 What are carbon credits?
The issue of carbon credits is fast becoming topical in South Africa. accesssimplifies the concept.
What are carbon credits?
The Kyoto Protocol, which aims to reduce greenhouse gas emissions, created a market in carbon credits. These represent the actual reductions in greenhouse gas emissions achieved by organisations that undertake emissions reduction projects, also known as the Clean Development Mechanism (CDM) projects.
Can I make money from carbon credits?
Businesses in developing countries like South Africa can now sell these credits to entities in developed countries at a market-determined price.
Are there any tax benefits to investing in CDMs?
An income tax incentive was proposed last year for any person holding CDM project registration whilst that person implements the project. The proposed amendment will be effective for the disposal of Certified Emission Reductions (CERs) occurring on or after 11 February 2009. This applies to CDM projects registered on or before 31 December 2012.
How would I go about registering a CDM project?
South Africa now has an established CDM project approval process run by the Designated National Authority (DNA) in the Department of Minerals and Energy. About 125 projects have been submitted to the DNA for approval so far.
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What types of CDM projects are there in South Africa?
The DNA considers projects that range from bio-fuels, energy efficiency, waste management, cogeneration, fuel switching and hydro-power, and cover sectors like manufacturing, mining, agriculture, energy, waste management, housing and residential.
Why has there been a limited uptake of projects?
Mainly because of the high hurdle rates given the risks associated with these types of projects. Most of the “low-hanging fruit”—projects involving reduction of industrial gases such as N2O and landfill gas-to-electricity projects—are either completed or actively under development, so the path is now open for development of more ambitious and complex projects, for example renewable energy and energy efficiency projects.
Who is getting involved?
Increased awareness of CDM as a financing option has led to more aggressive involvement by banks and other financing institutions, who increasingly see CDM as an opportunity to improve the client’s cash flow and thereby reduce lenders’ risks.
Sources:
www.sustainabilitysa.org
www.dmr.gov.za
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