Kenyan leaders are hugely betting on revenues from carbon credits to support the country’s environmental conservation efforts and more, but the journey to this reality will very well be long and bumpy.
Carbon credits are today the world’s most prominent way of fighting climate change, although whether or not they make any meaningful impact remains an issue of contention. Essentially, they provide a way for people and organisations in richer countries to offset their emissions by paying for projects that remove carbon from the atmosphere in poorer countries, like Kenya, which are also the most affected by climate change.
Such projects normally involve planting trees or paying those who own trees to not cut them down. Others invest in technologies like renewable energy and clean cooking stoves that reduce emissions from people’s daily activities.
President William Ruto, at the launch of the Africa Carbon Markets Initiative (ACMI) in Egypt last year, said money from carbon credits can provide the much-needed finance to restore landscapes, expand forest cover, and boost clean cooking and agroforestry in Kenya and Africa at large.
He remarked that Kenya and the entire continent “require carbon markets that actually work for” their communities and this got wheels turning, kicking off numerous schemes to tap into the carbon credits windfall within and outside Kenya. African countries have lately been rolling out guidelines and regulations both to streamline the trading of carbon credits and to define how the revenues generated from them are shared, with some seeking to impose taxes on them.
There are three Bills in Parliament that seek to guide the market, with one – The Climate Change (Amendment) Bill of 2023 – having been initiated by the environment ministry and approved by Cabinet. These Bills, if passed, will entrench laws on how different carbon offsetting projects should benefit communities, and how to involve indigenous people in related decision-making.
Experts say they will solve some of the problems associated with carbon projects, improving their ability to bring in more revenues as the leaders hope, but other difficulties that impede their progress will remain. The carbon markets are a little bit more developed in Kenya than in the rest of Africa. The world’s first carbon offsetting project through protection of forests is located in Taita Taverta County and is also the largest in the region, and has so far issued about 18 million credits, priced at about Sh26 billion.
There are over 10 carbon projects in the country, most of which involve forest cover restoration or protection, but others are agricultural, renewable energy and clean cooking projects. However, many of them are riddled with mistrust, opaqueness, lack of accountability and alleged skewed deals with communities where they are situated.
For example, the Northern Kenya Grassland carbon project in the northern parts of the country was earlier in the year suspended by carbon offsets certifier Verra, after questions arose about its methodology and interference with indigenous peoples’ grazing practices in the areas.
The largest one, known as Kasigau Corridor, in Taita Taveta, has also been marred with transparency issues as it reports have identified a disconnect between what the communities believe is the revenue sharing method and the reality, leaving room for suspicion.
Kenn Essau, a principal at carbon credits advisory firm Ecodev consultants, avers that the holes poked into these projects – which are inherently supposed to be improving the health of the world – paints the country in bad light and discloses insincerity of intentions.
“It shows the selfish interest that some of these parties have – not in addressing the climate question or benefiting communities, but only profiting themselves,” Mr Essau told The Weekly Review.
Essau argues that due to the enormous amount of capital investments needed to establish some of these projects, they always need investors to shoulder the upfront costs.
These investors then act as intermediaries between carbon buyers and landowners in the country, as they reclaim their investments by taking a cut from the carbon credits earnings.
Mostly, this means that the revenues that end up in the landowners’ or community members’ pockets is much less, an issue which President Ruto feels is unfair and should be fixed.
“Currently, 80 per cent of the value of some carbon credits are captured by intermediaries, leaving only a fraction of the communities undertaking the actual hard work on the ground,” Dr Ruto said in his speech at the ACMI launch last year.
But while the proposed regulations are set to instil some discipline and enforce equitable carbon revenue sharing between communities, landowners, and the investors, they will do little to incentivise the market or bring more in more revenue, experts argue.
Environmental lawyer Elizabeth Gitari-Mitaru, told The Weekly Review that to fully incentivise carbon trading in Kenya, the government should look at it like any other economic activity, like farming, for instance, and help facilitate investments by creating an enabling environment.
She says the proposal in the Carbon Credits Trading and Benefit Sharing Bill sponsored by Laisamis MP Joseph Lekuton – which seeks to control how the revenues should be shared – will constrain the industry and drive away investors if passed.
The bill proposes that 40 percent of the carbon revenues will be taken by the landowners, 33 percent by communities, 10 percent by the county government, and two percent by the national research fund, leaving the investor with only 5 percent.
“You cannot incentivise participation in carbon markets, whilst you’re restricting the capacity of people to actually make money from them; whether those people are communities, investors or whoever else in the value chain,” she said.
Besides the internal woes, carbon credits are facing great criticism on a global scale, and their future as a sustainable source of climate finance for Africa and other poorer parts of the globe lies in limbo.
Questions also abound on whether the revenues they earn the continent are enough to compensate for the losses and damages caused by climate change, which Africa has contributed least to.
According to the African Development Bank, Africa loses between $7 billion (Sh1 trillion) and $15 billion (Sh2.2 trillion) every year to climate change related damages, and this is projected to rise to over $50 billion (Sh7.3 trillion) every year by 2030.
Revenue from carbon credits is vaguely a match for these losses. The recently launched ACMI targets to earn Africa $6 billion (Sh873 billion) from carbon credits every year by 2030, meaning it is currently much lower. Yet, this is almost the only form of climate finance Africa is getting so far.
Environmental economist Peter Doyle, posits that while carbon credits have the potential of becoming a sustainable source of climate finance for Africa, they are not yet there mainly because of the fraudulent practices that riddle the industry.
The former IMF economist argues that earnings from carbon credits are and should not be classified as climate finance as they are not compensation from rich countries for the damages that climate change has caused in poorer African countries.
“The damages that has happened to countries like Kenya because of global warming, is not addressed by them getting revenue for carbon capture – that’s a private entrepreneurial activity,” Mr Doyle told The Weekly Review.
“In the context of what is economically right, compensation that is owed to Kenyans is compensation in the form of revenue – payment, and not in lending.”
Climate finance will be one of the four main focus areas at the Africa Climate Summit this week, where leaders will brainstorm how to increase climate action financing coming to the continent.