The data relating to South Africa's annual issuances and retirements of carbon credits presented in this factsheet is extracted from BloombergNEF's Voluntary Carbon Offset Data Viewer (1.7). To access this data tool, please contact sales.bnef@bloomberg.net.

Offset use in South Africa's carbon tax

Companies subject to South Africa’s carbon tax are allowed to submit domestic credits to reduce their liability. The levy was introduced in 2019, covering about 90% of the country’s emissions and the Carbon Offset Administration System – where the units are listed and retired – was launched in 2020. Offsets are one of the ways that the government has sought to ease the transition for obligated entities as well as tax-free allowances. In addition, they raise finance for domestic carbon reduction projects and may be purchased by companies and individuals to help meet their voluntary sustainability commitments.

How it works

Companies may use carbon credits – each representing 1 metric ton of CO2 equivalent – to offset up to 10% of combustion emissions and 5% of fugitive or process emissions. The units are generated by South African projects, which are verified using standards adopted by the Clean Development Mechanism, Verra and Gold Standard. The projects must also occur outside the activities covered by the carbon tax such as agriculture and forestry.

These credits are then listed on the Carbon Offset Administration System, which is hosted by the Department of Forestry, Fisheries and the Environment. Although most project types are accepted under South Africa’s carbon tax, the government has introduced restrictions on activities that do not meet fundamental criteria such as additionality and no double-counting.

Supply of carbon credits in South Africa is rising

While South African credits make up only 1% of total issued credits as of June 2025, annual supply of credits doubled in 2024 relative to 2023, signaling increased focus on credits in the South African economy. Some 14.2 million carbon credits had been issued by South African projects listed on Verra and Gold Standard, as of June 3, 2025, and 10.4 million were retired on the two international registries between 2019 and 2025.

These credits from South African projects come from a wide variety of sectors, spanning forestry, waste, energy demand and transport. The energy demand sector – generating credits from energy efficiency and clean cookstove projects – contributed the biggest share of total issuances and retirements, at 42% and 43%, respectively. A single clean cookstove project issued 2.7 million credits in 2024, accounting for 67% of South Africa’s supply that year.

Registered projects in South Africa have an estimated annual carbon credit production capacity of 25.5 million.

Supply falls short of expected carbon credit demand in South Africa

Despite the uptake in credit issuance in South Africa, it could still be insufficient to fulfill offset demand driven by the local carbon tax. The South African government reported emissions of 478.9 million metric tons of CO2 equivalent (MtCO2e) for 2022, according to its 9th National Greenhouse Gas Inventory report.

Combustion, fugitive and process emissions make up 90% of South Africa’s emissions, which are covered entirely by the carbon tax, translating to 431MtCO2e in that year. Assuming emissions remain stable and liable entities use credits to offset up to 5% of their liability, demand is estimated to have reached 21.6MtCO2e in 2022.

This exceeds cumulative issuances as of June 3, 2025 but is less than the estimated annual carbon credit production capacity. However, not all of the offsets from local projects are likely to meet the government’s detailed eligibility criteria, which could further reduce potential supply.

In addition, entities subject to the carbon tax will be allowed to use offsets to cover more of their liability from 2026. They are also not the only sources of demand for credits from South African projects, including governments and companies wishing to meet their sustainability pledges.

Moving forward

Phase 2 of the carbon tax begins on Jan. 1, 2026. The government plans to increase the quantitative limit on offsets to 10% for fugitive and process emissions, and 15% for combustion emissions, up from 5% and 10%, respectively. This change could grant companies more flexibility to use carbon credits to fulfill their compliance obligations, as the tax rate will increase each year. A strengthened demand signal would encourage project developers to issue more local credits. Otherwise, with insufficient supply, polluters will be forced to find other ways to decarbonize their operations.

The government is also considering expanding the scope of the carbon tax to cover other sectors such as waste and agriculture, forestry and land use. However, stringent quality standards will be needed to ensure that the projects deliver actual emissions reductions, or the decarbonization impact of the carbon tax will be weakened.