As a signatory to the Paris Agreement on Climate Change, Kenya has continued to take notable strides to fulfil its obligations on climate change mitigation, adaptation and finance.

Following the enactment of the Climate Change Act, 2023 (the Act) which came into force in September 2023, the Cabinet Secretary for Environment, Climate Change and Forestry gazetted the Climate Change (Carbon Markets) Regulations, 2024 (the Regulations) on 17th May 2024 to further operationalise carbon markets in Kenya.

The Act defines a Carbon Market as “a mechanism that allows public and private entities to transfer and transact emission reduction units, mitigation outcomes or offsets generated through carbon initiatives, products, programmes and projects subject to compliance with national and international laws”. 

Carbon Projects 

Carbon Projects in Kenya will now be subject to the Act and the Carbon Markets Regulations. 

The Carbon Market Regulations set out an approval process that all Carbon Projects must follow which are broadly as follows:

1. Letter of No Objection

The approval process is initiated by an application to the National Environment Management Authority (NEMA) which is the gazetted Designated National Authority under the Act for a letter of no objection.

2. Project Design Document

A project design document will then be prepared by the proposer of the project within 12 months of receipt of the letter of no objection.

The project design document will be submitted to the Designated National Authority for approval through an ad hoc committee composed of members of the Intergovernmental Panel on Climate Change which advices the Designated National Authority on carbon projects. 

3. Approval

Once approved, a project may be implemented and upon successful completion, it may seek issuance from a recognised standards body on the project outcomes.

4. Sale of Carbon Credits

After a carbon project implementor has successfully implemented the project and generated recognised outcomes, they may enter into commercial agreements including the sale of authorised carbon credits.

Community Carbon Projects

Carbon projects carried out on community land will be underpinned by a Community Development Agreement (CDA) to be entered into by the project proponent and the community in question. The CDA  shall be prepared in the form prescribed under the Regulations.

A CDA must generally outline the commitment from the project proponent to ensure sustainable and beneficial engagement over a community resource that ensures benefits to the community while remaining economically viable for the proponent. 

The Regulations require communities to formally register a Community Development Agreement Committee (CDAC) which comprises 9 specified members of the community and the project proponent on the other hand.

The CDAC is composed of:

• A county government representative appointed by the governor.
• A national government representative in charge of administration in the county.
• One representative of women in the community elected by the community.
• Two representatives of village elders of either gender elected by the community.
• Two representatives of youth of either gender elected by the community.
• One representative elected by civil society groups working in the area of climate change in the community.
• One representative of persons with disability elected by the community.
• One representative of the project proponent.

The CDAC is charged with monitoring and evaluation of the project and to resolve grievances arising from implementation of the project.

 In its operation, the CDAC will be required to set up a Monitoring, Evaluation and Reporting Sub-Committee and a Grievance Resolution Sub-Committee.

Prescribed Fees under the Regulations

The Regulations prescribe the following fees at different stages of the project:

1. Project Application Fees: Kes 10,000 for Kenyan citizens and Kes 100,000 for non-citizens.
2. Project Design Document Fees: Kes 100,000 for citizens and Kes 200,000 for non-citizens. 
3. Administrative Fees:

• Kes 150,000 for carbon projects with projected annual issuance of 15,000 carbon credits per annum or less.
• Kes 300,000 for carbon projects with projected annual issuance of more than 15,000 carbon credits per annum.

(The above fees are payable upon approval of the project design document)

• The Kenya Shilling equivalent of USD 0.10 per carbon credit issued for the first 15,000 tonnes of CO2 equivalent for which issuance is requested in a given year
• The Kenya Shilling equivalent of USD 0.20 per carbon credit issued for any amount in excess of 15,000 tonnes of CO2 equivalent for which issuance is requested in a given year.
  (These fees are payable within 30 days of the sale of issued carbon credits).

Annual Social Contribution

The Regulations clarify that the annual social contribution set out in Section 23E (5) of the Act is applicable to carbon projects implemented by a public entity and those undertaken on public and community land. A private carbon project on private land shall not be required to disburse the annual social contribution.

The contribution amounts are set at least 40% of the aggregate annual profit of the project for land-based projects and at least 25% of the aggregate annual profits for non-land-based projects.

Conclusion

The Regulations offer a welcome structure and guidance on the running of carbon projects and participation in carbon markets. 

They will apply to all Carbon Projects initiated after 17th May 2024. In the meantime, projects that are currently ongoing have been given a two-year grace period for compliance, provided that they undertake an environmental audit within six months of the commencement date of the Regulations.