Kenya’s strides towards establishing itself as a leader in the carbon trading arena gained momentum with a record-breaking sale of over 2.2 million tonnes of carbon credits to prominent Saudi Arabian companies, signaling the country’s potential to influence the global carbon trading landscape.
Carbon credits, representing the reduction of one tonne of greenhouse gas emissions, have become a valuable asset in addressing climate change. They can be traded in compliance markets, where entities must meet emission targets, or in voluntary markets, where buyers procure credits for environmental or social reasons.
Kenya’s recent sale was a monumental achievement, further solidifying its position as a frontrunner in the African carbon credit market with a share exceeding 24%.
The Capital Markets Authority (CMA), Kenya’s securities industry regulator, is diligently working on crafting regulations and guidelines to establish and oversee a carbon credits market within the nation’s borders. This ambitious endeavor is expected to contribute significantly to Kenya’s carbon trading aspirations.
Luke Ombara, CMA’s Director of Policy and Market Development, emphasized that an initial carbon assessment across the country will identify stakeholders and their roles, providing a foundation for Kenya’s progression into a carbon trading powerhouse.
Once Kenya evaluates the actual demand and supply of carbon credits, the results will inform the policy approach. Kenya faces the choice of establishing voluntary markets or becoming part of compliance markets such as the Paris Agreement or the African Continental Free Trade Area (AfCFTA).
The nation boasts a competitive edge in carbon trading due to its abundant natural resources, including forests, wetlands, and renewable energy sources, capable of generating carbon credits. Kenya’s vibrant private sector and proactive civil society are further catalysts, actively participating in climate action and sustainable development endeavors.
Ombara urged stakeholders to embrace carbon trading as an avenue to diversify their income streams, enhance environmental and social impact, and contribute to global climate change mitigation efforts. He emphasized the importance of increased awareness and education about carbon trading among various sectors and the general public.
Collaboration is at the heart of Kenya’s efforts, with the CMA working closely alongside the National Treasury, the Ministry of Environment and Forestry, the National Environment Management Authority (NEMA), and the Climate Change Directorate (CCD) to formulate a comprehensive framework for carbon trading.
Additionally, the Nairobi Securities Exchange (NSE) is making strides toward launching a dedicated carbon credits exchange. In 2022, the NSE partnered with the AirCarbon Exchange Group to establish this endeavor, in alignment with the NSE’s commitment to promote sustainable financial markets.
As Kenya paves the way for an extensive carbon trading ecosystem, the nation’s efforts are poised to make a lasting impact on both environmental sustainability and economic growth.