Finance experts have called for the development of a clear framework for buying and selling carbon credits locally, saying that unregulated trading is costing the country billions in unrealised revenue from the globally booming sector.
The value and potential of carbon trading has grown globally as more countries and companies wake up to the harmful effects of global warming.
The trade follows an offset system, where heavy emitters of greenhouse gases buy permits and credits from carbon-negative partners.
The Nairobi International Finance Centre (NIFC), which recently announced plans to establish a carbon trading exchange in the country to enable small-scale trades, says a formal framework would unlock revenue for Kenyan forestry farmers and small green energy producers.
“We are in talks with several players and regulators to develop a framework for carbon trading to scale the activity in the country, but this is an unregulated space,” said NIFC acting chief executive officer Oscar Njuguna.
“Let us start from the ground and create a good precise framework to sell carbon credits.” NIFC signed a collaboration agreement in July with AirCarbon Exchange (ACX) and the Nairobi Securities Exchange (NSE) to work on a Kenyan carbon exchange.
The partnership would establish a carbon ecosystem in Kenya connected to ACX’s international client order book, allowing buyers and sellers, international and domestic, to transact efficiently and transparently.
A sustainable financial ecosystem is instrumental in channelling global capital flows into Kenya’s high-impact environmental projects such as climate risk mitigation, water and sanitation, reforestation and land restoration among others.
“Carbon trading is a huge opportunity for Kenya, it could be at the centre of Africa’s response to climate change. We have the assets we can use to demand from the global north (big emitters) to connect our resources with their demand and get revenue streams that will accelerate the economy and create jobs,” said Mr Kelvin Massingham, director of risk and resilience Financial Sector Deepening (FSD) Africa.
Kenya’s nationally determined contributions target abatement of greenhouse gas emissions by 32 percent was increased from the previous 30 percent target by the year 2030 in the energy, transportation, industrial processes, agriculture, land use, forestry and waste sectors.