Clean Development Mechanism projects issued under national registries will be eligible for listing as eligible South African carbon offsets.

National treasury confirmed this in a statement on the recently gazetted amended Regulations.

Other changes include that the definition of the Verra registry was aligned with the official Verra documentation and a new definition for a certificate of voluntary cancellation was included.

The Regulations were published in Government Gazette 42873 on 29 November 2019.

They were drafted in terms of Section 13 of the Carbon Tax Act.

The section stipulates that taxpayers “must reduce the amount in respect of the carbon tax for which the taxpayer is liable in respect of a tax period by utilising carbon offsets as prescribed by the Minister”.

The Regulations focus on allowance of offset in respect of an approved project against carbon tax liability; offset creation and utilization period; limitation on allowance; designation of administrator; creation of offset registry; maintaining, overseeing of offset registry and access to offset registry; procedure for claiming allowance by taxpayer; duties of administrator for purpose of claiming of allowance by taxpayer and requirements for documents.

Approved projects qualifying for offsets must be undertaken in South Africa on or after 1 June 2019 and involve activities not subject to the carbon tax.

The Regulations came into effect on 1 June 2019.

Treasury published the amended Regulations in Gazette 44818 on 8 July 2021.

Draft amendments to the Carbon Offsets Regulations were published for comment on 31 March 2021.

According to treasury, 12 submissions were received.

Other changes to the Regulations following input include the crediting period for non-Agriculture, Forestry and Land Use Verified carbon standard projects added; setting 28 July 2023 as the date by when the carbon offsets from activities that are included in the carbon tax net can be used by taxpayers and clarifying that a taxpayer may not receive the allowance in respect of an offset of a project for which an allowance has been received in terms of section 12L.

Treasury also pointed out that the mineral resources and energy department is drawing up the draft framework for local standards developed under the World Bank’s Partnership for Market Readiness project for public consultation.

The framework will be used to determine whether a project qualifies as a carbon offset project.