President William Ruto has signed the Climate Change (Amendment) Bill 2023 into law, paving the way for the regulation of carbon markets in Kenya. This new law will enhance Kenya’s capacity to mobilize resources for climate resilience initiatives. It aligns Kenya with countries like South Africa, India, Indonesia, and Vietnam in establishing domestic carbon trading markets to address climate change challenges.
The law introduces a national carbon registry, enabling the trade of carbon credits. Carbon credits represent efforts to remove one tonne of carbon dioxide from the environment. “Cap and trade” mechanisms set limits on greenhouse gas emissions and create incentives for emission reduction, generating funds for climate resilience projects.
Globally, carbon credits are issued and regulated by the United Nations Framework Convention on Climate Change. Renewable energy initiatives, like transitioning from thermal to geothermal or hydro power generation, generate carbon credits.
Companies in Kenya, such as KenGen, Safaricom PLC, and East African Breweries Ltd, are already benefiting from carbon credit trading by reducing their carbon emissions and leveraging renewable energy sources.
In the future, companies in Kenya may face mandatory disclosures about their environmental sustainability alongside financial reporting, as the International Sustainability Standards IFRS S1 and IFRS S2 come into effect on January 1, 2024.
Additionally, Kenya is set to draw funds from the Resilience and Sustainability Facility (RSF) provided by the International Monetary Fund (IMF) to address climate-related challenges, contingent on demonstrating climate risk considerations in national planning and investments. This reflects a growing focus on climate financing and resilience-building in Kenya and other developing economies facing climate-related shocks like droughts and floods.
For more details please visit Kenya’s Carbon Credit Market Unlocking Plan
