Carbon trading: Gaps, opportunities and structures

With the current global climate crisis that continues to disrupt lives and livelihoods, carbon trading has become one method of reducing emissions, but also an alternative source of income.

Carbon trading, according to Investopedia, is the buying and selling of carbon credits. Carbon credits permit a company or organisation to emit a certain amount of carbon dioxide (CO2) or other greenhouse gases.

Trade in carbon credits, also called carbon emissions trading, is authorised by governments and aims to gradually reduce overall carbon emissions as a way of mitigating effects of climate change.

 Africa is considered a carbon offset giant, thanks to the continent’s diverse ecosystems that store enormous amounts of carbon called carbon sinks.

The opaque nature of the industry, coupled with a limited regulatory framework and even absence of laws in some cases, has, however, discouraged many from embracing this attractive venture.

Stella Ojango, an advocate of the High Court and an environmental lawyer, is one of the figures spearheading talks on carbon trading gaps in the country. She highlights some of the existing cracks in the carbon credit industry and how Kenyans could tap into the space.

Is carbon trading a practical venture in Kenya?

It is a practical venture. The biggest shortcoming right now, though, is the lack of a requisite regulatory and compliance component to facilitate investment in carbon credits.

Secondly, in Kenya, like in most developing countries, our industries are struggling to stay afloat. Burdening them with an obligation to pay for their carbon footprint would make it difficult for them to remain in business. What would work in our case for now is a voluntary carbon market, which enables business entities, organisations and individuals to offset their emissions outside a regulatory regime.

What does the regulatory environment for carbon trading in Kenya look like?

We do not have enough laws around this. We have the Climate Change Act of 2016, but it does not address carbon trading sufficiently. We need to amend that Act so that we can introduce regulations for trading carbons. We have other sectoral laws like the Environmental Management and Coordination (Amendment) Act (EMCA), the Water Act and the Energy Act too that contain clauses or sections on carbon trading, but which do not address the specifics. It will help to enrich the laws so as to regularise this business.

Which areas should Kenyans look to tap into in carbon markets?

We have to create an opportunity to show what we are selling, and in this case, what we are selling is the ability to reduce greenhouse gas emissions from the atmosphere. I have seen some countries go into alternative sources of energy. Here, they move away from dirty energy forms such as diesel to clean alternatives such as wind. Our electricity is 90 per cent clean, which is something to be proud of. We need a system to measure that.

When it comes to reforestation, we need to have in place mechanisms that measure how much carbon is being absorbed. By so doing, we will have created a market. Regulating the pricing aspect will then become easier.

For someone hoping to go into the carbon credits business in Kenya, what should they keep in mind?

You have to visit the various platforms that offer voluntary carbon trading services and register. This gives you and your work to reduce emissions visibility. Those who have planted trees that act as carbon sinks or moved to clean energy should have their work documented and showcased.

Kenya is among the 10 African countries that expressed interest in the African initiative on carbon credits launched last year at COP27 in Egypt. What is the significance of this initiative?

These are multiple opportunities for us to plug into. But even as we are doing that, our national and county governments must have some form of regulation on pricing of the credits. There should be a form of a baseline of how much a tonne of carbon sells for, for instance. With return on investment, our people will be motivated to venture into carbon trading.

There must be challenges in carbon trading…

The biggest one is lack of regulation. Then there is ignorance. There is minimal information to help people see the opportunity herein. A visit to online carbon trading sites shows that most players, including in Africa, are either foreign entities or have a foreign link. While there are local beneficiaries, most of the money remains at the top. We need to correct that by having more local players. Most importantly, we need to educate our people about how this venture works.

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