“Carbon-credit and payment-for-ecosystem-services projects are not currently realistic conservation incentives in South Africa because of the country's economic conditions.”

The world’s economy has put a price on carbon — for this specific kind of project, anything from $20 to around $45 per metric ton of CO 2 cleaned from the atmosphere, sources say. That’s why spekboom-led restoration has attracted the attention of a big international carbon-capture project developer and financiers, including the World Bank, as well as interest from tech giant Amazon. … The idea is to kick off longer-term thicket recovery and revive farms left moribund by decades of land degradation: Get investors to pay upfront to replant the landscape, and let them cash in on carbon credits down the line.

Building on this foundation, the Department of Forestry, Fisheries and the Environment is developing a complementary instrument, the Draft Carbon Credit Revenue Plan, which aims to monetise the Department’s natural assets and generate new sources of sustainable revenue. … The objectives of the Draft Carbon Credit Revenue Plan are threefold: - First, to generate sustainable revenue by converting South Africa’s forests, wetlands, oceans, and protected landscapes into high-integrity carbon credits. - Second, to reinvest this revenue into environmental programmes that advance our national priorities and NDC targets, ensuring that ambition is matched by practical implementation. - Third, to reinforce South Africa’s leadership in climate innovation by demonstrating that environmental protection can drive economic growth, social inclusion, and resilience.

Enhancing emission reductions in South African agriculture: The crucial role of carbon credits in incentivizing climate-smart farming practices.

The World Bank has priced a $120 million (about R2 billion) spekboom restoration outcome bond — its longest-dated outcome bond yet — aimed at funding large-scale ecosystem restoration in the Eastern Cape while tying investor returns directly to environmental outcomes. … As spekboom grows, it generates carbon removal units that can be sold on voluntary markets. … It is also the second such bond in South Africa, after the wildlife conservation or “rhino” bond, which launched four years ago and is a first-of-its-kind, outcome based financial instrument that channels investments to achieve an increase in black rhino populations.

South Africa will lead Africa’s carbon market evolution, exporting high-quality credits underpinned by environmental integrity while advancing domestic priorities. This is not a theoretical exercise but a practical imperative, grounded in law and economics.

Demand for carbon credits is projected to far outstrip supply in South Africa’s carbon market, with great potential to build more bankable carbon projects through market-based mechanisms. … The study also examined current supply-side dynamics, including the types of carbon projects being developed, the standards under which credits are issued, and the sectors with the greatest potential for credit generation. This work revealed significant supply-side potential across sectors, including waste management, energy, and nature-based solutions.

Tswalu has begun selling carbon credits, which it says will help fund continued conservation on the reserve. … Child calls the project at Tswalu “a mini proof of concept” for the way in which carbon credits can economically support restoration. … To date, Tswalu has issued more than 34,000 carbon credits validated by South Africa-based verifier Credible Carbon with a U.N.-backed methodology, and it expects to generate more than 275,000 in total. It’s the first private reserve in South Africa to earn carbon credits, each representing a metric ton of CO2, from wildlife conservation, says Oppenheimer Generations’ Duncan MacFadyen.

South Africa is one of the most unequal societies in the world. This inequality translates into widespread poverty, unemployment and limited economic opportunities in rural areas. Community-based carbon projects offer a way to link climate action with urgently needed local development and job creation. … Our research found that rural carbon capture and storage projects can be more than narrow climate interventions. They can also create broad, real-world gains for people and ecosystems.

In parallel, the National Treasury’s 2025 consultation paper on developing the carbon credit market highlights structural constraints affecting supply, including reliance on external standards, long project development timelines, fragmented registry and trading architecture, and the unclear legal status of carbon credits.

At present, water pricing cannot be used as a tool to secure funding for the restoration and maintenance of catchments supplying water to the Nelson Mandela Bay, and alternative funding sources must be secured such as private–public partner ships, water funds, or through market-based instruments (e.g., Payments for Ecosystem Services schemes, biodiversity offsets, or carbon trading schemes) (Gómez-Baggethun & Muradian 2015).

At this stage, carbon credits are not anymore an option

The total peak value of the financial mechanisms described in this report is ZAR 2.84 billion (USD 151 million) over an average of 10 years, 5 or ZAR 385 million (USD 20.4 million) per year (‘Target Budget’), assuming they have all been fully activated. This constitutes an estimated 14% of the estimated ZAR 21 billion (USD 1.1 billion) budget needed to manage the Greater Kruger landscape.

