A recent report by McKinsey estimates that the annual global demand for carbon credits could grow exponentially and the market size by 2030 could be between $5 billion and $30 billion.
By EB Content Lab
Kenya on Monday opened the Nairobi International Financial Centre (NIFC), with a goal of attracting investment of more than $2 billion by 2030, and of setting up East Africa’s first carbon exchange.
Singapore’s AirCarbon Exchange (ACX), which will develop the carbon exchange, said it will trade certified carbon offsets to help Kenya to finance environmental projects, including reforestation and land restoration, as it seeks to meet its climate commitments.
“The Carbon Exchange will be an important element in Kenya’s sustainable finance ecosystem and will be instrumental in channelling global capital flows into Kenya’s high-impact environmental projects such as Reforestation, Land Restoration and new technologies such as DACS and BECCS,” Kevin Iwanaga, president and chief operating officer – Middle East and Africa for ACX, said in a statement.
He did not give a date for when carbon trading would start.
ACX, the second investor in the NIFC after Prudential Plc PRU.L, will offer firms access to all global carbon registries, it said. Prudential PLC, the Centre’s anchor client, will also be able to gain additional revenue by selling its carbon credits on the new carbon exchange.
NIFC Chairman Vincent Rague said the Centre’s decision to prioritise green finance and pursue innovative new initiatives like carbon trading is a strong signal of its determination to face the future with confidence.
“Kenya has vast comparative advantages in the carbon offset space – including abundant offset-eligible project potential. Through this exchange, we will be leveraging existing verification models and brokering networks to standardize, regulate, and promote Kenya’s existing production of carbon offset activities internationally,” said President Uhuru Kenyatta.
Oscar Njuguna, the acting CEO of the NIFC, said the carbon exchange would allow clean energy producers like KenGen KEGN.NR to trade emissions locally.
He said it would seek to attract small companies by allowing trade of kilograms rather than tonnes of carbon dioxide, which is the international norm.
But Njuguna said there was much to do to convince prospective investors.
He said the government needed to sign more double taxation agreements to prevent companies from paying the same taxes in two countries.
In addition, he said the NIFC has proposed the creation of a special court dedicated to financial and technological disputes to try to get round the issue of slow dispute resolution.
In most cases, the Kenyan judiciary takes a minimum of five years to reach a resolution, which Njuguna said deterred international investors.
A recent report by McKinsey estimates that the annual global demand for carbon credits could grow exponentially and the market size by 2030 could be between $5 billion and $30 billion.
