Uptake In Carbon Tax Offsets (CTOs) Doubles

The Carbon Tax Offset (CTO) market was almost double at the closing of this year’s tax period, according to the latest Carbon Offset Administration System (COAS) market update report.

For the 2019 tax year, almost 2.7 million tonnes of carbon dioxide equivalent (CO2-e) were retired on COAS, increasing to 7.4 million tonnes CO2-e retired on COAS for the 2020 tax period, thanks to the massive uptake of 4.7 million tonnes CO2-e commercialised as offsets for tax compliance.

The massive uptake was due to several reasons, and the trend is expected to continue.

Reasons for the massive CTOs uptake:

• The longer 12-month trading period from January to December 2020, compared to only nine months between June and December 2019.

• Many new trading customers and compliance buyers entered the market voluntarily to buy offsets to reduce their tax liability.

• Increased awareness of CTOs as a means to reduce carbon tax liability by up to 10%, and greater incentive as a result of Covid and the economic conditions.

• Improved trust in the carbon tax system and continual improvement of carbon tax implementation by National Treasury.

The number of compliance buyers and the uptake of CTOs is expected to increase further in the immediate future, especially as the carbon tax rate will likely increase again in March 2022.

Fortunately, an additional supply of CTOs is expected from new mitigation projects in forestry and agriculture. This will allow verified credits from national registries, including EU registries, to be converted to CTOs under the SA Carbon Tax Scheme.

EcoMetrix Africa’s portfolio of projects that supply eligible CTOs to entities liable for carbon tax includes landfill gas to energy, N2O abatement, renewable energy generation and energy efficiency projects, providing CTOs across the different tax periods. To speak to one of our partners, email Lodewijk.Nell@ecometrix.co.za or Henk.Sa@ecometrix.co.za.