On June 20th, The South African Government published a draft regulation for its new carbon tax, which includes a provision that would allow covered entities to use carbon credits to cover a portion of their tax liability. The regulation cites VCU’s issued by the VCS Program as compliance instruments. This innovative new mechanism to price carbon represents a turning point for voluntary carbon market standards as South Africa would become the first government to fully recognize the requirements and infrastructure provided by voluntary standards like the VCS Program.
California has already recognized the VCS as a 3rd party Offset Project Registry and permitted certain VCS project types to participate as Early Action Offset Projects as their cap-and-trade program got underway. In the case of South Africa, if the regulation moves forward, they will recognize not just the registry functionality provided by VCS (as in California), but the entire suite of requirements outlined in and the infrastructure provided by the VCS Program, from our underlying standards and methodologies to our auditing process and registry system.
In effect, this national government-level recognition of the VCS Program and other voluntary standards places us on the same playing field as traditional compliance market mechanisms like the CDM, ushering in a new era in the carbon crediting landscape. Other compliance initiatives, such as the measure being proposed by the International Civil Aviation Organization (ICAO) which would commit the aviation industry to carbon-neutral growth starting in 2020, are also looking to include credits issued from programs that meet rigorous criteria and thus deliver real emission reductions.
Though South Africa’s regulation is still in draft phase, it presents an exciting potential new opportunity for credits from voluntary standards like the VCS Program to be used in compliance markets.
The explanatory note for the draft regulation is available for download here.