Kenya is stepping up its efforts to combat climate change by leveraging the vast potential of carbon credits. On 1st September, President William Ruto demonstrated his commitment by signing into law the Climate Change (Amendment) Bill 2023, thereby granting the Cabinet Secretary of the Ministry of Environment, Climate Change and Forestry authority to appoint the designated national authority for market mechanisms, including those arising from Article 6 of the Paris Agreement. This designated national authority will also be responsible for overseeing the newly established national carbon registry outlined in Section 23G.
Carbon credits are tradable permits that represent the right to emit a specific amount of greenhouse gases, encouraging emission reductions. They are earned by organizations or projects that cut emissions below a predetermined level, providing a financial incentive for eco-friendly practices and helping combat climate change. One carbon credit usually represents the authorization to release greenhouse gases equivalent to one ton of carbon dioxide emissions. Organizations that earn these credits can then sell them to entities looking to offset their emissions.
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Implementing a supportive regulatory framework provides clarity and incentives for businesses to participate in carbon credit programs. The defined regulatory environment will allow local stakeholders to take up funding opportunities to adopt green technologies and implement sustainable practices. One such opportunity is the Kshs 200 million pledged by USAID to support the establishment of a carbon trading market in Kenya.
The establishment of a carbon credit register also incentivizes more firms in Kenya to reduce their carbon emissions and participate in environmentally sustainable production processes. KenGen, which has made significant strides in reducing its carbon footprints by investing in renewable energy sources, received Kshs 12.7 million revenue from carbon credits in 2022. Other companies which have declared their commitment to reducing emissions include East African Breweries Ltd (EABL) and Safaricom plc.
Furthermore, the establishment of the carbon credit regulatory framework aligns with the conditions set by the International Monetary Fund (IMF) for the country to access the Resilience and Sustainability Facility (RSF) of USD 551.4 million (Kshs 80.6 billion) approved in July 2023.
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Putting in place a supportive regulatory framework will spur the growth of the carbon credit market in Kenya and help the country meet its climate goals while at the same time stimulating economic growth by creating new business opportunities in the green sector. However, the process needs robust oversight and transparency to prevent fraud and inflated claims.
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