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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 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:
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.
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.
1. Kimberly Mureithi – Associate
2. Fenan Estifanos – Trainee Lawyer
3. Sharon Muoki – Trainee Lawyer