ALL ABOUT CARBON CREDIT: THE ELUSIVE GOLDMINE IN KENYA

Disappearing forests, pollution of Marine life and degradation of land deprive the East African economy of as much as billions of dollars, of which  Forest Loss constitute $75 million of income a year, about five times the amount the country earns from forestry and logging, the United Nations Environment Programme (UNEP)and state-run Kenya Forest Service (KFS)said in 2014. Deforestation has also disrupted natural water-movement cycles into lakes and rivers, the agencies said. It should be remembered that 80% of the Earth’s above-ground terrestrial carbon and 40% of ibelow-ground terrestrial carbon is in forests. Forests aid in Carbon Sequestration: a natural or artificial process by which carbon dioxide is removed from the atmosphere and held in solid or liquid form in long-term to either mitigate or defer global warming and avoid dangerous climate change.This is where carbon Credit find its place. 

WHAT IS CARBON CREDIT/TRADE ?

 

 Photo credit ;  KFS Portal

According to the Collins English Dictionary, carbon credit refers to a certificate showing that a government or company has paid to have a certain amount of Carbon dioxide (CO2) removed from the environment. This means that an organization or individual has an allowance of credits which gives them the right to emit one metric tonne of CO2 or any other greenhouse gas.

A carbon credit is a permit that allows a country or organisation produce a certain amount of carbon emissions and that can be traded if the full allowance is not used.

The emissions trading system allows countries or companies with higher carbon emissions to purchase the right to release more carbon dioxide into the atmosphere from those with lower emissions. The developed ( industrialized) countries engaging developing countries to help reduce carbon emission.

The concept of being paid for protecting the environment from greenhouse gases, such as carbon dioxide, methane, Chlorofluorocarbons(CFCs) and nitrous oxide, dates back to Japan’s 1997 Kyoto Protocol. This international agreement is observed by at least 170 countries of the 193 states recognized by the United Nations. Kenya being one of them.

Under the protocol, caps were placed on the greenhouse gas emissions industrialized countries were permitted to emit. Those that exceeded their limit (one metric tonne) however, could buy "credits" from other member nations whose emissions fell below their target levels. It sought to commit countries to reduce greenhouse gas emissions by at least 5%. The key aim of carbon emissions trading, involving carbon "credits" was to provide economic incentive to those taking care of the already ailing* environment.

Having been laid out in the UN's Kyoto Protocol, an international treaty that came into force in 2005 to help mitigate climate change, carbon trade strategies' implementation became very imperative.

Since the December 2009 Copenhagen Climate Change Summit, interest in forest carbon trading has been on the rise largely due to its huge benefits, financially. 

The concept was then extended to private companies (and even individuals), which could earn credits for reducing their carbon emissions by engaging in sustainable practices such as using solar power instead of coal or gas or protecting trees. Carbon emitters could buy those credits on a voluntary basis to offset their own pollution.

REDD+ , THE FOREST CARBON PARTNERSHIP FACILITY.

REDD+ stands for Reduce Emissions from Deforestation and forest Degradation efforts and to foster conservation, sustainable management of forests, and enhancement of forest carbon stocks in developing countries. It was first negotiated under the United Nations Framework Convention on Climate Change (UNFCCC) since 2005, with the objective of mitigating climate change through reducing net emissions of greenhouse gases through enhanced forest management in developing countries. Most of the key REDD+ decisions were completed by 2013, with the final pieces of the rulebook finished in 2015. Deforestation and forest degradation are the second leading cause of global warming, responsible for about 15% of global greenhouse gas emissions, which makes the loss and depletion of forests a major issue for climate change. 

THE CARBON MARKET

 

The carbon market, estimated to be worth $176 billion, has attracted various stakeholders including farmers. The United Nations Framework Convention on Climate Change (UNFCCC) has registered over 3,927 Clean Development Mechanism (CDM) projects in the world with only 84 of such projects in Africa, a clear indication that Africa needs to tap into the industry for development.

