22 TMI | THE SOUTHAFRICANTREASURER NEXT GENERATIONTREASURY time frames between now and 2050. Governments have committed to ambitious carbon neutral goals and through carbon taxes force corporations to pay a carbon tax if carbon emissions exceed certain measured thresholds. There is a carrot and stick approach. A corporation that meets the carbon emission goals may find that their cost of capital is reduced as investors and lenders are being incentivised to focus on companies that are meeting carbon offset targets. The stick is in the form of carbon taxes which add to companies’ cost bases should they exceed government set emission targets for their industry. Among the early buyers of carbon credits were tech companies such as Apple and Google, airlines, and oil and gas majors (including Sasol domestically), but more industry sectors, including finance, are joining the market as they set their own net-zero targets or look for a way to hedge against the financial risks posed by the energy transition. Producers of carbon credits – the sellers A carbon credit (one tonne of CO2e) is generated where the producer can show that his or her activity has resulted in either: 1. A certain measure of carbon being removed from the atmosphere on a permanent basis. Examples are reforestation, the introduction of kelp into oceans, the rehabilitation of wetlands. Any activity that facilitates the sequestration of carbon helps the reduction of GHGs in our atmosphere. These fall under the forestry and conservation banner; or 2. The generation of carbon credits where the operator of a project can demonstrate that the activity that they are promoting reduces the amount of carbon emissions that would have been emitted without their intervention. This includes renewable energy projects that are displacing coal and gas power and heat retention cooking solutions that reduce the reliance on electricity, gas, coal and wood. Globally, heat required for cooking is one of the single biggest users of energy. Many sellers of carbon credits are environmental or charitable organisations that are finding ways to save the planet and humanity. As such they are poorly funded, relying on government, large corporate or individual donations to keep operating. The ability to sell the carbon credits that are generated revolutionises Fig 1The Participants in theVoluntary Carbon Credit Market the funding of these essential humanitarian and environmentally focused organisations. The regulators Every market requires regulation in order to standardise measurements and ensure compliance. This gives the buyers and sellers confidence that they are getting what they pay for. Corporations want certainty that their carbon emissions are accurately calculated so that they can measure improvement and accurately calculate any carbon taxes payable. The corporations that are purchasers of carbon credits also require absolute certainty that the credits that they purchase for offset have been reliably measured and verified. Regulators in the carbon emission and offset environment take two forms: 1. The agencies that help a corporation to measure their emissions.They consider: a. Direct emissions from company operations. b. Indirect emissions from company operations such as electricity purchased, staff travel both to and fromwork and for company purposes. c. Indirect emissions from supply chain and rawmaterial extraction. GOVERNMENTS SET CARBON EMISSION STANDARDSVIA COP26 OR SIMILAR AGREEMENTS REGULATORS INTHE CARBON INDUSTRYMEASURE AND CERTIFY PRODUCERS OF VERIFIED CARBON OFFSET CREDITS (SELLERS) CORPORATIONS OR ANY NET EMITTEROF GREENHOUSE GASES (BUYERS) INTERMEDIARIES: MARKETMAKERS AND FINANCIERS FACILITATE THEMARKET BILATERALMARKET
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