Over the past six weeks I have travelled the length and breadth of the country speaking to farmers, financiers, government officials, academics and business representatives about SA’s growing climate vulnerability and financial levers that unlock investment in environmental resilience measures.
It has been the kind of trip to buoy one’s spirits in the face of increasingly bleak climate impact projections. How unpleasant then to arrive home last week just in time for the release of the World Wildlife Fund’s (WWF) latest Living Planet Report.
In this comprehensive report, for which data from almost 32,000 populations of 5,230 species across the planet was gathered, it was found that wildlife populations fell on average 69% between 1970 and 2018. Despite an array of political and private sector commitments, there is no sign that the loss of nature is being halted, let alone reversed.
Disturbingly, SA ranked alongside the polar regions and the east coast of Australia as having the highest global biodiversity impact probabilities resulting from climate change, which the report refers to as “two sides of the same coin”.
In the same week, Henk Sa of Brundtland Consulting presented findings from his company’s carbon market modelling projections at the Carbon Forward conference in London. His report showed how the shortfall between demand and supply of carbon credits eligible for use under SA’s Carbon Offset Administration System will average 100-million credits across each trading phase until at least 2030.
This supply constraint will most certainly not be helped by another finding from the presentation — that project listing transactions peaked at 129 in 2021 and have seen fewer than 30 listings so far this year.
Low priority
This apparent divergence between the need for nature-based climate change investments in SA and the scarcity of such investments is a reflection of how low biodiversity-related climate investments feature on the priority list of SA business. Last year a mere 79 out of 354 JSE-listed companies and state-owned enterprises assessed by the Endangered Wildlife Trust’s Biodiversity Disclosure Protocol even recognised biodiversity as a material issue.
It is also a reflection of the widely held perspective that the value of carbon credits generated in SA is limited by the low price of carbon taxation. As Sa pointed out, “the price of offsets tracks the tax level very closely and will never exceed the tax rate because otherwise a buyer will simply cancel their emissions directly against the tax”. This would mean that in 2022, for example, the price of a carbon offset in SA could never exceed R143 a tonne, which is precious little money to build a biodiversity investment.
There is an important caveat to this position. This week delivered the successful conclusion of a carbon credit offtake agreement between Climate Neutral Group (CNG) and an international company for the Natural Climate Solutions (NCS) carbon credits generated through CNG’s AgriCarbon programme at a significant price premium to that of the current SA carbon tax rate. The deal delivered a price in excess of the current carbon tax rate because these NCS credits are being sold into the international voluntary market, which is being driven by the rapid growth of Science-Based Targets initiative for net-zero commitments.
This represents two distinct potential sources of revenue for climate change and biodiversity investments in SA: the low price of the domestic regulatory system and the premium price achievable on international voluntary markets.
SA companies that want to understand this dynamic better should review the World Business Council for Sustainable Development’s new report on “Natural Climate Solutions & the Voluntary Carbon Market: A Guide for C-suite Executives”, which provides decisionmakers with guidance to drive demand for high-quality NCS projects.
• Maguire is carbon project manager at Climate Neutral Group SA. He writes in his personal capacity.
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