CARBON CREDIT PRICES 

Prices for carbon credits reached an all-time high in July 2008 at 36.43 euros ($50.17) per tonne under the European Union’s carbon market, the world’s biggest.
The cost of carbon sequestration varies from region to region, and also from country to country, based on different economic analyses. Phat et al. (2004) estimated the cost of carbon at around US$ 19.7 per Mg C in Southeast Asian countries. Kirschbaum (2001) assumed a cost of US$ 10 per Mg C for indefinite carbon savings in different arbitrary accounting periods. Missfeldt and Haites (2002) used a 1995 cost of US$ 15 per Mg C for a sink enhancement scenario, and Tschakert (2002) used a cost of US$ 15 per Mg C for her study in Senegal. In other studies, it ranged from US$ 1 to 100 (Healey et al., 2000; CIDA, 2001; Niles et al., 2002).There is no study on prices of carbon credits from forests in Kenya but it can be assumed from the above findings that the price would range from US$ 15 per Mg C based on the scenarios in Southeast Asian countries and Senegal, assuming the same socio-economic conditions.

RULES FOR SALE

The CDM allows the possibility of trading carbon offsets from forestry or land-use projects (at least from reforestation and afforestation activities) through the Article 12 (the CDM or CERs‘ from developing countries). The sale of carbon credits are done under the Kyoto Protocol of 2005, more information can be obtained from the links embedded below.

CARBON CREDIT/TRADE STATUS IN KENYA

Data from the Ministry of Finance shows that only seven projects are currently registered for carbon credit trading in Kenya.

WHICH COMPANIES IN KENYA

Mumias Sugar Company, East Africa Portland Cement Company and Kenya Power as well other smaller companies are among institutions participating in the carbon credit trading market. KenGen is counting on its continued geothermal, energy-capacity expansion programme and the existing potential for emission reduction to expand its carbon credit assets.

WHICH PROJECTS IN KENYA

They include a 35-megawatt electricity co-generation project by Mumias Sugar Company, the Olkaria II and III Phase 2 geothermal development projects, the yet-to-be-constructed Lake Turkana Wind Power project, and the Mount Kenya Small Scale Reforestation initiative. Others are the redevelopment of the Lake Turkana hydropower station project and the Kirimara Kithithina rehabilitation project in the Aberdares.  

The majority of the voluntary carbon projects in Kenya are in the forestry sector.  Currently, there are nine forestry sector voluntary projects that include the Kasigau Corridor REDD Project Phases I (Rukinga Sanctuary) and II (the Community Ranches); the International Small Group & Tree Planting Programme (TIST); Aberdare Range/Mt. Kenya Small Scale Reforestation Initiative; the Forest Again Kakamega Forest; Mikoko Pamoja Mangrove Restoration; the Enoosupukia Forest Trust Project; Treeflights Kenya Planting Project; the Chyulu Hills REDD+ Carbon Credit Program; and the Mbirikani Carbon, Community and Biodiversity Project. These projects are at various stages of development. 

Benefit Reaped Already

So far, KenGen, Mumias Sugar, East Africa Portland Cement and Kenya Power have reaped from the credits by negotiating one-on-one with international buyers. Mumias Sugar was the first Kenyan firm to sell carbon credits, making Sh22 million in 2010. This was followed by Kenya Power which sold 700,000 credits to Standard Bank. Also Sustainable Agriculture Land Management project in Kenya, working with western Kenyan farmers.

The biggest beneficiary has been KenGen, which in two years to 2015 earned about Sh270 million by selling its credits through the World Bank’s Emission Reduction Purchase Agreements. According to the firm’s Chairman Joshua Choge, the revenue from the credits is shared with local communities where KenGen operates. They include a 35-megawatt electricity co-generation project by Mumias Sugar Company, the Olkaria II and III Phase 2 geothermal development projects, the yet-to-be-constructed Lake Turkana Wind Power project, and the Mount Kenya Small Scale Reforestation initiative. Others are the redevelopment of the Lake Turkana hydropower station project and the Kirimara Kithithina rehabilitation project in the Aberdares

In 2012, Carbon Manna Unlimited was pushing forward an ingenious pilot project that rewards small scale farmers in Mbeere and Bungoma districts for planting trees and using more energy efficient stoves, known locally as jikos, for cooking. To start of with, it was giving each family involved Sh 2,200 per month. A personal carbon emission trading offered a financial carrot to individuals or families to get them to clean up their act. The farmers involved in the project would be allowed to emit only a specified amount of carbon dioxide measured according to pre-agreed scale. If they cut their emissions below this limit, the balance was calculated in monetary terms and they are paid for it. The carbon credits payment was then in its trial stage. Carbon Manna would subsidise the purchase of the jikos in Kenya. This project falls under CDM executed in developing countries that cannot afford the technology required to lower carbon emissions.

