South Africa’s Carbon Tax Act (2019) imposes a tax on greenhouse gas emissions from large emitters, primarily industrial sources, fuel combustion, and electricity generation. The tax rate is set in legislation and escalates annually.
For voluntary carbon credit pricing, this matters in two ways.
The tax provides a domestic price floor for credits
VCU prices are anchored to the carbon tax rate. As the tax escalates, the floor price for credits used in offset transactions tends to track upwards alongside it. This makes the SA VCU market more stable and more predictable than markets without a similar domestic anchor.
The carbon offset allowance creates compliance demand
Under the Carbon Tax Act, taxable emitters can use voluntary carbon credits to reduce their tax liability through the carbon offset allowance.
As of 1 January 2026, the offset allowance is:
- 15% for fuel combustion emissions
- 10% for fugitive and process emissions
These figures increased from earlier thresholds.
To qualify for the offset allowance, credits must be:
- Issued under an approved standard (Verra VCS qualifies)
- Retired on the Verra Registry
- Listed on the Carbon Offset Administration System (COAS) maintained by South Africa’s National Treasury
Verra VCUs from registered solar projects generally meet these requirements, assuming the project is properly registered and the credits are correctly retired and listed.
What this means for sellers
If you’re a solar asset owner, the carbon tax framework is the reason your credits have a robust domestic buyer base. Your credits aren’t competing only on the international voluntary market. They have a structural compliance buyer in South African corporates seeking to use the offset allowance.
What this means for buyers
If you’re a corporate buyer subject to the SA carbon tax, voluntary VCUs from registered SA solar projects can directly reduce your tax liability, up to the allowance percentages above. The savings are substantial: every tonne offset is one less tonne taxed at the prevailing rate.
Contact us if you’re interested in purchasing.