As climate finance becomes increasingly important to international economic systems, Kenya plans to introduce carbon credit trading at the Nairobi Securities Exchange (NSE).
However, behind this ambitious project, the core infrastructure required for market operation is still substantially undeveloped. Kenya needs to satisfy a number of structural prerequisites that historical data directly relates to market viability before carbon credits can trade on the NSE.
The foundation of efficient market operations is a functional carbon registry. This technical system must properly track credits, avoid duplicate counting, and unambiguously certify emissions reductions in accordance with international standards.
Costa Rica invested years in creating internationally recognised monitoring procedures, verification techniques, and registration capabilities.
Only this necessity is acknowledged by Kenya's current legislative framework, which ignores the significant technical effort required to create a trustworthy system that merchants will be able to rely on.
Carbon accounting methods suited to Kenya's ecological diversity present a significant challenge, as the country's varied landscapes—from forests to savannas to coastal mangroves—each store carbon in unique ways that standard international frameworks fail to capture properly.
The carbon dynamics in tropical ecosystems, where seasonal patterns and biomass distribution diverge significantly from those in northern latitudes, are difficult to measure using global approaches that were largely created for temperate regions.
The experience of New Zealand is instructive because, in response to their unique forestry systems, they created specialised accounting methods that struck a balance between scientific precision and usefulness, enabling market players to function with assurance while preserving the environment.
For Kenya's market to function effectively, it must develop governance structures with clearly defined institutional responsibilities, transparent decision processes visible to all participants, and protective mechanisms that prevent market manipulation while allowing legitimate trading to flourish.
These governance elements must be established before trading begins on the exchange, since markets that launch with structural weaknesses become increasingly difficult to reform once participants with vested interests in maintaining those structures emerge and resist necessary changes.
The hardest part is creating equitable benefit-sharing arrangements. Communities with complex land connections and tenure structures are often the sites of carbon projects.
Working with Aboriginal tribes in Australia demonstrates how local communities can retain power while getting fair pay. Before carbon becomes a marketed commodity that could exacerbate already-existing disparities, Kenya must create frameworks that acknowledge community rights, transparent revenue sharing, and conveniently accessible dispute resolution.
Cross-sector local competency is an additional prerequisite. South Africa was able to strengthen its position in international carbon negotiations and reduce its dependency on outside experts by building up its own capabilities.
Kenya should train government officials, community groups, and businesses in carbon accounting, project creation, and market operations before trade favours foreign knowledge over local understanding.
Before full deployment, market mechanisms must be tested. Inadequate testing hindered Colombia's early market efforts, leading to depreciated equipment and operating issues.
Mexico was able to avoid similar issues by progressive implementation, starting with voluntary pilots before mandatory programs and allowing adaptations based on local circumstances.
Kenya would be able to identify some problems before exchange-based trade began with the use of controlled testing.
As carbon markets expand globally, cross-border compatibility requires consideration. Kenya must move from diplomatic negotiations to technical alignment with Sweden, Singapore, and Switzerland.
Switzerland's agreements with Ghana and Peru demonstrate how partnerships can incorporate environmental protections, technical assistance, and skill development in addition to economic provisions—elements Kenya could include in its international accords.
Instead of being optional features, these fundamental components—functional registry systems, customized accounting procedures, equitable benefit distribution, balanced governance, local knowledge, market testing, and global alignment—are necessary.
What occurs when these underpinnings are neglected is evidenced by hurriedly established carbon markets: low prices, low participation, and dubious environmental results.
Kenya is well-positioned for success in the carbon market thanks to its remarkable natural resources and climate policies. This potential is reflected in the interest shown by foreign investors and partners.
But rather than racing to market, leveraging these benefits necessitates careful preparation. Kenyan policymakers must decide whether to invest on foundations that would enable long-term success or attempt rapid implementation at the risk of market failure.
The stakes go beyond national boundaries as other African countries observe Kenya's approach. Kenya may create a model that strikes a balance between economic opportunity and ecological integrity by establishing these fundamental market foundations prior to introducing exchange-based trading. This will create long-lasting value that cannot be achieved through hurried deployment.
The writer is a development and public policy specialist.
