The National Treasury and the Environment Ministry have concluded a due diligence study on a proposed project to monetise an ambitious carbon credits scheme, edging closer to tapping the climate millions.
An update by the Treasury‘s Public Private Partnership (PPP) Unit showed that due diligence on a proposal by privately-owned Suni Smart Energy to develop the country’s carbon credits trade was concluded in November—paving the way for a final approval of the scheme.
“The project was given conditional approval in December 2023, for the project to progress to project development/feasibility study, subject to fulfilment of the four pre-conditions, which included undertaking of the due diligence by the contracting authority and PPP Directorate,” the Treasury said.
“The due diligence was finalised in November 2024 and the report is awaiting submission to the PPP Committee” it added.
Carbon credits are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases, with the units purchased from owners of forests or other environmentally friendly assets.
The proposed project has two components, including supporting the development and trade of jurisdictional carbon credits nationwide under a programme called Reduce Emissions from Deforestation and Degradation in Kenya and the Lowering Emissions through Accelerated Financing Coalition.
The Environment Ministry targets to ink a $ 3.5 million (Sh452.06million) deal with Suni Smart Energy which would run over 10 years.
The Environment Ministry in 2023 published draft regulations proposing that the government would take 25 percent of the revenue generated by private companies from the sale of carbon emission reduction credits and use it to fund sustainable development.
The draft regulations classify carbon credit projects as national, community, or private, with the community ones giving five percent of the revenues to their respective county and another five percent to the national government’s consolidated fund.
The Ministry in its proposed regulations said that the government would establish a national carbon registry that will have details such as the number of carbon credits issued or recognised by Kenya.
According to the regulations, there would also be sector registries such as aviation, forestry, or energy, where entities would pay a registration fee to the sector registrar to be recognised and become eligible for accumulating carbon credits.
The proposed rules further said that those seeking to register carbon projects would be required to disclose ownership and indicate how their project would add to nationally determined contributions and the number of jobs to be created. The nationally determined contributions refer to voluntary plans that countries create to reduce greenhouse gas emissions and adapt to climate change.
The Environment Ministry in newly released proposals targets to limit the volume of carbon credits that would be traded in the country.
The implementation of the cap means that the government will set a maximum quota of carbon credits tradable within a certain period after which such trades are frozen.
“The National Climate Change Council shall during every nationally determined contribution implementation period, upon the advice of the Cabinet Secretary as required by the Act, determine the carbon budget for trading,” reads part of the draft regulations which are now the subject of public participation.
