On 1 September 2023, the Climate Change (Amendment) Act, 2023 (the Amendment Act) was signed into law by the President of Kenya. In the following week, Kenya hosted the Inaugural Africa Climate Summit 2023, underscoring the country's steadfast commitment to combat climate change.
ALN Kenya participated in the public participation process leading up to the enactment of the Amendment Act by submitting comments to the Ministry of Environment, Climate Change and Forestry, with respect to the draft legislation in May 2023. ALN Kenya takes a proactive approach to regulatory compliance. Our team stays up to date on the latest regulatory developments and trends, and we work closely with our clients to identify potential risks and opportunities before they become problems.
Additionally, ALN Kenya with the help of other private sector participants who are part of the Africa Private Sector Coalition, prepared a statement that aims to represent the private sector's perspective in the ongoing dialogue on addressing climate change and promoting environmentally responsible growth. ALN Kenya pledged its commitment to specific areas of collaboration and partnership for achieving the shared goals of building climate action for resilience and green growth.
At a glance:
- The Amendment Act amends the Climate Change Act, 2016, to provide for the introduction and regulation of carbon markets in Kenya.
- The Amendment Act provides for the participation in carbon markets through bilateral or multilateral trading agreements, engagement with private entities, or involvement in voluntary carbon markets.
- Under the Amendment Act a carbon registry will be established to support carbon markets and facilitate investments.
- The Amendment Act provides for and recognises the importance of multiple stakeholders in carbon projects.
- The Amendment Act seeks to facilitate Kenya's updated Nationally Determined Contribution (NDC) goals of reducing greenhouse gas emissions by 32% by the year 2030 through voluntary contributions.
The highlights of the Amendment Act are shared below:
Participation in Carbon Markets
The Amendment Act creates a flexible and inclusive
framework by offering diverse avenues for engaging in carbon
trading to different players including government and private
proponents, while addressing distinct aspects of emissions
reduction and carbon management. Participation in the carbon
markets may be through bilateral or multilateral trading
agreements, trading between the Government and a private entity, or
in a voluntary carbon market.
The Amendment Act also offers a comprehensive approach to emissions mitigation through carbon reduction credits, removal or sequestration credits, technologies and projects on the whitelist, and emphasises the significance of carbon removal and sequestration strategies (including afforestation, reforestation, nature-based solutions, and advanced removal technologies). This multi-faceted approach offers a holistic and adaptable framework for addressing the complexities of greenhouse gas emissions management and facilitating Kenya's transition to a low-carbon and climate-resilient future.
Classification of Projects and Social
Contributions
The Amendment Act creates a distinction between the
implementation of land-based and non-land-based projects, although
these specific types of projects are not defined in the Act.
Land–based projects appear to be projects implemented through
a community development agreement which governs the relationships
and obligations of the stakeholders. The annual social contribution
from land-based projects will be at least 40% of the aggregate
earnings. For non-land-based projects, the annual social
contribution from the project will be at least 25% of the aggregate
earnings.
Establishment of the National Carbon Registry
The Amendment Act establishes a National Carbon Registry
(the Registry), which will be maintained by the
Designated National Authority. Kenya's Designated National
Authority is the National Environment Management Authority (NEMA).
The Registry will serve three main purposes:
- It will provide a centralised and authoritative platform for recording and tracking various aspects of carbon trading and emissions reduction efforts within Kenya.
- The Registry will maintain a register of Community Development Agreements, demonstrating Kenya's commitment to recognising the rights and benefits of local communities impacted by carbon projects, and fostering transparency and fairness in benefit-sharing arrangements.
- The Registry will record transfers, adjustments, and cancellations of carbon credits, thereby promoting integrity and preventing double-counting, which is essential for maintaining the environmental effectiveness of carbon trading.
Overall, the establishment of the Registry reflects a commitment to effective carbon market governance, transparency, accountability of carbon market activities and the accurate monitoring of emissions reduction efforts, all of which are fundamental in achieving Kenya's climate goals and fostering trust among stakeholders in the carbon market ecosystem.
Community Development Agreements
The Amendment Act requires every land-based project to
have a Community Development Agreement (CDA) in place. The CDA is
intended to enable the identification of the stakeholders of the
project; the establishment of a framework for the involvement and
engagement of communities in carbon trading initiatives; and to
document the impacted communities' socio-economic development
priorities. Furthermore, the CDA should provide for the prescribed
annual social contributions (being at least 40% for land-based
projects and at least 25% for non-land based projects).
A "community" is defined under the Amendment Act as an organised group of individuals sharing common attributes such as Kenyan citizenship, ancestry, culture, livelihood, socio-economic interests, geographical and ecological location, and ethnicity. This definition aids in eliminating ambiguity and ensuring that the term "community" is uniformly understood across various projects.
Additionally, the National Government and the relevant County Government are tasked with monitoring and overseeing the negotiation of CDAs and the enforcement of the community rights negotiated under a CDA.
Dispute Resolution under the Amendment Act
Under the Amendment Act, any dispute under a land-based
project will be subject to the dispute resolution mechanism set out
in the CDA. However, the Amendment Act prescribes that any dispute
that is not land-based is to be settled through alternative dispute
resolution in the first instance. Where any of these disputes has
not resolved within 30 days the dispute is to be referred to the
National Environmental Tribunal.
Enforcement of the Amendment Act
– Offences and Penalties
The Amendment Act establishes a framework for addressing a
range of actions that undermine the integrity of carbon trading.
These violations include: (i) unauthorised carbon trading,
inadequate record-keeping, (ii) the dissemination of false
information regarding environmental or financial benefits, (iii)
involvement in money laundering through carbon projects, and (iv)
the unauthorised sale of carbon credits. Individuals or entities
found guilty of these offences may incur significant penalties,
with fines reaching a maximum of KES. 500 million and potential
imprisonment for a period of up to 10 years.
Conclusion
The Amendment Act, represents a significant step forward in
Kenya's commitment to address climate change and develop a
viable carbon market. This development is not only crucial from a
climate impact perspective but also holds significant commercial
prospects as the recognition of diverse stakeholders and
establishment of a regulatory and implementation framework promotes
transparency and accountability, which are aspects highly valued by
investors and trading partners.
As global markets increasingly demand sustainable and carbon-neutral products and services, the Amendment Act positions Kenya to participate actively in the evolving carbon market ecosystem.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