The company, which is awarded credits for emitting less carbon in the market, recently received over 18,000 carbon credits from the redevelopment of Tana Hydro Power Station. Carbon is now being tracked and traded like any other commodity and any company can buy the credits from someone else to reduce their carbon emission footprint.

Benefit Sharing in Carbon Credit Schemes  

Benefit sharing refers to the fair and equitable distribution of the benefits arising out of the utilization of a resource. Because indigenous cultures and livelihood systems are totally dependent on the environments in which they are found, carbon credit schemes should strive not to negatively impact the rights of indigenous communities. Unfortunately, not only have communities been evicted to pave the way for renewable energy carbon credit schemes like geothermal power generation, but they also rarely benefit beyond mere compensation, at government determined rates, for the land compulsorily acquired for such projects.  For those who are given alternative land for settlement, Resettlement Action Plans rarely consider the sustainability of the community’s cultures and livelihood system.  Carbon project developers consider benefit sharing only within the context of corporate social responsibility and not as a community entitlement. 

How to share benefit accrued from Carbon Credit:

Forest carbon projects in Kenya have yet to raise serious concerns, as they approach benefit sharing differently.  In the national REDD+ context, benefit sharing has been brought to the forefront, focusing on both carbon and non-carbon benefits.  The design of the REDD+ strategies has so far included strong community participation in REDD+ benefit sharing discussion. Benefit sharing accruing from forest carbon projects will be both financial and environmental.  According to the UNREDD program, financial benefits from forest carbon projects will be based on project performance with projects that secure more carbon while respecting rights that are more attractive to buyers. 

Laws Regulating Carbon Trade in Kenya

  

For benefit sharing, Section 26 of the Natural Resource (Benefit Sharing) Bill, 2014 proposes the establishment of a Benefit Sharing Authority,  whose functions will include “coordinating the preparation of benefit  sharing agreements between local communities and affected organizations. The Authority shall also “review, and where appropriate, determine the royalties payable by an affected organization engaged in natural resource exploitation.” The bill states that: 

(1)  The revenue collected shall be shared as follows — 

(a)   twenty per cent of the revenue collected shall be set aside and shall, subject to subsection (2), be paid into a sovereign wealth fund established by the national government; and 

(b)   eighty per cent of the revenue collected shall, subject to subsection (3), be shared between the national government and the county governments in the ratio of sixty per cent to the national government and forty per cent to the county governments.

 

(2)  The monies paid into the sovereign wealth fund under subsection (l)(c) shall be paid into the following funds constituting the sovereign wealth fund as follows - 

(a)   sixty per cent of the monies shall be paid futures fund; and 

(b)  forty per cent of the monies shall be paid natural resources fund. 

(3)  At least forty per cent revenue assigned to the county governments under subsection (l)(b) shall be assigned to local community projects and sixty per cent of that revenue shall be utilized in the entire county. 

(4)  Where natural resources bestride two or more counties, the Authority shall determine the ratio of sharing the retained revenue amongst the affected counties. 

(5)  In determining the revenue sharing ratio of retained revenue amongst counties sharing a resource as prescribed under subsection (4), the Authority shall take into account - 

(a)   the contribution of each affected county in relation to the resource, 

(b)  the inconvenience caused to the county in the exploitation of the natural resource; and 

(c)   any existing benefit sharing agreement with an affected organization. 

EXPORT MARKET OPPORTUNITY FOR KENYAN COMPANIES

Given the Kenyan forest cover of 6.9, Large water bodies and vast expanses of land, there a big opening of lucrative investments in green economy. Take for example Kakamega Forest with the following statistics. The total amount of carbon that can be sequestered by the undisturbed indigenous forest is 334Mg C/ha while of the surrounding farms is 203Mg C/ha. This gives a total of 537Mg C/Ha. It is notable that indeed the forest has a higher amount of carbon as compared to the farms.   

There are several companies in Kenya, mainly in the export market such as those in the flower sector that could benefit from such a venture when their products are seen on the international market as ‘green.’ 

