Kenya stands to gain billions of dollars from the global carbon credits market, but regulations need to be fast-tracked to unlock this potential, according to speakers at the Diamond Trust Bank’s (DTB) Fourth Economic and Sustainability Forum. The event, held at Serena Hotel, brought together hundreds of stakeholders to discuss the challenges and opportunities of Kenya’s emerging carbon market.
Kenya, the first African country to enact a Climate Change Act in 2016, amended the law in 2023 to include provisions for carbon markets and released its first set of regulations in May 2024. However, industry leaders at the forum noted that additional regulatory efforts are required to fully capitalize on carbon trading.
Paul Muthaura, CEO of the Africa Carbon Markets Initiative, emphasized Kenya’s potential to lead carbon trading in Africa, leveraging its technological advancements and digital systems.
“We now have a fairly solid legal framework. The law is only the first step, and with robust public participation, we can truly live up to our potential,” said Muthaura.
Dr. Jackson Koimburi, Head of Circular Economy and Climate Change at the Kenya Private Sector Alliance, highlighted several challenges hindering Small and Medium Enterprises (SMEs) from accessing the carbon market. He cited issues like lack of awareness, high transaction costs, and market volatility, which deters investors due to the fluctuating price per ton of carbon dioxide.
“Carbon markets are a low-hanging fruit compared to traditional investment routes, but there is still more that needs to be done,” Koimburi added.
Clarice Wambua, an Environmental Lawyer and Consultant at Cliff Decker Hofmeyer, stressed that the remaining work needed to unlock the carbon market largely lies with the government. She noted that the National Environment Management Authority (NEMA) now serves as the designated authority for carbon markets, but four more regulations must be finalized for the system to function fully. These include the establishment of technical infrastructure committees, a national carbon registry, and carbon trading regulations.
Wambua also pointed out that although Kenya’s carbon markets have been active since 2005, the lack of formal regulations has led to revenue-sharing issues with local communities hosting carbon projects.
Reshma Shah, Lead for Carbon Markets at FSD Africa, revealed that in 2023, 50% of carbon credits in Sub-Saharan Africa were generated from forestry, and 40% from land use. Despite these promising numbers, the region still grapples with regulatory complexities, verification and reporting challenges, and high upfront costs, among other barriers.
Speakers concluded that Kenya is well-positioned to become a leader in Africa’s carbon market, but accelerating the enactment of necessary regulations will be key to unleashing its full potential.
