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Opinion: Pre-buying Carbon Credits
Nicholas Rowley
South Africa’s carbon tax, though gradual in its rollout, is becoming an increasingly material financial consideration for heavy emitters. As we transition further into Phase 2 of the Carbon Tax Act, the window for strategic action is narrowing — and pre-buying carbon credits might be the smartest move your company can make.
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We break down the potenetial financial benfits of using carbon credits, as well as pre-buying them. There are also numerous other benifits including creating trust and accelerating impact, which compliment the financial rewards.
Let’s break this down with a practical example.
Company XYZ emits 1 million tonnes of CO₂ in 2025. Under Phase 2 of the South African Carbon Tax, they’re liable for 40% of those emissions — that’s 400,000 tonnes. However, they can offset up to 25% of their total emissions, i.e. 250,000 tonnes, using qualifying carbon credits.
Company XYZ is liable for R94 million in Carbon Tax in 2025.
Company XYZ pays R47.5m for carbon credits, and R35.4m tax, for a total of R82.9m, or an 11% saving on their total carbon tax liability in 2025.
In 2026, Compnay XYZ invests into emissiosn reductions technology and reduces their total emissions to 800,000 tonnes. However, with the phasing in of Phase 2 of the Carbon Tax, Compnay XYZ is now liable for 42.5% of their emissions, or 340,000 tonnes. The company can still offset up to 25%, or 200,000 tonnes.
Company XYZ is liable for R94 million in Carbon Tax.
Company XYZ pays R47m for carbon credits, and R43.12m tax, for a total of R90.12m, or a 13.9% saving on their total carbon tax liability in 2026.
If Company XYZ pre-buys its 2026 credits in 2025, the R47 million spent early could have been invested elsewhere. Assuming a 10% annual return on this R47m, this opportunity cost reduces the net benefit.
Pre-buying carbon credits is not just about tax efficiency — it’s about strategic positioning in a rapidly evolving carbon economy.
By securing carbon credits early:
• You create certainty: Prices are rising, supply is tightening, and regulation is becoming more stringent.
• You build trust with stakeholders: Pre-buying signals climate leadership, not just compliance.
• You accelerate impact: Early capital helps scale climate-positive projects faster.
• You support the local carbon economy: Creating demand fuels domestic carbon project growth.
• You gain internal leverage: Planning early enables long-term decarbonisation strategies, not just short-term patchwork fixes.
In short: pre-buying carbon credits transforms the tax from a liability into a lever for climate performance, operational resilience, and market credibility.
Carbon credit prices are rising, demand is heating up, and the regulatory leash is tightening. Companies that plan ahead — and lock in credits at current prices — will not only dodge escalating costs, but also position themselves as climate leaders.
So don’t just react to the carbon tax. Use it. Strategically.
Nicholas Rowley,
CEO Green Asset Exchange
Interesting in pre-buying carbon credits?
Contact us as info@greenassetexchange.com
Disclaimer:
This article is provided for informational purposes only and does not constitute financial, tax, or legal advice. The scenarios presented are illustrative and based on publicly available information and assumptions which may change. Readers should consult with a qualified advisor before making any investment or compliance decisions related to carbon credits or tax planning.
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