Kenya’s State Department for Blue Economy and Fisheries warned that the country’s carbon credit schemes may not be reaching their full potential because of weak verification and exploitative contracts between communities and buyer firms.

The department said Kenya has become a regional leader by hosting Africa’s first carbon markets framework under the Climate Change (Amendment) Act 2023 and by showcasing projects such as Mikoko Pamoj and Vanga Blue Forest at the 2023 Africa Climate Summit in Nairobi.

It added that the sector’s rapid growth is outpacing regulation and oversight, with reports of foreign carbon-trading firms signing vast land deals with local communities, sometimes covering areas comparable to whole counties, and offering limited compensation that many communities do not fully understand.

The department noted unresolved questions about who owns carbon rights – the national government, county governments or the communities – creating friction as multiple actors compete for the same projects.

It also highlighted that verification of carbon credits is insufficient, with weak, independently audited measurement, reporting and verification (MRV) systems that could lead to credits being issued for carbon that is not reliably measured or permanently stored, jeopardising Kenya’s credibility in international markets.

The State Department for Environment and Climate Change announced a ceiling on carbon-credit export volumes, capping transfers at 10 million tonnes of carbon dioxide equivalent between now and 2030, and said a local carbon exchange is planned for March 2027.

A World Bank report identified that the voluntary carbon market in Kenya is dominated by large global corporates such as Delta Airlines, Netflix, Nespresso, Air France-KLM, Apple, BHP, Kering, Nedbank, Shell, NatWest and Zenlen Inc.

The report gave examples of purchases, noting that Delta Airlines bought 1,164 kilotons of carbon equivalent from Kenya and Uganda in 2021, Netflix took up 600 kilotons, BHP 200 kilotons, Nespresso 192 kilotons jointly from Kenya, Zimbabwe and the DRC, and NatWest 145 kilotons jointly from Kenya and Uganda.

Household and community-based credits, especially from cooking stoves, also generate significant volumes, though the enterprises behind them are fragmented and largely dependent on carbon-credit revenue.

A small share of Kenya’s credits are sold in compliance markets through the Kyoto Protocol’s Clean Development Mechanism, with the Kenya Electricity Generating Company (KenGen) planning in April 2023 to sell 287,416 certified emission reduction credits from its Olkaria 1 geothermal project.

Kenya’s green fertiliser project is also expected to sell carbon credits in the compliance market, adding to the country’s participation in regulated schemes.

The State Department did not name the specific contracts it considered flawed.