Carbon credits: How you can get into the lucractive market

As at 2021, Kenya’s forest cover was said to be about nine percent. There is an ambitious plan to increase coverage to 30 percent by 2032.

There are many advantages of having a good forest cover. One of the emerging benefits is the possibility of earning extra revenue from sale of what are known as carbon credits. Both governments and businesses can engage in carbon credit trading as a way of raising extra revenue.

The origins of carbon credits trace to the 1980s when an American manufacturer became concerned about the level of gas emissions it was producing from its manufacturing process. The leader of the organisation was troubled by the negative effect his production was having on the environment.

However, he was unable to stop the production or change his business model to accommodate his concerns. Therefore, he and an expert devised an innovative scheme.

What if the business supported farmers to pursue projects that would have the opposite effect on the environment, that is projects that minimise gas emissions, could his business claim the positive impact as his own?

In 1997, the Kyoto Protocol was signed. The backdrop of this protocol was that industrialised nations were concerned about the negative impact their processes were having on the environment. They felt these were contributing to negative global climatic change due to gas emissions.

They then got into discussions with developing nations, to get into projects that would reduce gas emissions and therefore in a way, offset the overall negative effect caused by their gas emissions. Such projects include reforestations projects and others.

Against this protocol the carbon credit system was formalised.

Read: Kenya inches closer to monetising Sh452m carbon credit deal

Carbon credits are digital certificates granted to correspond to reduction of carbon. Currently, 1 carbon credit is equivalent to one metric tonne of carbon dioxide.

If your project contributes to the reduction of carbon dioxide in the atmosphere, then this is quantified according to the measure of carbon dioxide reduced. To simplify this, from expert views, 50 trees are enough to give you one carbon credit.

Carbon credits are traded mostly through the voluntary carbon trading market. One carbon credit trades for between 1-96 US dollars depending on the buyer.

This means that 50 trees can generate 96 dollars. Five acres of land would give you 5,500 trees meaning that you can get 110 carbon credits and earn almost Sh1.3 million as passive income from carbon credit trading.

Well, carbon credit trading is not as simple as the illustration above shows. However, it is still possible to undertake a carbon credit project with the help of experts.

The first step is to assess your potential project. Before getting started, establish if it fits the acceptable standard for carbon credit certification.

An expert will advice you on the best project, for example intertwining tree planting and crop production. The project could even include projects like having green infrastructure in urban areas or forestation projects.

Once the project is mature, then an expert will come and quantify the carbon reduction your project contributes. This is a technical process that can only be done by experts. They employ global standards in measuring the carbon credits.

Your project goes through a validation process using acceptable methodology from the global standards. It is then issued with the corresponding carbon credits. These credits can then be traded through carbon credit markets.

Ms Mputhia is the founder of C Mputhia Advocates. Email: [email protected]