The proposed carbon offset trading scheme, currently being considered by National Treasury, has the potential to be aligned to the carbon budgeting approach set out in the National Climate Change Response Paper (NCCRP) if the right foundation is put in place, a report by carbon emissions and climate change advisory company Promethium Carbon has shown.The carbon offset trading system formed part of the carbon tax set to be implemented in 2016, while the carbon budgeting approach, also known as the desired emission reduction outcomes (DEROs) system was suggested in the NCCRP in conjunction with a mix of measures aimed at achieving the desired outcomes.

In its report titled ‘Potential alignment between the proposed South African carbon offset trading scheme and the carbon budget approach’ released on Thursday, Promethium explained that it considered carbon tax and carbon offset trading to form a part of the mix of measures to be implemented under the DEROs system, stating that most of the elements required for the practical implementation of a fully aligned system were already in place.

“These include the country’s technical infrastructure and the legislative framework,” the company noted.

However, Promethium said the alignment was currently hampered by issues relating mostly to the lack of common use of terminology and a disconnection between the current debate and the adopted standards for greenhouse-gas accounting and reporting.

The report stated that four aspects would have to be addressed for an offset scheme to be implemented as part of a carbon budgeting approach.

These included a common and consistent understanding of the terms used in the proposed regulations that had to be agreed on and appropriate accounting mechanisms that had to be put in place to provide a common accounting platform for all components of the mix of measures.

Further, an appropriate reporting structure also had to be used and the principles and the goals of offset trading had to be aligned with the DEROs system and the other components of the mix of measures.

The Promethium analysis further found that the carbon offset mechanism, as part of the bigger carbon tax design, could easily be aligned with the carbon budgeting approach, on condition that the carbon budgeting system being developed by the Department of Environmental Affairs returned to the principles in the adopted IOS standards and the NCCRP.

“It is necessary that both the carbon tax design, including the design of the offset system, and the carbon budgeting system be aligned with the existing infrastructure. This will ensure full alignment of the whole system,” Promethium believed.