The Jostle For Regulation of The Kenya's Carbon-Credit Industry

Introduction

Carbon-credits are a market-based approach to reducing greenhouse gas emissions where countries and companies purchase carbon-credits to compensate or offset for their greenhouse gas emissions. A carbon-credit is a token representing the avoidance or removal of greenhouse gas emissions, measured in tonnes of carbon dioxide (CO2) equivalent.

As the global focus on climate change intensifies, Kenya has emerged as a key player in the carbon-credit industry. Based on the Voluntary Carbon Market Overview 2022 by ClimateFocus, Kenya ranks eighth, globally, amongst countries selling carbon-credits from nature-based projects. Moreover, Kenya accounts for approximately 20 of the total value of carbon-credits issued in Africa. According to a Kenya Private Sector Alliance Report, Kenya has the potential to earn up to USD 600 Million annually from the voluntary carbon-market industry by 2030. The potential notwithstanding, the growth of the Kenya carbon-market industry has been bogged down by the absence of a regulatory framework for the carbon-market industry.

Competing Bills

In order to open up the carbon-market industry, the Kenya’s Ministry of Environment, Climate Change & Forestry developed the Climate Change (Amendment) Bill 2023 whose objective is to incorporate carbon-credits into the existing Climate Change Act 2016. The Bill was recently approved by the Cabinet and should be tabled in Parliament for debate imminently. Contemporaneously, the National Assembly’s Budget and Appropriations Committee recently approved the Carbon-Credit and Benefit Sharing Bill 2023 for formal introduction to parliament.

Highlights of the Climate Change (Amendment) Bill 2023

The Climate Change (Amendment) Bill 2023 proposes regulation of the carbon-market under the existing Climate Change Act 2016. Some of the key highlights of the Bill include:

Definitions of terms related to the carbon-credit market

The lack of legal characterization has been one of the biggest stumbling blocks to the growth of the carbon-credit industry so far. The Bill intends to introduce definitions for new terms such as carbon markets, carbon budgets, carbon standards and nature-based solutions, among others.

Establishment of a carbon-registry

Other provisions

The Carbon Credit Trading and Benefit-Sharing Bill 2023

Unlike the Climate Change (Amendment) Bill 2023, the Carbon Credit Trading and Benefit Sharing Bill 2023 has a bias towards ensuring a fair and equitable sharing of benefits accruing from carbon-credit projects among stakeholders. The Bill seeks to establish a Carbo Credit Trading and Benefit Sharing Authority which is tasked with issuing policy directions and guiding both the national and county governments with respect to the carbon markets. The Authority will also issue carbon trading permits to businesses intending to engage in carbon-credit trading in Kenya. Aside from the Authority, the Bill also seeks to establish a Carbon Credit Trading Tribunal to resolve disputes arising out of the trade.

Conclusions

The carbon-credit industry presents Kenya with a unique opportunity to combat climate change, protect natural resources, and drive sustainable economic development. However, the existing confusion within the market, which is best exemplified by the two competing Bills at play currently, needs to be resolved for progress in the market.

Please note that this is not legal advice and is intended primarily for information purposes. If you require tailored advice or further information, please contact us on sarinke@mckayadvocates.com.