Carbon tax global trading market likely by 2020

A global market is dependent on domestic climate change action by the US at a federal level. At the moment this seems unlikely in the near future. As a preferred route, countries are developing their own markets and are trading between countries.

Government regulations are already in place, it is now up to the government to take the necessary steps towards its implementation, a local carbon tax will probably be introduced by 2015.

A lower ceiling for SA?

The tax will more than likely affect businesses that emit more than the 100 000 tons per annum. In Australia, companies pay carbon tax on emissions over 20 000 tons per annum, which is a much lower ceiling. We therefore expect that there could be a lower ceiling than 100 000 tons for SA.

In terms of current participation in carbon tax reporting, South Africa was the second highest country after Europe in carbon disclosure for corporates in the Carbon Disclosure Project (CDP) 2011 report.

In contrast, participation by corporates in the US was low. South Africa does not have the institutional infrastructure for carbon verification compared to other large countries, which can be seen as a disadvantage. To address this, SANAS will begin its first round of training in December to educate businesses on accreditation.

The CER carbon price has collapsed from 13 euros a year ago to its current level of 0.85 cents. This is negatively affecting the carbon market, but other markets are starting to emerge that have higher trading prices.

A powerful Asian trading hub

For example, there are currently seven trading schemes in China. By 2015 these will be linked and will operate outside of the UNFCCC and could create a powerful Asian trading hub.

Europe and Switzerland have agreed to link their trading schemes by 2014 and California had its first trade on 15 November. I believe that by 2015 most countries will have some sort of trading scheme legislation in place and a situation could arise where countries become less dependent on the UNFCCC as the centre for carbon trading, as more alternate markets emerge.