COP26 Delay Could Disrupt Offset Supply

The decision whether Clean Development Mechanism (CDM) projects could continue beyond the end of this year, or if renewal activities should be halted until COP26 UN negotiations (postponed by 12 months until December 2021 due to COVID-19) are concluded, have been postponed. The COP26 delay could disrupt offset supply under the SA Carbon Tax.

The delay and lack of clarity has caused uncertainty among investors and project developers regarding the future of emissions reduction projects and investments, eroding investor confidence and directly impacting on the continuation of projects in various countries, including South Africa.

“Halting activities could have a direct impact on the supply of carbon credits from the CDM, leaving Carbon Tax payers scrambling for available Carbon Tax Offsets (CTOs) before the supply dries up. If anything, this emphasises the urgency for and the listing of CTOs by government to isolate the local offset system from international wrangling in the run-up towards the postponed COP26 UN negotiations.” comments Henk Sa, Partner at EcoMetrix Africa.

“With the carbon tax deadline just weeks away, speeding up the issuance of eLoAs is the first step to address the potential supply interruption in the short-term. In the medium to long term, the development of a local carbon offset standard will ensure that South Africa takes control of its climate change mitigation policy infrastructure and provide the investor confidence needed to build back better”.