September 1st, 2025

Africa stands at a crossroads where climate ambition meets economic opportunity. As carbon markets rapidly evolve, Kenya is poised to set a new benchmark for integrity, inclusivity, and innovation, showing how climate solutions can deliver real benefits for people, communities, and the planet.

During the London Climate Action Week (LCAW) in June 2025, global stakeholders gathered carrying a sense of urgency and optimism, optimism that the world remains committed to a sustainable future. Ahead of COP30 in Belém, Brazil, the LCAW underscored the collective determination required to tackle climate change. A significant milestone of the week was the launch of The Coalition to Grow Carbon Markets, spearheaded by the climate envoys of the United Kingdom, Kenya, and Singapore. This promising partnership aims to reinvigorate high integrity carbon markets, which have recently suffered a crisis of confidence, reflected by a decline of carbon credit purchases in the Voluntary Carbon Markets.

Carbon markets are a mechanism through which a price is placed on a tonne of carbon dioxide equivalent and provides the financial incentive to undertake activities to avoid, reduce or remove emissions. It is critical to emphasize that carbon credits alone cannot solve climate change and climate injustice. Instead, they represent one essential mechanism within a broader suite of strategies necessary to bridge the global development finance gap. The reduction of Overseas Development Assistance (ODA), exacerbated by geopolitical tensions including the ongoing Ukraine-Russia war, necessitates exploring every available financing channel, particularly for Africa. Thus, carbon credits must be leveraged effectively, transparently, and sustainably.

The ratification of the Paris Agreement and the finalisation of Articles 6.2 and 6.4 rules at COP 29 in Baku, has expanded opportunities for trading carbon credits, beyond the voluntary carbon markets, through Internationally Transferred Mitigation Outcomes (ITMOs). In 2023, prior to the inaugural   Africa Climate Summit in Nairobi, Kenya set a commendable example by enacting the Climate Change Amendment Act, establishing a robust framework for carbon trading. Subsequently, the Carbon Markets Regulations reinforced Kenya’s position as a leading carbon trading hub in Africa by providing clear provisions for mandatory environment and social assessments as well as benefit sharing. Kenya is currently developing the county’s National Carbon Registry infrastructure which will enhance transparency, integrity, and efficiency by providing visibility on all carbon projects implemented in the country. The signing of two Bilateral agreements with Switzerland and Sweden under Article 6.2 promise to unlock further investment to the country, reflected by a recent Carbon Markets Association of Kenya study that speaks of the potential debt free financing of more than 1 billion USD through these mechanisms.

The global carbon market remains promising. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) has opened the door to demand of up to 161 million units between 2024-2026. Notably, the European Union (EU) is proposing to reintroduce the use of international carbon credits into its climate strategy. Under amendments to the EU Climate Law, the bloc is setting a legally binding target to reduce net greenhouse gas emissions by 90% by 2040, compared to 1990 levels. Beginning in 2036, the EU may permit limited purchases of high-quality credits from international markets, capped at around 3% of 1990 net emissions. According to analysis by the Oeko-Institut, this could translate into cumulative demand of roughly 1 billion carbon credits between 2036 and 2049. At a conservative estimate of USD 20 per tonne, this represents a potential market of USD 20 billion. These plans, however, remain subject to negotiation and approval by the European Parliament and Council before they can enter into force.

This move underscores a significant market opportunity that cannot be overlooked, however carbon developers in Kenya urgently need firm investment today. It is therefore critical to establish avenues to unlock demand today and structure and scale advance purchase commitments and results-based finance. The Coalition to Grow Carbon Markets is a step in this direction. It will release Shared Principles at COP30 offering greater clarity to businesses from governments on the use of carbon credits as part of corporate decarbonisation plans, therefore unlocking critical financing today.

Restoring confidence in carbon markets hinges on integrity, transparency, and verifiable impacts. Progress has been made in Paris Agreement Crediting Mechanisms, and frameworks such as ICVCM’s Core Carbon Principles that are increasingly shaping the integrity in the market. It is also critical to ensure that communities and the youth are not left behind as this results in tension and blockage of carbon projects. Recent engagement with the youth and community groups highlighted the need for stronger enforcement of consent procedures, clear Community Development Agreements (CDAs), and inclusion of youth and women, particularly in land-based projects.

Prioritising investments in digital Measurement Reporting and Verifications (dMRV) systems unlocks increased opportunities for innovation by leveraging technology to establish trust, enhance investor confidence in the market.

To unlock the full potential of carbon markets for Kenya and Africa, integrity must remain the foundation. The upcoming Africa Climate Summit 2 in Ethiopia offers a pivotal moment to shape the narrative, not as extractive offset schemes, but as development tools capable of delivering jobs, investment, emissions reductions, and resilience when governed with transparency and equity. As Amb. Ali, Kenya’s Special Envoy for Climate Change and Co-Chair of the Coalition to Grow Carbon Markets, notes: “The potential is real and global demand signals are emerging, with investors paying close attention. But to truly unlock this opportunity, we must get both integrity and demand right. Credibility is essential: policy and regulatory alignment with the Paris Agreement’s Article 6, investment in robust digital MRV systems, fair benefit-sharing with communities, and transparent governance are non-negotiable pillars. At the same time, we must accelerate efforts to stimulate real and sustained demand, both regionally and globally, to ensure the market delivers impact at scale. Next month, at the Africa Climate Summit, we will host two events to elevate the opportunities available in carbon markets, as well as challenge African governments to invest in readiness preparation and engage more in demand-side stimulation.”

His call to action underscores a broader truth: with the right balance, carbon markets can become a powerful tool to close Africa’s climate finance gap. Kenya, as a first mover, has the opportunity not just to lead in setting high-integrity standards, but to shape a thriving market that works for both people and planet.

This commentary was first published in the Business Daily on Wednesday 27th August 2025

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