Cross theme insights
Corporate risk radar – Part 2: Climate change, digital transformation & global analysis
Climate Change Risk Practice
President William Ruto assented to the Climate Change (Amendment) Act, 2023 (the Climate Change Act) which came into force on 15 September 2023 and amends the Climate Change Act, 2016. This preceded the Africa Climate Summit, held in Nairobi which focused on discussions around climate change. The Climate Change Act is a bold legislative step towards enhancing the country’s response to climate change. It significantly contributes to fulfilling Kenya’s international obligations under Africa’s Agenda 2063, the Paris Climate Change Agreement and the United Nations Agenda 2030 on Sustainable Development.
In this article, we explore the highlights of the Climate Change Act, the multisectoral coordination approach towards climate change mitigation and the nascent opportunities for green investments in Kenya through carbon markets. The Climate Change Act lays down a framework for regulation of carbon markets. A carbon market is a mechanism that enables and allows public and private entities to transfer and transact on emission reduction units, mitigation outcomes or offsets generated.
The Climate Change Act establishes the National Climate Change Council (the Climate Change Council), the regulatory body in charge of Kenya’s national climate change coordination framework. The Climate Change Council is entrusted with providing guidance and policy direction on carbon markets to national and county governments, the public and other stakeholders.
The onus is on the Cabinet Secretary for the Ministry relating to climate change (the Cabinet Secretary) to advise the National Climate Change Council on the carbon budget available for trading based on Kenya’s international obligations and to approve the measurement, reporting and verification of greenhouse gas emissions. In addition, Kenya may participate in global carbon markets.
The Climate Change Act empowers the Cabinet Secretary to enter into agreements with other states as well as private sector carbon market players.
The Climate Change Act establishes a Designated National Authority whose role shall be to authorize participation in projects under the Paris Agreement. The Designated National Authority has also been tasked with the responsibility to maintain a National Carbon Registry. The National Carbon Register shall contain information on the amount of carbon credits issued or transferred by Kenya and on carbon credit projects implemented to reduce greenhouse gas emissions in Kenya.
The National Environment Management Authority (the NEMA) plays a fundamental role in the regulation of Kenya’s carbon market. Carbon trading projects authorized under the Climate Change Act are required to carry out an environmental impact assessment study to be submitted to NEMA.
The Climate Change Act places an obligation on the proponents of carbon trading projects to specify the anticipated environmental, economic and social benefits of the project. All projects undertaken pursuant to the Climate Change Act shall be implemented through a community development agreement which shall be recorded in the National Carbon Registry.
A community development agreement outlines the relationships and obligations of the proponents of the project with the impacted communities. The community development agreement should provide an annual contribution of at least 25% of the aggregate earnings of the previous year to the community, to be managed and disbursed for the benefit of the community.
The national government and respective county governments have the responsibility of overseeing and monitoring the negotiation of community development agreements with project proponents and other key stakeholders.
With numerous investors trading in international carbon markets already participating in various sectors of commerce in Kenya, the Climate Change Act is a positive step towards the creation, participation and regulation of carbon markets in Kenya. The Climate Change Act has laid the foundation, we can look forward to finer details in regulations that shall be published in due course.
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