Nairobi bourse plans platform for trading in carbon credits
Nairobi Securities Exchange staff monitors trading at the bourse. NSE is about to draft rules and the legal framework for a carbon emissions board. PHOTO | FILE
What you need to know:
Nairobi Securities Exchange (NSE) plans to set up a carbon-tracing board for Kenyan companies with carbon credits to sell to foreign countries and manufacturers.
Power generators, petrochemical firms, steel producers, car makers, electro-mechanical firms and airlines from developed countries are the likeliest buyers of credits since they face strict emission caps at home.
Kenyan firms such as KenGen, Mumias Sugar, East Africa Portland Cement and Kenya Power already participate in carbon trade arrangements, while plantations can also generate carbon credits from large tracts of land under forest cover.
The Nairobi Securities Exchange (NSE) plans to set up a carbon-tracing board for Kenyan companies with carbon credits to sell to foreign countries and manufacturers.
The emissions trading system allows countries or companies with higher carbon emissions to purchase the right to release more carbon dioxide into the atmosphere from those with lower emissions.
Kenyan firms such as KenGen, Mumias Sugar, East Africa Portland Cement and Kenya Power already participate in carbon trade arrangements, while plantations can also generate carbon credits from large tracts of land under forest cover.
“We are dealing with our listed institutions who have amassed a war chest of carbon credits, trying to create a board much like is in existence in Korea where we get the big industries and industrialised nations to come to Kenya and buy the credits from our companies. We view it as tied up cash,” said Rogito Nyangeri, the NSE head of strategy and research.
“We are 65 per cent done with taking a carbon market live in Kenya, and are now looking to draft rules and the legal framework for the board.”
Power generators, petrochemical firms, steel producers, car makers, electro-mechanical firms and airlines from developed countries are the likeliest buyers of credits since they face strict emission caps at home.
KenGen sells its credits
Other than South Korea, the European Union and Kazakhstan also operate national carbon trading markets while China, the US and Japan operate regional schemes.
Kenyan companies have been negotiating individually to sell carbon credits to international buyers. A formal trading board in the exchange would provide companies with a platform linking them to buyers without the hassle of having to negotiate individual deals which are harder to close for companies with a small amount of carbon credits.
The National Environment Management Authority (Nema) coordinates carbon market projects while the Treasury approves trading in credits.
KenGen sells its credits through the World Bank’s Emission Reduction Purchase Agreements (ERPAs) while Mumias Sugar entered into a similar agreement with the Japan Carbon Finance Limited in 2009.
KenGen said in its latest annual report it had registered under its sale scheme six clean energy projects with a potential emission reduction of 1.5 million tonnes of carbon dioxide equivalent a year.
These projects include three geothermal power plants, two hydro power plants and one wind farm.
The power producer said it earned Sh270 million from three of the projects which had 300,000 tonnes of certified emission reduction between 2013 and 2015. The firm is on the lookout for a new market to sell its credits however, given that its arrangement with the World Bank expires this year.
“With the end of the ERPAs managed by the World Bank, all registered KenGen Clean Development Mechanism (CDM) projects will not have ERPAs or buyers, hence the need for new buyers and alternative markets,” said KenGen in its 2015 annual report.
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