Kenya has built a legal and institutional framework for carbon and climate finance, and it’s giving investors something many emerging markets lack: clear host-country rules.
Across emerging economies, the biggest obstacle to carbon investment has been uncertainty about how projects are approved, governed, and monetised. Kenya is closing that gap with clearer project pathways, stakeholder requirements, benefit-sharing obligations, and regulatory oversight.
For venture capital and private equity investors, the opportunity isn’t automatic. It comes from knowing what the framework allows, where the institutions are still settling in, and where the real openings are. This article covers the opportunities, the legal points that matter, and the risks that can affect returns.
The Opportunities
1. A legal framework investors can underwrite
The Climate Change (Carbon Markets) Regulations, 2024 put the Climate Change (Amendment) Act, 2023 into operation. They set rules for project eligibility, registration, validation and verification, benefit-sharing, monitoring and reporting, and oversight.
What matters for investors is the clarity this brings on costs and obligations:
- Private land vs. public or community land. Projects on private land don’t carry the annual social contribution requirements that apply on public and community land. The requirement to sign a Community Development Agreement also applies only to public or community land projects.
- Eligibility and compliance. Projects must be validated and certified by an independent accredited auditor before implementation, verified periodically, and compliant with applicable laws, policies, and national climate goals. Project proponents must also say whether and how a project supports Kenya’s Nationally Determined Contribution (NDC) under the Paris Agreement.
These are more than formalities. They give investors a structured way to assess project quality, governance, and compliance, which is especially useful when evaluating carbon-linked revenue streams and carbon credit offtake structures. Compliance doesn’t guarantee success, but clear rules make due diligence, valuation, and risk allocation easier than they’ve historically been in many emerging carbon markets.
2. Institutions with defined roles
Rules only work if someone is responsible for applying them. Kenya’s regime assigns clear mandates for project review, approval, oversight, and coordination:
- National Environment Management Authority (NEMA) is Kenya’s Designated National Authority for carbon markets. It reviews and approves projects, oversees compliance, and administers the National Carbon Registry.
- Multi-Sectoral Technical Committee (MSTC) advises on project assessment, registration, monitoring, and implementation.
- Climate Change Directorate coordinates stakeholders, supports public participation and compliance oversight, and advises government on carbon market activity.
For investors, the value is knowing who is accountable for what. It also signals a move toward more transparency, traceability, and oversight, which builds confidence in project integrity and host-country governance.
3. A national carbon registry
Kenya launched the Kenya National Carbon Registry (KNCR) in February 2026. It’s the digital platform for registering, tracking, and authorising carbon projects and credits in one place. It’s still early in implementation.
The registry matters beyond administration. It improves transparency and oversight, and it provides the infrastructure Kenya needs to take part in Article 6 carbon market mechanisms. It also tackles concerns about traceability, authorisation, and double counting that international buyers and investors care about.
Operational processes will keep evolving, but early engagement lets developers and investors get familiar with the requirements and position projects within Kenya’s emerging carbon market infrastructure.
4. Growing deal precedent
The Africa Carbon Markets Initiative (ACMI) estimates that African carbon markets could unlock up to US$120 billion in economic value by 2050, and Kenya is well placed to capture a meaningful share. The more useful signal for investors is that Kenya is starting to generate the transaction precedent needed to support larger, more sophisticated capital deployment.
Recent activity shows a shift from small, grant-supported projects towards structured, investable deals:
- The Lake Victoria Watershed Agroforestry Carbon Project has secured over US$50 million in financing from Trafigura to support its expansion, reflecting appetite from commodity traders and institutional counterparties for carbon-linked assets.
- Regenerative agriculture and soil carbon projects are starting to reach the scale and verification standards institutional buyers require. In 2025, Boomitra’s East Africa Carbon Farming Project in Kenya was registered under the Verra standard. It covers more than 44,000 acres and nearly 1,000 smallholder farmers, and is expected to generate over 1.7 million tonnes of carbon removals over its lifetime.
- At the sovereign level, Kenya has signed carbon cooperation agreements with countries including Sweden and Switzerland. These create a route for qualifying projects to eventually access Article 6 markets and generate Internationally Transferred Mitigation Outcomes (ITMOs). Implementation is at an early stage, but it lays groundwork for participation in compliance-oriented markets, where credits may command a premium over voluntary market transactions.
Together, these point to growing interest from development finance institutions, specialised climate funds, strategic corporates, and impact investors. Structured offtake arrangements, verified large-scale projects, and government-level cooperation suggest Kenya is heading toward a market that can support more sophisticated capital participation.
