Kenya has unveiled draft regulations that would place its emerging carbon credit market under the supervision of the Capital Markets Authority (CMA), as part of proposals to transform the country into Africa’s first fully regulated climate trading hub.
- •Under the proposed Climate Change (Carbon Trading) Regulations, 2025, the government will anchor both voluntary and compliance carbon markets within a tightly controlled framework.
- •Carbon credits will only be traded through a licensed, regulated marketplace, with custody and settlement managed under the Central Depositories Act; thus bringing the entire ecosystem under the same legal scaffold as equities and bonds.
- •The move signals Kenya’s intent to formalize carbon trading, long characterized by fragmented bilateral deals and opaque project development.
“Only carbon credits that are registered in the National Carbon Registry established under the Act, meet the verification and certification requirements of relevant carbon standards, and are issued by projects approved by the Designated National Authority in compliance with the Act and its regulations, shall be eligible for trading on the carbon exchange,” the proposed regulations state.
Carbon credits represent one metric ton of carbon dioxide either prevented from entering the atmosphere or removed from it. They are generated through projects that avoid emissions, such as renewable energy or sustainable waste practices, or the offsetting of existing carbon via natural sinks like forests or engineered technologies.
These credits can be sold or retained and are traded in two markets: compliance, where governments enforce emission caps, and voluntary, where companies offset their carbon footprints by purchasing credits. As Africa emerges as a key carbon sink, its role in this trillion-dollar ecosystem is drawing heightened scrutiny and investment.
According to the draft regulations, the Environment Cabinet Secretary will have wide powers, including deciding how many carbon credits Kenya can trade, based on the country’s climate goals under its Nationally Determined Contributions (NDCs). Only extra emissions cuts, beyond what Kenya has already promised, can be sold as carbon credits. These must come from big, approved projects, especially in tough industries like cement, steel, or aviation where reducing pollution is harder.
All international trading will be governed by bilateral or multilateral agreements that must pass constitutional and environmental compliance tests. These agreements must avoid double counting, provide for transparency and dispute resolution.
The authorization of international mitigation transfers falls to the Cabinet Secretary, with a 90-day deadline for decisions. Disputes will first go to mediation under the Nairobi Centre for International Arbitration, and if unresolved, escalate to the National Environment Tribunal.
The move follows global pressure on developing countries to bring transparency and oversight to the fast-growing but controversial carbon offset market, which has drawn scrutiny over inflated claims and weak community protections.
Two of the country’s largest carbon offset projects, both based on community lands, have been embroiled in legal and political disputes that could test the limits of the proposed regulatory system. In northern Kenya, Verra — a global carbon credit certifier — suspended the Northern Kenya Rangelands Carbon Project for a second time this year after a court ruled that two conservancies under the program had been set up unconstitutionally. Both Netflix and Meta, two giant American companies, had bought credits from the scheme.
According to the Wall Street Journal, the NRT had sold over 6 million carbon credits, worth between US$42 million and $90 million depending on market prices. Community members alleged breaches of land rights and lack of proper consent.
In Kajiado County, a separate soil carbon initiative covering 1.5 million hectares has met resistance from Maasai herders, who disrupted a planned 40-year lease signing over concerns that the project’s developers misrepresented the terms of the deal. The initiative is backed by foreign investors and expected to generate tens of millions of credits, but remains uncertified amid rising opposition.
In November last year, President William Ruto pledged that communities that hosted carbon credit initiatives will benefit from at least 40% of proceeds, but the draft regulations are vague on how those benefits would be delivered or enforced.
As Kenya aims to position carbon credits as a major export commodity, estimated to fund up to 80% of the country’s climate action plan, the unresolved disputes raise questions about land governance, benefit-sharing, and the risks of financializing emissions reductions without strong local safeguards.The draft regulations are yet to be tabled in parliament.
