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On 20 June 2016, the South African National Treasury published draft Carbon Offsets Regulations (draft regulations), intended as a component of the proposed carbon tax. Taxand South Africa investigates this update further.
The draft regulations mark the next step in the process of bringing the carbon tax into operation by early 2017. Treasury is also expected to publish a second draft of the Carbon Tax Bill in August 2016, in time to submit the Bill to Parliament once its proceedings resume after the recess aimed at accommodating the municipal elections.
The draft regulations have been widely anticipated by industries that will be subject to the carbon tax and the local carbon market. It is expected that the local carbon market will experience a revival as a result of the inclusion of offsets as a means to comply with part of a carbon tax liability.
Discover more: Draft carbon offsets regulations published for comment
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Prevailing market wisdom is that if the cost of generating such offsets is below the level of carbon tax liability, it will be attractive for tax liable entities to purchase such offsets in order to comply with part of an overall tax liability.