Carbon credits, also known as carbon offsets, represent one metric ton of carbon dioxide or other greenhouse gases prevented from entering the atmosphere. They are generated by projects that reduce emissions, such as renewable energy projects, energy efficiency upgrades, and forestation efforts. Credits are certified by independent third-party organizations to ensure they represent real, additional, and verified reductions.
Kenya began exploring the potential of developing a domestic carbon credit in 2006 under the guidance of the UN Framework Convention on Climate Change. A number of pilot projects were launched around afforestation, renewable energy, and energy efficiency. However, it was not until 2020 that the government moved to formally establish a regulatory framework and carbon credit exchange.
Establishing The Regulatory Kenya Carbon Credit
In 2020, the National Environment Management Authority (NEMA) was tasked with developing Kenya's domestic carbon credit regulatory system. NEMA spent two years drafting legislation that would govern carbon credit project validation, verification, and issuance. The key pieces of framework included the Carbon Credit Regulations of 2022, which standardize methodology and set baselines for eligible project types. It also included guidelines for accrediting verifiers and regulating the carbon credit exchange.
Stakeholder consultations were held during the drafting process to ensure the rules balanced environmental integrity with facilitating private sector investment. The framework drew upon best practices from other carbon s like Europe and California. It aimed to ensure credits represent real and verifiable emission reductions while reducing barriers and costs for developers.
Launching The Carbon Credit Exchange
With the regulatory framework in place, NEMA launched the Kenya Carbon Exchange (KCX) in early 2022. The KCX serves as the national platform for listing, trading, and transferring carbon credits. It provides online interfaces for project developers, verifiers, buyers and other stakeholders to interact.
Several features were built into the KCX design to promote uptake and liquidity. These included standardized contracts, online credit registration, an electronic registry to issue and track credits, and online credit auctions. Developer support services were also established to provide guidance navigating validation, verification and other participation requirements.
Initial credits listed on the KCX came from several pilot projects that were validated and verified under the new rules. This included various renewable energy, efficient cookstove and afforestation projects. Buying interest came both from large corporates looking to offset emissions and environmental funds seeking quality offsets for portfolio requirements.
Early Successes And Future Growth Potential
While still in its infancy, Kenya's domestic carbon has achieved some noteworthy early successes. Over 500,000 credits from initial pipeline projects were listed on the KCX in its first year. Several auctions matched buyers and projects, establishing a reference carbon price.
Analysis by NEMA and other observers indicates substantial potential for scaling up credits over the long term. Key sources include energy efficiency upgrades in cities and transitioning transport and power to low-carbon options, and expanding sustainable agricultural practices. With the right support, Kenya's 'Big Four' economic agendas around manufacturing, food security and affordable housing could generate large volumes of high-quality domestic credits.
The government aims to develop Kenya's carbon into a regional hub. Plans are underway to establish links with neighboring countries exploring carbon pricing. Linking domestic s could help each develop critical scale through an expanded geographic scope. International linkage may follow as frameworks mature across Africa. If successful, Kenya's carbon trading system could become an exemplar for establishing credibility and private sector involvement in African climate actions.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
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