The fact remains that land restoration projects in the Eastern Cape using P. afra are not yet selling any carbon credits, despite being in existence for over a decade, and are largely supported by the public sector, which may not be sustainable in the long run.

South Africa’s national carbon tax has been a major turning point for domestic carbon markets, creating an increased demand for carbon credits. As the tax enters phase two, the country is likely to see surging demand. … South Africa is expected to see an increase in structural demand for carbon credits as its carbon tax tightens. However, a lack of early-stage capital for carbon projects limits supply.

There are two main reasons why PES has not taken off in South Africa. Firstly, hydrological ecosystem services are demanded by local water providers and users, rather than international society (as is the case for carbon or biodiversity), and as such, willingness to pay is limited. … The success of PES is highly context specific. International success for delivering hydrological ecosystem services is not replicated in communal land contexts and/or where users have limited ability to pay.

The fact remains that land restoration projects in the Eastern Cape using P. afra are not yet selling any carbon credits, despite being in existence for over a decade, and are largely supported by the public sector, which may not be sustainable in the long run. … In terms of economic growth and long-term sustainability, none of the carbon sequestration projects examined was generating income by selling carbon credits. … Without continued public funding, such projects are not likely to be sustainable.

In projecting the financial benefits of the finance solutions, it is important to be cognisant of substantial uncertainty around the effectiveness with which solutions would be implemented, the effectiveness of enabling factors required for success, and the state of the broader economy.

The Biodiversity Finance Plan (DFFE & UNDP 2017) identifi ed the creation of an enabling environment for Biodiversity Offsets as a key component of bridging the fi nance gap in South Africa. In particular, the exploration of proactive offset schemes (also called ’offset- or ‘conservation banking’) as a potential fi nancial solution for protected area (PA) expansion and management.

Carbon Credits Markets Enabling the scaling of the voluntary and compliance carbon credits markets through development, financing, acquisition, implementation, investment in and/or R&D of projects that are otherwise eligible within this framework

Together, these results demonstrate both the scale and distribution of carbon sequestration values across Amathole. The combination of scenario-based and ecosystem-specific estimates provides a robust evidence base to inform conservation priorities, guide restoration efforts, and strengthen the case for integrating Amathole into climate finance mechanisms such as carbon markets, payments for ecosystem services, or ecological fiscal transfers.

Earlier this year, TASC’s Grassland Restoration and Stewardship in South Africa (GRASS) issued Verified Carbon Units (VCUs) on behalf of farming communities working with Meat Naturally Africa, becoming the first project anywhere in the world to carry both the Climate, Community and Biodiversity (CCB) label and the VM0042 methodology under Verra’s Voluntary Carbon Standard. … Those credits have now been sold, and R2,7 million worth of proceeds are being deposited directly into community sub-accounts this month – a tangible and immediate reward for the farmers and land stewards who made it possible.

The Carbon Tax Act became effective from 1 June 2019 and makes provision for the carbon offset tax-free allowance in terms of Section 13. The carbon offset allowance provides flexibility to firms to reduce their carbon tax liability by either 5 or 10 per cent of their total greenhouse gas (GHG) emissions through investment in projects that reduce their emissions outside their taxable activities.

The PES-like 1 1 This emerging Payment for Ecosystem Services (PES) system differs from others in that the service providers are previously unemployed individuals that tender for contracts to restore public or private lands, rather than the landowners themselves (Turpie et al. 2008). approach of WfW was conceptualized as a mechanism to improve the efficiency of natural resource management.

Agri Carbon has become the first African soil carbon credit programme to earn certification under Verra’s Verified Carbon Standard (VCS) – a non-profit organisation that operates the world’s leading carbon standard. … South African farmers now have access to the growing global carbon credits market, earning new income from regenerative practices that improve soil health, resilience and yields. … Investec purchased the entire first issuance of 39,207 tonnes, enabling it to shift from avoidance to removal credits while maintaining its carbon neutrality, achieved through a combination of emission reduction and responsible offsetting.

