KEY POINTS
-
South African mines can use eligible carbon credits to reduce up to 15% of combustion emissions and 10% of process and fugitive emissions for carbon tax purposes.
-
TASC has issued 12.4 million carbon credits, created over 700 jobs and supports grassland restoration across 1.2 million hectares.
-
The company targets two million hectares under its restoration programme by 2030, combining emissions reduction with rural employment and farmer support.
South African mining companies could reduce part of their carbon tax liabilities while supporting rural development, job creation and agricultural sustainability through investments in verified carbon offset projects.
The opportunity was highlighted by Dr Storm Patel, Commercial Director of The African Stove Company (TASC), during the Minerals Council South Africa’s inaugural Climate Change Day of Learning in Johannesburg.
Patel explained that purchasing locally generated carbon credits could help mining companies lower their tax expenses while directing funding towards environmental restoration and community development projects outside the mining industry.
He stressed, however, that carbon offsets should complement rather than replace efforts by mining companies to reduce emissions directly through renewable energy, improved energy efficiency and cleaner technologies.
The discussion comes as South Africa prepares for higher carbon tax rates around 2030, increasing the financial importance of carbon trading and emissions reduction initiatives for businesses.
Carbon Credits Provide an Additional Route to Lower Emissions
Minerals Council senior climate specialist Shalendra Subramoney said carbon offsets should form part of a broader strategy for reducing emissions across the mining industry.
He noted that mining companies must continue investing in direct emissions reduction measures while addressing emissions that are difficult to eliminate, particularly those linked to their wider supply chains.
According to Subramoney, carbon offsets can help companies manage residual emissions while supporting climate mitigation projects in other sectors of the economy.
He also pointed out that South Africa’s carbon market presents growing commercial opportunities, as companies can use eligible carbon credits to reduce their carbon tax obligations or generate revenue by selling credits into domestic and international markets.
TASC has issued 12.4 million carbon credits since its establishment and created more than 700 local jobs through its climate mitigation activities.
The company focuses on developing projects that combine emissions reduction with community empowerment, reinvesting part of the revenue generated into local development and sustainability initiatives.
South Africa’s Carbon Tax Rules Create Financial Incentives
South Africa’s Carbon Tax Act allows qualifying companies to surrender eligible carbon credits to offset a portion of their taxable emissions.
The current allowance covers up to 15% of combustion emissions and 10% of process and fugitive emissions. This gives mining companies an opportunity to reduce their tax bills by purchasing credits generated through approved environmental projects.
Patel described the arrangement as an important government initiative because it channels investment into economic activities that are not necessarily covered by the carbon tax, including certain agricultural operations and household energy efficiency projects.
He illustrated the financial benefits using a hypothetical mining company with 100,000 tonnes of taxable greenhouse gas emissions annually. Of this amount, 40,000 tonnes would come from fuel combustion, while the remaining 60,000 tonnes would result from process and fugitive emissions.
Under the applicable offset allowances, the company could use eligible carbon credits to cover part of its taxable emissions rather than pay the full carbon tax.
Patel estimated that the company could save approximately R2.3 million on its annual tax bill by using the available offset allowances.
He explained that the arrangement benefits businesses through lower tax expenses while providing additional funding for climate projects and rural communities. However, the allowances are subject to a use-it-or-lose-it arrangement, meaning unused offset capacity cannot be carried forward.
Three Carbon Markets Create Investment Opportunities
Patel identified three major markets through which companies and project developers can trade carbon credits.
The first is the voluntary carbon market, where businesses purchase credits to support their net-zero commitments and climate-related targets.
The second is the domestic compliance market, which allows eligible South African companies to surrender carbon credits to reduce their carbon tax liabilities.
The third is the international market established under Article 6 of the Paris Agreement, which allows countries to trade verified emissions reductions towards their respective climate commitments.
Under Article 6.2, countries can enter into bilateral agreements to transfer emissions reductions. For example, South Africa could enter into an agreement with Singapore, authorising the transfer of credits generated by an approved project.
