Pollution to profits: The A-Z of carbon markets

Members of Mikoko Pamoja, Swahili for 'mangroves together', plant mangrove trees in the beaches of Gazi Bay, in Kwale county, Kenya on June 12, 2022. [File, Standard]

As Kenya strives to reduce greenhouse gas emissions and achieve its climate goals, the implementation of carbon markets has gained significance.

Carbon markets, also known as emissions trading systems are market-based approaches designed to incentivise the reduction of greenhouse gas (GHG) emissions. They create a financial value for emissions reductions by setting a limit on the total emissions allowed within a specific jurisdiction or sector. Regulated entities are issued permits, known as carbon allowances or credits, which represent the right to emit a certain amount of carbon dioxide or its equivalent.

"Carbon markets create a powerful economic incentive for companies to reduce their emissions, driving the transition to a low-carbon economy," says Rosemary Owigar, a climate change expert and lecturer at Maseno University "By putting a price on carbon, we encourage businesses to innovate and invest in cleaner technologies."

Carbon dioxide

Carbon credits are the units of measurement used within carbon markets. They represent one metric ton of carbon dioxide equivalent (CO2e) emissions reduced or removed from the atmosphere through emission reduction projects.

These projects can encompass a wide range of activities, such as renewable energy generation, energy efficiency improvements, afforestation, or methane capture from landfills.

"In essence, carbon credits represent the environmental benefit achieved through emissions reductions," notes Owigar "They provide an avenue for businesses to offset their emissions by supporting projects that actively contribute to the fight against climate change."

Kenya, known for its commitment to addressing climate change and sustainable development, has recognised the potential of carbon markets as a crucial tool in achieving its climate goals while unlocking economic opportunities.

The implementation of the Kenya Emissions Trading System (KETS) highlights the country's proactive approach and signifies its readiness to participate in the global carbon market.