Mecktilda and Stefano with their solar lighting kit, local agents for Global Cycle Solutions, a solar energy provider, in their village near Mwanza, Tanzania. Photo: Russell Watkins/Department for International Development DFID
As the demand for high integrity, African-originated carbon credits increases, we believe there is a unique opportunity to further leverage carbon markets to address the significant financing gap for climate action in the continent. Even though multiple initiatives are underway to stimulate both the supply and demand for carbon credits in Africa, the region has not yet realized its full carbon market potential. Currently, Africa only generates around 2% (39 million in 2021) of its estimated potential of 2,400 million carbon credits per year.
Kenya, never a country to be left behind on the race track, was the second largest issuer of carbon credits in the voluntary market in Sub-Saharan Africa in 2022 and is taking further action to position itself as a regional leader by amending its 2016 Climate Change Act in 2023 and finalizing regulations to create the enabling environment for carbon trading in the country. To further promote carbon markets, the World Bank Group and the Kenya Private Sector Alliance (KEPSA) launched the Carbon Market Guidebook for Kenyan Enterprises to bridge the knowledge gap and empower Keyan enterprises to access carbon finance. We hope that, together, these efforts will further bolster Kenya's position as a dynamic economic hub in East Africa and contribute to global climate mitigation efforts.
Why Carbon Markets Matter for Kenyan Enterprises
Kenya's vibrant enterprise sector, predominantly consisting of small and medium-sized enterprises (SMEs), has long been a critical driver of the country's economic prosperity, contributing significantly to the GDP and employment. Yet, despite their potential, these enterprises face substantial challenges in scaling their climate action, primarily due to funding constraints. Carbon markets can provide a much-needed solution, offering a pathway to non-debt, results-based financing that could revolutionize how enterprises engage in climate strategies. Along with KEPSA, we developed the Carbon Market Guidebook for Kenyan Enterprises provide practical insights on carbon project development and expert advice on mitigation carbon project risks, in order to catalyze the participation of Kenyan enterprises in carbon markets, ensuring they are well-positioned to access and leverage innovative financing mechanisms through carbon markets.
Navigating the Complexities of Carbon Markets
Assessing the potential of a business to earn carbon credits and registering a carbon credit project is complex and costly. For this reason, only a handful of developers have been able to tap into carbon markets. Our goal through the Carbon Market Guidebook is to demystify this journey across the lifecycle of a carbon project (Figure 1), providing enterprises with a step-by-step detailed, country-specific guide to developing successful carbon projects. The guidebook covers essential aspects such as determining a project's suitability for carbon credits, selecting the right carbon credit standard and methodology, conducting feasibility studies, and navigating the intricacies of project financing, development, and sales. Tailored to the Kenyan context, the guidebook equips enterprises with the knowledge and tools needed to unlock the full potential of carbon markets, thereby supporting the country's transition to a green economy and its broader climate action and development objectives. Through practical insights and expert advice, the guidebook aims to catalyze the participation of Kenyan enterprises in carbon markets, ensuring they are well-positioned to contribute to and benefit from the global move towards sustainability.
Figure 1. Lifecycle of a carbon project
A Step Towards Sustainable Development
The voluntary carbon market is projected to grow significantly by 2030. Even though carbon markets alone cannot address the climate challenge in Kenya, we believe that carbon markets, both voluntary and compliance, hold transformative potential for Kenya and can play a pivotal role in enabling enterprises to implement sustainable practices, innovate, and grow. The launch of the Carbon Market Guidebook for Kenyan Enterprises on April 12th, 2024, was a testament to Kenyan enterprises’ commitment to scaling climate action. By offering practical guidance and shedding light on the untapped potential of carbon markets, the guidebook aims to catalyze a shift towards more sustainable business practices across the nation.
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