Challenge: Lately, the price of carbon credits has been on a downward trend internationally. This has hurt earnings of companies such as power producer KenGen, which have invested heavily in environment-friendly projects that have lower carbon emissions in the race to end global warming. KenGen targeted to earn Sh1.2 billion annually from trading in carbon credits.

Cause:  When Europe’s industrial production stalled after the 2009 financial crisis, supply quickly dwarfed demand, driving the credits to their lowest level. Now, KenGen is looking for new markets outside Europe. 

OTHER SECTORS WHERE CARBON CREDIT HAS BEEN APPLIED IN KENYA

Agriculture: Farms in Western Kenya

Sustainable Agriculture Land Management project in Kenya , which, since 2009, has been working with thousands of smallholder farmers to increase their use of sustainable agriculture land management practices. The project, is supported by the World Bank Group’s BioCarbon Fund in partnership with the Swedish NGO Vi Agroforestry.It aims to support a total of 60,000 farmers managing 45,000 hectares of farmland in western Kenya.

It has trained farmers on how to sustainably rehabilitate degraded lands to increase crop yields and farm productivity. On average, farmers saw maize yields more than double during the project, leading directly to higher incomes.

Wildlife: Kasigau Community 

Kenya is one of 53 nations partnering with the UN-REDD program (short for Reducing Emissions from Deforestation and Forest Degradation), and Wildlife Works's Kasigau project is the country's pilot carbon offset initiative adapted for wildlife management in partnership with the community. The Wildlife Work's rangers monitor more than 500,000 acres of wooded land in the Kasigau Corridor—a stretch between Tsavo East and Tsavo West national parks containing more than 110,000 inhabitants—to prevent illegal tree-cutting and keep elephant poachers at bay.

CONCLUSION:

Clean mechanism development (green projects) costs are high and given the lack of access to capital by individuals as well as general lack of information, carbon credit trading has mainly been dominated by companies rather than individual investors. Despite this, It is important to note that carbon credit schemes will play an important role in both climate change adaptation and mitigation not only in Kenya but also in other parts of the world. There is still wide untapped opportunities that if seized by "green" investors,  as company or individual, would go along way in mitigating climate change, deforestation,pollution of marine life, degradation of soil ,hence collectively curbing the harsh effects of global warming which is a big menace to both fauna and flora of this beautiful earth. Together we can bring the most desired change. Do that little thing in you own way.  

REFERENTIAL LINKS

Forest Forest service/carbon credit credit http://www.kenyaforestservice.org/index.php/2016-04-25-20-08-29/news/302-forest-carbon-credits.

Worldbank press release http://www.worldbank.org/en/news/press-release/2014/01/21/kenyans-earn-first-ever-carbon-credits-from-sustainable-farming

Worldbank News 
http://www.worldbank.org/en/news/feature/2017/07/18/kenya-project-boosts-maize-production-and-climate-change-benefits

Standard media /kengen to trade on carbon credit https://www.standardmedia.co.ke/article/2000172369/kengen-to-trade-its-carbon-credits-on-local-bourse

Business daily http://www.businessdailyafrica.com/Nairobi-bourse-plans-platform-for-trading-in-carbon-credits/539552-3059574-n70ji6z/index.html

Standard Media https://www.standardmedia.co.ke/business/article/2000208079/government-to-support-nse-introduce-carbon-credits-trading

Kenya Draft Policy On Carbon Trade http://www.nation.co.ke/lifestyle/smartcompany/Kenya-drafts-policy-on-carbon-trading/1226-1493718-dpjcj4z/index.html

Kenya carbon credit tree protection program http://www.v-c-s.org/kenya-carbon-credit-tree-protection-program-grow-fivefold/

UN-REDD PROGRAMME, CARBON RIGHTS AND BENEFIT-SHARING FOR REDD+ IN KENYA 8 (2013) [hereinafter BENEFIT-SHARING FOR REDD+ IN KENYA], available at http://www.kenyaforestservice.org/documents/Carbon%20Rights%20and%20Benefit%20S harring%20For%20REDD%20in%20Kenya.pdf. 

Natural Resources (Benefit Sharing) Bill, 2014, KENYA GAZETTE SUPPLEMENT No. 137, available at http://kenyalaw.org/kl/fileadmin/pdfdownloads/bills/ 2014/NaturalResources_Benefit_Sharing_Bill__2014.pdf.