Motorists will pay a traffic congestion charge and companies hit with a new tax for every tonne of carbon emitted from their plants if a government proposal to protect the environment is adopted.
The Treasury disclosed plans for the daily variable toll in a policy document made public on Tuesday in the race to ease traffic snarl-ups and air pollution.
Under the plan, the State is seeking the introduction of a congestion charge— a fee charged on cars driven in zones marked as heavy traffic areas such as the central business district.
Companies, especially manufacturing plants, face a fresh carbon tax to encourage them to cut emissions.
Kenya will follow in the footsteps of major cities that have introduced or are on course to unveil the traffic congestion charge.
New York, which has the most congested traffic in the US, will become the first major global city to introduce the charge after London, which did so in 2003.
The US city will introduce a congestion charge of up to $23 (Sh2,863) a day late while London charges a fee of £15 (Sh2,300) per day.
“The government will explore the development of a congestion charging scheme in the cities, as a source of revenue for greening the sector,” says the document labelled the National Green Fiscal Incentives Policy Framework.
The Treasury document has not specified how much motorists will pay as congestion tax that will target urban centres like Nairobi, Mombasa, Kisumu, Eldoret and Nakuru.
Official data show Kenya’s registered vehicles more than doubled in the past five years to 4.35 million in 2021.
The Treasury sees carbon tax, which has been gaining traction across the globe, as a route to hasten the switch to clean energy and promote the polluter-pays-principle, which requires polluting firms to bear the costs of managing or preventing environmental damage.
A carbon tax is a type of penalty that businesses pay for excessive greenhouse gas emissions. Such tax is usually levied per tonne of carbons emitted.
“Recognising the ability of carbon taxes to both cost-efficiently reduce greenhouse gas emissions and also to provide a revenue stream that can be used to meet broader government objectives, the government will explore the viability and design of a carbon tax in Kenya,” says the Treasury.
“Correct carbon pricing will send a right signal to markets and private investors which is pivotal in creating an enabling environment for private investment.”
The Treasury says that the next steps will be to design the carbon tax in the budget, decide its rate, who to pay and how to allocate the revenues raised.
More than 40 governments globally have implemented some form of carbon pricing.
Closer home, South Africa recently introduced carbon taxes of R46 (Sh330) per tonne of carbon emissions while Ethiopia is mulling over the same move.
Carbon taxes in richer countries are generally over $25 (Sh3,100) per tonne of emission and can be as high as $100 (Sh12,450).
The Treasury says Kenya will consider opportunities for companies to reduce their carbon tax liability by purchasing offsets from forestry projects in the country through an emissions trading system.
The world’s largest carbon emitter, China, in 2020, pledged to reduce carbon emissions to net zero by 2060.
Between 2022 and 2030, Kenya’s combined greenhouse emission from forestry, electricity generation, energy demand, transportation, agriculture, industrial processes and waste is projected to grow to between 100 and 143 million tons of carbon dioxide.
In 2030, the highest amount of emissions would come from electricity generation, followed closely by transportation and agriculture.
The Treasury reckons that investors are rapidly shifting from dirty to clean assets and Kenya risks dimming its attractiveness to foreign direct investment (FDI).
Kenya is one of the largest recipients of FDI in Africa, totalling $1.3 billion (Sh161.85 billion) in 2019, according to a United Nations Conference on Trade and Development report.
The largest share of FDI was directed to ICT, health and the extractive sector (oil exploration and production). About a third was directed to climate-related investments, mainly renewable energy.