In a bold move towards combating climate change, Kenya has introduced the Climate Change (Carbon Markets) Regulations, 2024, which came into effect on May 17, 2024. These regulations lay a robust foundation for a transparent and efficient carbon market, positioning Kenya as a trailblazer in sustainable development and environmental stewardship.

1. WHY THESE REGULATIONS MATTER

• Initiating Carbon Projects

For those looking to embark on carbon projects, the new regulations provide a comprehensive framework to navigate legal requirements. This ensures that projects align with environmental standards and meet regulatory expectations from the outset.

• Long-term Viability

Adhering to these regulations enhances the sustainability and longevity of carbon projects. By meeting these standards, projects attract investors and stakeholders committed to environmental stewardship.

• Accessing Markets

Compliance with global standards, including those outlined in the Paris Agreement, allows projects to access international carbon markets. This opens up opportunities for revenue generation and global partnerships.

• Ensuring Compliance

Understanding and following these regulations reduce the risk of penalties and disruptions, ensuring projects comply with both local and international laws.

2. KEY HIGHLIGHTS OF THE REGULATIONS

• Streamlined Carbon Project Approval Process

The regulations establish a clear and structured pathway for carbon project development. Project proponents begin by submitting a detailed concept note to the Designated National Authority (DNA), followed by obtaining preliminary approval. After reviewing the project design document, the DNA issues a final approval letter. Projects must initiate within 12 months, with provisions for extensions, and adhere to mandatory annual reporting of progress and carbon credit issuance notifications. This rigorous process ensures all projects meet stringent criteria, enhancing the credibility and environmental integrity of Kenya’s carbon market.

• Robust Institutional Framework

The regulations introduce a comprehensive institutional framework to support the implementation and oversight of carbon projects:

• Designated National Authority (DNA): Central authority for authorizing and monitoring carbon projects.
• Ad Hoc Committees: Project-specific committees provide technical expertise.
• National Carbon Registry: Ensures accurate tracking and reporting of carbon credits.
• Sector Registries: DNA coordinates with sector-specific registries, covering energy, transport, agriculture, forestry, industrial processes, and waste management.

This structure promotes accountability and enhances coordination among various sectors, fostering a unified approach to carbon market regulation.

• Equitable Benefit Sharing Mechanisms

The regulations ensure significant benefits for local communities through structured contributions and transparent agreements:

• Mandatory Contributions: Land-based projects must allocate at least 40% of the previous year’s earnings, post-business costs, to local communities. Non-land-based projects allocate at least 25% to the Climate Change Fund.
• Community Development Agreements (CDA): Outlines specific social contributions and their disbursement, ensuring transparency and fair compensation.

These provisions promote social equity, ensuring that communities most affected by carbon projects receive tangible benefits.

3. STRICT PENALTIES FOR NON-COMPLIANCE

To uphold market integrity, the regulations impose stringent penalties for various infractions:

• Minor Offences: Fines up to KES 20,000 or imprisonment for up to six months for minor breaches like failure to submit annual reports.
• Major Offences: Severe penalties, including fines up to KES 500 million or imprisonment for up to 10 years, for serious violations such as unauthorized trading of carbon credits or providing false information.

These penalties deter non-compliance, ensuring transparency, accountability, and trustworthiness in Kenya’s carbon trading practices.

4. TRANSITIONAL FRAMEWORK

The regulations provide clear guidelines for transitioning to the new framework:

• Existing Projects: Must achieve compliance within two years and undergo an environmental audit within six months of the regulations taking effect. These provisions facilitate a seamless transition for current projects, ensuring they adapt to the new regulatory landscape without interruption.

5. CONCLUSION

Kenya’s Climate Change (Carbon Markets) Regulations, 2024, mark a significant advancement in the country’s fight against climate change. By establishing a robust framework for carbon market operations, these regulations not only ensure environmental integrity and sustainability but also position Kenya as a leader in global climate action efforts. As the world looks towards more sustainable futures, Kenya’s proactive approach provides a valuable blueprint for other nations to follow.