Mumias Sugar Company has become the first Kenyan company to receive payment for reduction of carbon dioxide emissions, paving the way for others to open fresh income streams from carbon trading.
The sugar miller will receive Sh22 million from selling 43,000 tonnes of carbon dioxide arising from its electricity generation plant that uses sugar waste.
The venture allowed the sole power supplier, Kenya Power and Lighting Company (KPLC), to reduce its intake of power generated from diesel engines, the major emitters of carbon dioxide.
Carbon trading involves the purchase of credits by mainly European and Asian firms that have exceeded their emissions limits.
Trading happens in exchanges in the US and Europe.
Mr Peter Kebati, the Mumias chief finance officer, said the carbon credits arose from electricity generated between May 2009 and February this year.
The miller earned Sh359 million from the power it sold to KPLC in the year to June.
“We expect a minimum price of $6.5 for every tonne and we plan to apply for new verification for the period of March to December this year,” said Mr Kebati.
Under the deal, Mumias sold its carbon credits to Japanese Carbon Finance, which will shop for buyers at the global climate exchanges.
At present, KenGen and East African Portland Cement Company (EAPCC) have applied to join the carbon trading business for using clean energy, but their applications are yet to be approved, two years after intention to tap EAPCC signed a deal to offer 105,000 tonnes to JP Morgan Climate Care, a division of investment banker JP Morgan in November 2008.
KenGen hopes to sell 177,600 tonnes of carbon annually by generating power from geothermal sources.
The announcement by Mumias that they are set to receive payment is expected to ignite interest in conserving the environment and entering the climate market now estimated to be worth more than $30 billion (Sh2.1 trillion) by Unep.
“Lots of companies are sitting on huge carbon assets,” says Tom Owino, the vice president of the local office of JP Morgan Climate Care. “People are aware, but the proposals they present are poorly done,” he said.
Kenyan companies have opportunities to develop carbon emissions reduction projects.
Some of the ways are reducing use of fossil fuel to run machines and vehicles, reducing staff travel by using video conferencing, investing in renewable energy like solar, wind and biogas, and redesigning their buildings to use less electricity for lighting and air conditioning.
Mumias Sugar plans to increase its share of earnings from the carbon market after it starts to produce ethanol next year, which will earn it credit from the reduced use of fossil fuel.
“We do not plan to make carbon trading one of our core sources of revenue, although it’s good because it is like free cash,” said Mr Kebati.
The sugar firm has stepped up search for new product lines as it races to cushion itself from the expected competition that will come with the opening of the local market to region’s least cost producers in 2012.
The Kenyan sugar industry is protected from intense competition by the Common Market for Eastern and Southern Africa (Comesa) safeguard, which limits the amount of sugar that can be imported from these countries. It is expiring in 2012.