Carbon Credit Market in Kenya: Opportunities, Legal Compliance & Recent Case Law
- Muhoro & Gitonga Associates
- Mar 11, 2024
- 6 min read
Updated: Oct 9
Table of Contents
Opportunities in Kenya’s Carbon Credit Market
Legal and Regulatory Framework
Recent Regulatory & Procedural Developments
Landmark Cases & Legal Challenges
Compliance Requirements under the Climate Act & Amendments
Practical Considerations for Project Developers & Investors
Challenges, Risks & Mitigation Strategies
Frequently Asked Questions (FAQ)
Carbon Credit Project Developer’s Due Diligence & Compliance Checklist
1. Opportunities in Kenya’s Carbon Credit Market
Kenya’s natural resource endowment including forests, wetlands, and rangelands positions it as a global leader in carbon sequestration projects.
Forestry and land use projects (afforestation, reforestation, and REDD+) remain highly promising. Improved forest data can unlock significant carbon finance.
Renewable energy projects such as wind, solar, and geothermal provide low-carbon alternatives and generate substantial credits in both compliance and voluntary markets.
Sustainable agriculture through agroforestry, rotational grazing, and soil carbon sequestration offers vast potential for smallholder inclusion and rural development.
Waste management initiatives, including landfill gas recovery and waste-to-energy, generate emission reductions and contribute to Kenya’s circular economy goals.
Carbon trading enables Kenyan firms to monetize climate-friendly operations by selling surplus credits.
International partnerships, supported under Article 6 of the Paris Agreement, allow Kenya to access global carbon finance and cross-border trading.
Carbon projects that engage local communities promote inclusive development, new income streams, and environmental conservation.
2. Legal and Regulatory Framework
The Climate Change (Amendment) Act 2023 provides a clear statutory framework for Kenya’s participation in global and voluntary carbon markets.
The forthcoming Climate Change (Carbon Markets) Regulations 2024 outline project registration, monitoring, and benefit-sharing procedures.
The Carbon Registry Regulations 2025 (Draft) introduce a national registry for all carbon projects to ensure transparency and prevent double-counting.
Additional frameworks such as the Non-Market Mechanisms Regulation govern non-trading climate actions and align projects with Kenya’s NDCs.
Regulatory agencies like NEMA, the Designated National Authority, and the Climate Change Council oversee approvals, verification, and policy enforcement.
The Finance Act 2025 introduced fiscal changes such as taxes on direct air capture equipment and revisions on timber income that affect project costs and incentives.
3. Recent Regulatory & Procedural Developments
The National REDD+ Registry, launched in July 2025, improves monitoring and transparency for forestry-based emissions reductions.
Public participation and community consent are now legally mandatory, ensuring social and environmental safeguards in all projects.
Draft Carbon Registry and Carbon Trading Regulations are expected to be gazetted by late 2025, providing clear trading and registry rules.
The Ministry of Environment has strengthened oversight and stakeholder coordination, engaging project developers to enhance market integrity.
Kenya is also improving forest inventory data to ensure accurate valuation of carbon sinks and compliance with international standards.
4. Landmark Cases & Legal Challenges
Osman & 164 others (Suing on Their Behalf and Behalf of Residents of Merti Sub-County, Chari, and Cherab Wards in Isiolo County) v Northern Rangelands Trust & 8 others (Petition E006 of 2021) [2025] KEELC 99 (KLR) (24 January 2025) (Judgment): The Environment and Land Court halted operations of the Northern Rangelands carbon project, citing lack of public participation and environmental assessment. This landmark ruling reinforced the need for transparency and community consent.
Verra Suspension of Soil Carbon Project (2025): Following the Osman ruling, Verra suspended the project’s credit issuance pending legal and methodological compliance.
Ogiek Community and Mau Forest Case (2024–2025): Evictions linked to conservation and carbon projects led to legal scrutiny over indigenous rights and state obligations under the Constitution.
CQC Carbon Fraud Case (U.S. 2024): U.S. prosecutors charged executives with manipulating carbon data across Africa, including Kenya, spotlighting the need for robust verification and governance systems.
5. Compliance Requirements under the Climate Act & Amendments
Project Registration – All carbon projects must be registered with the National Carbon Registry once operational.
Environmental & Social Impact Assessment (ESIA) – Mandatory for all projects to assess environmental and community impacts.
Free, Prior and Informed Consent (FPIC) – Required for projects on community or indigenous land.
Verification & Certification – Projects must adopt recognized standards such as Gold Standard or Verra.
Monitoring, Reporting & Verification (MRV) – Ongoing data collection, independent audits, and transparent reporting.
Alignment with NDCs – Each project must contribute to Kenya’s national climate targets.
Institutional Compliance – Adherence to the roles of NEMA and the Climate Change Council is mandatory.
Benefit Sharing – Communities must receive a fair share of project revenues and tangible benefits.
6. Practical Considerations for Project Developers & Investors
Feasibility Studies – Conduct detailed baseline assessments and cost analyses.