5. A wider climate finance toolkit
The Climate Change (Non-Market Approaches) Regulations, 2026, gazetted on 12 February 2026, extend Kenya’s framework beyond carbon-credit generation and trading. They give domestic legal effect to Article 6.8 of the Paris Agreement and set a structured basis for climate interventions that don’t depend on issuing or transferring carbon credits.
In practice, this formalises a move toward programme-based climate action: adaptation, resilience infrastructure, clean cooking, renewable energy access, and ecosystem restoration. Value is measured in climate and development outcomes rather than tradable units. And unlike Article 6.2 carbon market mechanisms, this framework is driven more by coordination than by transactions, with a bigger role for state-led prioritisation and oversight.
For investors, the investable universe widens beyond carbon-credit revenue to blended finance and outcome-based structures. Kenya is effectively building a dual-track climate finance system: one anchored in carbon markets under Article 6.2, the other in state-coordinated, non-market interventions under Article 6.8. Knowing where a project sits across the two tracks will increasingly shape how deals are structured, how risk and return are priced, and how regulatory and performance risk are allocated.
The Risks
Kenya’s carbon market is a compelling opportunity, but it operates in a relatively new and evolving legal and regulatory environment. For private equity investors, these risks belong in the overall assessment alongside the underlying carbon economics.
1. Carbon rights and land ownership
How carbon rights interact with land tenure is a key issue for land-based projects.
- Different tenure systems. Land in Kenya is held as freehold, leasehold, and customary land. Freehold and leasehold generally offer clearer contractual routes. Customary and community land need more engagement and documentation to make sure participation is properly authorised and enforceable.
- Outdated land records. Records may not have been updated after succession or inheritance. Project agreements may then be signed with people who control the land in practice but whose legal title isn’t fully reflected in official records. Investors need to account for this when structuring entitlement to carbon revenues and making sure project arrangements hold up long term.
- Agricultural land. Under the Land Control Act, certain transactions involving agricultural land need Land Control Board consent. Carbon projects don’t generally transfer ownership, but long-term land-use commitments can raise the question of whether consent is required. That has to be factored into legal structuring and diligence.
Land tenure analysis, title verification, and succession checks should be part of early-stage assessment of any carbon project.
2. Community benefit-sharing
Carbon projects depend on sustained participation from landholders and communities, so community engagement and benefit-sharing are central to project durability.
The CC Regulations require projects on public or community land to allocate at least 40% of net aggregate earnings to community benefit-sharing arrangements. That statutory requirement doesn’t apply to private land projects, but benefit-sharing expectations still matter commercially and reputationally.
Accurate land classification is therefore critical. It decides whether statutory benefit-sharing applies, and it can change project economics and structure. More broadly, a project lasts only if participating communities see it as delivering real, fairly shared benefits that fit their wider economic and land-use interests. Investors should treat community participation as an ongoing consideration to manage over the life of the project, not a box ticked at the start.
3. Regulatory compliance and timelines
Kenya’s framework is in place, but how it works in practice is still developing as institutions refine processes and build capacity.
Timelines for project approval, registration, and verification can vary with institutional workload and project complexity. That matters for financial modelling, especially where revenue depends on credits being issued and sold on time. Where credits are transferred internationally, including potential treatment as ITMOs, approvals are needed across several government institutions. Investors should build those coordination steps into their structuring and timing assumptions.
Key Takeaways for Investors
Kenya’s carbon market is developing into a more structured climate finance ecosystem. It has an established legislative framework, growing institutional infrastructure, and a rising number of visible transactions. It’s still maturing operationally, but the regulatory direction is clear and increasingly in line with international carbon market standards.
Three themes stand out for VC and PE investors:
- Better visibility. A clearer legal framework improves visibility over project development, approval pathways, and compliance requirements, strengthening the basis for assessing and structuring carbon-linked investments.
- Real transaction depth. Kenya is starting to show meaningful deal activity, which suggests the market is moving beyond pilot-stage projects.
- Execution still decides outcomes. As in other emerging markets, results depend on disciplined structuring, thorough due diligence, and careful handling of regulatory processes as they mature in practice.
Overall, Kenya offers a carbon market with a widening pipeline of climate-aligned opportunities in an increasingly clear regulatory environment, as the market continues to deepen.
Should you have any questions regarding Kenya’s carbon market economy, please do not hesitate to contact Dominic Rebelo, Kabu Karanja or Eden Gatuiku.
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This article was first published in AVCA’s Legal and Regulatory Bulletin, Issue 12.