AND SINCE Government is desirous of providing a flexibility mechanism that will enable industry to deliver least cost mitigation, being mitigation at a lower cost to what would be achieved in their own operations, and thereby lower their tax liability;

In the terrestrial realm, confidence in the success of restoration in reinstating biodiversity is generally low and can take an extremely long time. In most instances therefore, especially when working in the terrestrial realm, restoration is not a realistic achievable goal for biodiversity offsetting.

In South Africa, PES is considered by a number of stakeholders as having the potential to mitigate climate change, as well as promote sustainable land use and the better management of scarce water resources. PES is also viewed as a way of promoting new livelihoods and generating more sustainable growth.

A payments for ecosystem services (PES) system came about in South Africa with the establishment of the government-funded Working for Water (WfW) programme that clears mountain catchments and riparian zones of invasive alien plants to restore natural fire regimes, the productive potential of land, biodiversity, and hydrological functioning.

While ecological restoration delivers real, measurable value, those benefits accrue diffusely across households, municipalities, agriculture and industry, making them difficult to price, monetise or verify in ways that meet institutional investment standards.

Market-based economic instruments, such as the carbon tax introduced in 2019, have incentivised businesses to reduce carbon emissions by imposing financial penalties on greenhouse-gas emissions. Carbon offsets play a crucial role in the carbon tax framework, supporting a market-based strategy.

Several PES initiatives and studies, especially those associated with the Maloti-Drakensberg Transfrontier Project (MDTP), claim that an 'ecosystem services' market in the area is feasible and desirable. Based on empirical research in the area between 2003 and 2008, the paper challenges these assertions.

The authors are inclined to want conservation projects to go ahead and still feel this way about South Africa’s Working for Water Programme. However, the cost-benefit analysis of six sites in the Eastern and Southern Cape only provides qualified efficiency support.

South Africa's chequered history and its contemporary volatile socio-political situation often makes it very difficult for conservation interventions to mediate the various social, economic, and political pressures on land-use, and marry these constructively with the conservation of biodiversity. … Due to its alleged propensity to stimulate win-win solutions and the legitimacy brought by its international popularity, I argue that PES provided a seemingly ideal mechanism for the implementers of the MDTP to deal with the differential demands of stimulating economic development, social justice, and ecological sustainability in the area. … In this tense atmosphere, and with much pressure on the South African PCU, the PES solution was indeed welcome.

These problems have manifested in South Africa too. As this report will show, not only is the carbon trading system unworkable at an institutional/government level, but there are widespread problems with the nature of verifying organisations such as Verra, the world’s largest carbon certification company, where carbon schemes exaggerate or falsely claim the carbon reduction benefits.

A payments for ecosystem services (PES) system came about in South Africa with the establishment of the government-funded Working for Water (WfW) programme that clears mountain catchments and riparian zones of invasive alien plants to restore natural fire regimes, the productive potential of land, biodiversity, and hydrological functioning. … There is a strong case for concentrating on the most valuable services provided by ecosystems, such as water supply, carbon sequestration, and fire protection, and using these as ‘umbrella services’ to achieve a range of conservation goals.

Tswalu has become the first privately protected area in southern Africa to earn carbon credits because of wildlife management interventions, creating a pioneering model that has the potential to restore degraded ecosystems, fund conservation and community development, and provide meaningful economic benefits to local communities.

This project aims to assist farmers by offsetting costs that come with conservation, creating an enabling environment for proactive conservation.

According to Zunckel (2006), the main difficulties encountered so far are: i) to find suitably qualified people available to do the work; ii) compiling specific enough terms of reference for the World Bank procurement processes; iii) lack of trust in the potential of PES as an appropriate tool for the environmental problems to address; iv) uncertainty as to how brokering agreements between catchment managers and water users would fit in with national water legislation that sees water as a national asset; v) despite the existence of a water trading treaty between South Africa and Lesotho, there seems to be some resistance to developing it further on a micro scale.

While South African credits make up only 1% of total issued credits as of June 2025, annual supply of credits doubled in 2024 relative to 2023, signaling increased focus on credits in the South African economy.

The potential in the arid biomes for projects which are both viable and nationally meaningful was found to be very small (Ibid.).

Despite the challenges posed by limited upfront finance and onerous compliance requirements, the potential benefits for food security, rural development and environmental sustainability are substantial.