Legal Due Diligence – Verify land tenure, title documents, and any disputes.
Certification Choices – Select methodologies accepted by international buyers.
Stakeholder Engagement – Maintain early and transparent dialogue with local communities.
Accurate Data Systems – Invest in credible monitoring technologies like GIS and remote sensing.
Tax Planning – Evaluate the implications of the 2025 fiscal reforms on project financing.
Market Awareness – Track international demand, buyer preferences, and emerging pricing trends.
Regulatory Updates – Stay informed of upcoming Carbon Trading and Registry Regulations.
7. Challenges, Risks & Mitigation Strategies
Inadequate Data – Poor forest data undermines credit valuation. Solution: adopt modern inventory systems.
Legal Disputes – Land rights and FPIC violations have triggered litigation. Solution: ensure consent and lawful registration.
Regulatory Uncertainty – Draft laws can delay approvals. Solution: maintain ongoing liaison with authorities.
Reputational Risks – Projects face “greenwashing” accusations if verification is weak. Solution: apply high-integrity standards.
Price Volatility – Carbon prices fluctuate widely. Solution: long-term offtake contracts.
Tax Burdens – Fiscal changes can erode profits. Solution: optimize project structures and leverage incentives.
Benefit Sharing – Lack of equitable sharing leads to social conflict. Solution: implement transparent agreements and grievance mechanisms.
8. Conclusion
Kenya’s carbon credit market is maturing into one of Africa’s most structured systems. The Climate Change (Amendment) Act 2023 and related regulations have set the foundation for accountability, transparency, and participation.
However, recent cases especially the Northern Rangelands litigation demonstrate that compliance and community involvement are non-negotiable. Businesses that combine environmental integrity with legal compliance will not only profit from carbon markets but also help Kenya achieve its long-term climate and development objectives.
9. Frequently Asked Questions (FAQ)
Q1. What is the Climate Change (Amendment) Act 2023?
It is Kenya’s updated legal framework that regulates carbon markets, carbon trading, and compliance with international climate commitments.
Q2. Must all carbon projects be registered in Kenya?
Yes. Every project must register with the National Carbon Registry once fully operational and comply with ESIA, FPIC, and verification standards.
Q3. What is Article 6 of the Paris Agreement?
It allows countries like Kenya to participate in international carbon trading mechanisms for emission reduction units.
Q4. What are the key risks in developing carbon projects in Kenya?
They include unclear land rights, lack of FPIC, poor data, and regulatory uncertainty.
Q5. How do communities benefit from carbon projects?
Through fair benefit-sharing arrangements that provide income, infrastructure, and capacity-building.
Q6. What recent case influenced Kenya’s carbon market most?
The Osman & others v Northern Rangelands Trust case, which halted a major project for lack of participation and ESIA compliance.
Q7. What are project verification standards?
Global certification standards like Verra or Gold Standard that ensure emission reductions are real and measurable.
Q8. What costs are involved?
Baseline studies, ESIA, certification fees, monitoring, audits, taxes, and community benefits.
Q9. When will the Carbon Trading Regulations be enacted?
They are expected to be operational by late 2025.
Q10. How can investors ensure project credibility?
By performing legal due diligence, ensuring transparent benefit-sharing, and using approved certification methodologies.
10. Carbon Credit Project Developer’s Due Diligence & Compliance Checklist
To help project developers, investors, and legal advisors ensure smooth compliance and risk mitigation, here is a practical checklist:
A. Pre-Project Assessment
Confirm project alignment with Kenya’s NDCs and Climate Change Act.
Conduct land title verification and confirm ownership or community consent.
Undertake baseline carbon measurement and feasibility analysis.
Evaluate financial viability and expected carbon revenue.
B. Legal and Regulatory Compliance
5. Obtain NEMA environmental impact assessment approval.
6. Secure FPIC documentation for community or indigenous lands.
7. Register with the National Carbon Registry upon activation.
8. Select appropriate certification standards (e.g., Verra, Gold Standard).
C. Project Implementation
9. Develop a monitoring and reporting plan in line with MRV guidelines.
10. Set up data tracking tools (GIS, remote sensing, or verified software).
11. Ensure transparent benefit-sharing agreements are in writing and signed.
12. Conduct periodic audits and submit compliance reports to regulators.
D. Governance and Stakeholder Engagement
13. Create a grievance redress mechanism for communities.
14. Maintain transparent financial records and audit trails.
15. Engage local stakeholders regularly for updates and consultations.
16. Keep accessible documentation for government or third-party review.
E. Post-Registration and Trading
17. Confirm credit issuance through the national or international registry.
18. Secure long-term purchase agreements to mitigate price risks.
19. Track tax obligations and report carbon credit income accurately.
20. Periodically review project compliance against new regulations and policies.
This checklist ensures that project developers adhere to Kenya’s environmental, social, and governance (ESG) standards—boosting both project integrity and investor confidence.
To explore this further, see the Climate Change Act, the Climate Change (Amendment) Act, 2023 and the Carbon Credit Trading and Benefit Sharing Bill, 2023.
