Climate change poses significant challenges to Kenya, impacting various sectors such as agriculture, water resources, health, and infrastructure. The country is vulnerable to droughts, floods, and extreme weather events, which have adverse effects on food security, water availability, and livelihoods.

To address climate change effectively, Kenya requires coordinated efforts from multiple stakeholders, including government institutions, the civil society, communities, and the private sector. The country continues to work towards implementing climate change policies, developing resilient infrastructure, promoting sustainable agriculture, and enhancing climate change awareness and education.

National Climate Change Policy in Kenya

Kenya  recognised the importance of addressing climate change and  developed a National Climate Change Response Strategy (NCCRS) to guide its actions. The NCCRS focuses on adaptation, mitigation, technology development, capacity building, and public awareness regarding climate change. It promotes sustainable development, resilience, and low-carbon growth across various sectors.

Legal Framework

Kenya is a signatory to various international climate change agreements, including the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement. These agreements commit Kenya to taking climate action, including mitigation and adaptation measures, and accessing climate finance and technology transfer to support its efforts.

Kenya has established a legal framework to address climate change. The Climate Change Act of 2016 (Act) is the primary legislation governing climate change in the country. It provides a comprehensive framework for coordinating, planning, implementing, and monitoring climate change actions. The Act establishes the Climate Change Directorate within the Ministry responsible for climate change matters and outlines the roles of various stakeholders.

The Act also requires the development and implementation of sectoral climate change action plans, mainstreaming climate change into policies, plans, and programs, and establishing a Climate Change Fund to support climate change activities. Additionally, the Act encourages public participation, capacity building, and research and development in climate change-related areas.

Kenya has introduced the Climate Change (Amendment) Bill, 2023 (Amendment Bill) to include carbon markets as a means to  address climate change. The proposed amendment Bill aims to establish systems and rules for managing and implementing mechanisms that promote climate resilience and low-carbon development in Kenya. It also guides the creation and execution of carbon markets and other non-market approaches in line with international obligations. The Amendment Bill provides policy direction on carbon markets to national and county governments, the public, and other stakeholders. Additionally, the Amendment Bill includes provisions for benefit-sharing arrangements within carbon markets. The carbon markets and projects must also go evaluation under the rules provided for in the Environmental Management and Coordination Act of 1999 to see its impacts on the environment and the society.

The Amendment Bill provides that planting trees and nature-based solutions can earn credits for removing or storing carbon. This means that the forestry sector will be included in the emissions trading system, rather than just being seen as a way to offset emissions. To ensure this works well, the regulations should ensure that those involved in the forestry sector carefully track emissions throughout the life of the forest. Moreover,  to effectively utilise this system and make it easier to manage, there must be guidance on which sectors and sources of emissions are eligible to participate in the carbon market.

Investing in Climate Change and Renewable Energy in Kenya

Kenya has recognised the potential of renewable energy as a key solution to mitigate climate change and achieve sustainable development. The country has invested heavily in renewable energy projects, particularly in the areas of geothermal, wind, solar, and hydroelectric power.

Kenya has established favorable policies and incentives to attract investment in renewable energy. The Government of Kenya also provides tax incentives, duty exemptions, and has streamlined regulatory processes to facilitate renewable energy projects.

The country has also taken steps to increase energy efficiency, promote sustainable transportation, and develop climate-resilient infrastructure. Under the Amendment Bill, the Carbon markets provide an avenue for investors to participate in climate change mitigation efforts and support projects that reduce greenhouse gas emissions. While Kenya does not currently have its own national carbon market, there are opportunities for investment in projects that generate carbon credits through international carbon markets or mechanisms.

Here are some key aspects to consider:

1. Clean Development Mechanism (CDM): The CDM is a project-based mechanism under the Kyoto Protocol that allows developed countries to invest in emission reduction projects in developing countries and earn Certified Emission Reduction (CER) credits. Investors can explore opportunities to support CDM projects in Kenya, such as renewable energy projects, energy efficiency initiatives, or methane capture from waste management.
2.  Voluntary Carbon Markets: Voluntary carbon markets enable companies, organizations, and individuals to voluntarily offset their emissions by purchasing carbon credits. Investors can support projects in Kenya that generate carbon credits, such as reforestation and afforestation projects, renewable energy installations, or projects promoting sustainable land use and agriculture.
3.  REDD+ Projects: REDD+ (Reducing Emissions from Deforestation and Forest Degradation) projects aim to conserve forests and reduce emissions from deforestation and forest degradation. Investors can explore opportunities to invest in REDD+ initiatives in Kenya, which involve forest conservation, sustainable forest management, and community engagement.
4.  Nationally Determined Contributions (NDCs): Kenya has committed to reducing its greenhouse gas emissions as part of its Nationally Determined Contributions under the Paris Agreement. Investors can support projects aligned with Kenya's NDC targets, such as renewable energy development, energy efficiency improvements, and sustainable transport initiatives.
5. Climate Finance and Funds: Investors can explore opportunities to contribute to climate finance mechanisms and funds that support climate change mitigation and adaptation projects in Kenya. Examples include the Green Climate Fund, the Adaptation Fund, and various bilateral and multilateral climate finance initiatives.
6. Partnerships and Carbon Offsetting: Investors can form partnerships with organizations and project developers in Kenya to facilitate carbon offsetting. By investing in projects that reduce emissions or remove carbon dioxide from the atmosphere, investors can offset their own emissions or offer carbon offset services to clients.
7. Project Due Diligence: It is crucial for investors to conduct thorough due diligence on potential carbon market projects in Kenya. Assess project viability, additionality (emission reductions beyond business-as-usual), sustainability, and adherence to recognised standards such as the Gold Standard or Verified Carbon Standard. Engagement with project developers, local stakeholders, and carbon market experts is important to ensure the credibility and integrity of investments.

Conclusion:

Kenya recognises the urgent need to address climate change and has developed a comprehensive legal framework and policies to guide its actions. By investing in renewable energy and implementing climate change mitigation and adaptation measures, Kenya aims to achieve sustainable development, reduce greenhouse gas emissions, and enhance resilience to climate change impacts.

Even as the landscape of carbon markets evolves, it is essential for investors to stay updated on international market developments, emerging mechanisms, and evolving regulatory frameworks. Collaborating with experienced project developers, carbon market intermediaries, and specialized advisors can provide valuable insights and guidance in identifying suitable investment opportunities in carbon markets related to Kenya.

References

1. The Climate change Act 2016
2. The Climate Change (Amendment) Bill , 2023
3. Kenya Climate Change Knowledge portal  www.kcckp.go.ke
4. The Environmental Management and Coordination Act , 1999

By: Tony Muguna - Trainee Advocate