Carbon Credits, Markets And Trading: Frequently Asked Questions

Highlights of the Carbon Markets Regulations, 2024 

1. When did these Regulations come into force? 17th May 2024. 

2. What is the why for these Regulations? The Regulations were enacted to give effect to the 2023 amendments to the Climate Change Act which sought to address carbon markets concerns. The Regulations provide a legal framework for the governance and oversight on carbon credits and trading. 

3. What regulatory body regulates carbon trading in Kenya? Vide Gazette Notice 7621, the Cabinet Secretary for Environment, Climate Change and Forestry gazetted the appointment of the National Environment Management Authority (NEMA) as the Designated National Authority in charge of the carbon markets.  

4. What are carbon credits? Carbon credits are permits created when one metric tonne of carbon dioxide is sequestered or prevented from entering the atmosphere.  

5. What are carbon markets? Carbon markets are trading systems or mechanisms through which carbon credits can be bought and sold. We have two types of carbon markets, voluntary and regulated carbon markets. 

Voluntary carbon markets are based on wilful or voluntary participation where entities purchase carbon credits to offset their emissions voluntarily.  

Regulated carbon markets on the other hand are structured to ensure entities comply with mandatory compliance. Regulated carbon markets operate on the Cap-and-Trade System where a regulatory cap is set on emissions and the allowances thereby are traded among the entities.  

6. What is the criteria for eligibility as a project proponent?  

1. The project proponent must be a legal entity 
2. Must have the financial capacity to undertake the project 
3. Must demonstrate expertise in carbon project execution 
4. Compliance to legal requirements incidental to the operation of carbon projects 
   
   

7. What is the procedure for developing carbon offsets projects? 

1. Make an application to NEMA by submitting your Project Concept Note 
2. Upon approval, NEMA will issue a letter of no objection 
3. The project proponent submits the project design documents 
4. NEMA upon satisfaction, issues a letter of approval which allows the proponent to commence the implementation of the project. 

8. What requirements are tied to the commencement of carbon projects? 

1. Each project is required to undergo an environment and social impact assessment prior to commencement. 
2. The projects must be certified by a recognized international body 
3. They must be validated by an independent auditor 
4. Verification of the results from process (a) and (b). 

9. What  types of projects are recognized under the Regulations? 

The Regulations recognize land and non-land-based carbon projects. Land based projects encapsulate projects consisting of activities related to land use, land management, ecosystem conservation or restoration. They include afforestation and reafforestation. 

Non-land-based carbon projects on the other hand consists of activities that reduce carbon emissions or that remove carbon dioxide from the atmosphere. They include the use of green technology such as electric powered transport, energy efficient cookstoves etc. These projects can either be private or public. 

10. How does the regulations address social contributions to communities when projects are undertaken on public or community land? 

The Regulations provide for annual social contributions of at least 40% and 25% of aggregate earnings exclusive of the cost of business from land and non land based carbon projects respectively to the respective community. It is required that project proponents enter into a Community Development Agreement with the community involved. 

11. How do these Regulations apply to project proponents engaged in carbon projects before their enactment? Project proponents engaged in carbon projects prior to the coming into force of these Regulations will be required to comply with the provisions of the Regulations within two years of their commencement. 

Contact us today 

Should you have any questions on this or any other matter, please do not hesitate to contact Emily Gitau on egitau@cmadvocates.com.