Unlocking the potential of the kenyan carbon market

With the signing into law of the Climate Change (Amendment) Bill in September 2023, Kenya officially sent the signal that it is open for carbon business.

Before September, 2023, Kenya did not have laws specifically governing carbon credits and carbon markets. Its ambitious 2016 Climate Change Act, sought to provide a legal framework for promoting climate resilience and low carbon economic development but crucially lacked provisions specifically dealing with carbon credits and trading.

The Climate Change (Amendment) Act, 2023 successfully amended the existing legislation to:

• introduce various definitions in respect of carbon trading such as “carbon credit”, “carbon market” and “carbon project”. These definitions mirror the generally accepted international definitions
• Set up the framework for a National Carbon Registry. We believe this is a good step as registries can help ensure confidence, integrity, transparency, and efficiency of information relating to emission reduction programmes, and any units and payments issued for them
• introduce a new section to the Climate Change Act that specifically deals with regulation of carbon markets. This effectively seals a major lacuna in Kenya’s climate change laws.

The law now also establishes that every carbon trading project must undergo an environmental and social impact assessment. Where the project is land-based, it must be implemented through a community development agreement which shall outline the relationships and obligations of the proponents of the project in public and community land where the project is developed. Such agreement shall be overseen by national and relevant county government and recorded in the National Carbon Registry.

Project proponents are legally obligated to distribute to the community of 40% of total project earnings for land-based projects and 25% for non-land based projects. The law also has penalties of up to KES 500,000,000 and prison terms of up to 10 years on conviction for persons who violate the laws on carbon trading. Examples of violations include unauthorised trade in carbon credits or manipulating carbon credit measurements.

There is still more to be done in terms of shoring up the framework for carbon trading space in Kenya. Other critical proposed legislation such as the Carbon Credit Trading and Benefit Sharing Bill, 2023 which seeks to create a regulator (Carbon Credit Trading and Benefit Sharing Authority) and a framework for trading of carbon and sharing of benefits accrued thereunder has yet to be passed.

However, we believe that Kenya is making positive strides in setting up its domestic carbon market.

How can we help you
At Agema Analysts, we would be delighted to assist you with legal advisory to the Climate Change (Amendment) Bill in September 2023, its regulatory implications, and opportunities.

Please get in touch with us