Japan, Singapore, South Korea and Switzerland are among the major buyers of internationally transferred mitigation outcomes, commonly known as ITMOs.
Article 6.4 provides another route through a United Nations-supervised crediting mechanism known as the Paris Agreement Crediting Mechanism.
Patel said the development of these international markets could give South African carbon credit developers access to additional buyers willing to pay more than the domestic carbon tax price.
However, when South Africa authorises the transfer of emissions reductions to another country, it cannot also count those reductions towards its own nationally determined contribution under the Paris Agreement.
How Carbon Credits Are Generated and Verified
Patel explained that carbon credits are not issued simply because a company or community claims to have reduced emissions. Projects must follow established methodologies, undergo independent verification and demonstrate measurable environmental benefits.
The process begins with a methodology that specifies how emissions reductions will be achieved, measured and documented. The proposed project must also satisfy the requirements of an internationally recognised standard.
Project developers then assess its feasibility, including whether the participating communities support the initiative and whether its financial structure is sustainable.
Once the project design is completed, an independent auditor reviews the documentation before implementation approval is granted.
After implementation, another verification process checks whether the project has delivered the promised emissions reductions. Only then can carbon credits be issued and assigned individual serial numbers on a public registry to prevent double counting or multiple sales.
Patel said developing a single carbon credit could take years of preparation, investment and independent assessments before it becomes available for trading.
He added that TASC operates as an end-to-end project developer, handling activities from the initial project concept and implementation to the commercialisation and sale of the resulting credits.
Grassland Restoration Project Supports Rural Farmers
One of TASC’s major initiatives is a grassland restoration and stewardship programme in South Africa, which works with cattle, sheep and goat farmers to improve land management and increase carbon storage in the soil.
The project addresses the degradation of grasslands caused partly by unmanaged grazing, which reduces biodiversity and the availability of nutritious vegetation for livestock.
Patel noted that farmers often have little financial incentive to adopt regenerative grazing practices because the environmental benefits do not necessarily translate into immediate income.
The problem is particularly significant for communal livestock farmers, who collectively own up to half of South Africa’s livestock but have access to only about 9% of the formal market, partly because of difficulties transporting animals from rural areas to established meat markets.
TASC’s programme seeks to address these challenges by providing farmers with training, veterinary services and financial incentives linked to improved land management.
Through regenerative grazing, healthier grasslands can absorb more carbon dioxide from the atmosphere and store it in the soil. The measured carbon benefits are then converted into credits that can be sold to generate revenue for the project.
Patel said the programme also provides participating farmers with access to mobile meat auctions and sheep-shearing services through its implementation partner, Meat Naturally, a farmer-owned social enterprise.
The arrangement allows rural communities to benefit from improved market access and livestock services while retaining control over important aspects of project implementation.
Project Targets Two Million Hectares by 2030
TASC’s grassland restoration initiative was registered in 2023 and received its first carbon credit issuance in January 2026.
The programme currently involves 178 communal grazing associations and 145 commercial farms, covering approximately 1.2 million hectares of land.
Patel said the company aims to expand the area under management to two million hectares by 2030.
He also described the initiative as the first project globally to be registered under Verra’s VM42 carbon credit methodology for improved agricultural land management.
The project incorporates an additional Climate, Community and Biodiversity (CCB) standard, which requires evidence of benefits extending beyond carbon reduction to include improvements in local livelihoods and environmental conservation.
Its climate monitoring activities include measuring soil organic carbon, reducing methane emissions from livestock through improved animal health and managing fires to limit wildfire-related emissions.
Patel said the additional certification provides buyers with greater assurance that the projects deliver measurable benefits for communities and the environment.
Through its grassland restoration activities, TASC is seeking to demonstrate how carbon finance can support climate action while improving rural livelihoods, strengthening livestock production and creating economic opportunities outside the mining industry.
