Latest Developments

The Kenya Electricity Generating Company (KenGen) is facing questions regarding the transparency of its carbon credit tendering process after a bidder, who reportedly submitted the highest offer for 6.38 million carbon credits, was excluded at a preliminary stage. The exclusion was attributed to a seemingly minor addition to a tender document, an addendum, which became a critical sticking point. This development, reported on Tuesday, October 7, 2025, has ignited public debate and calls for greater clarity in the execution of carbon market policies in Kenya.

Context of KenGen's Carbon Credit Programme

KenGen, a leading power generator in Kenya, has been actively involved in carbon credit initiatives for over a decade, leveraging its extensive portfolio of clean energy projects. The company's carbon credit programme is primarily driven by its geothermal, hydro, and wind power plants, which significantly reduce greenhouse gas emissions by displacing fossil fuel-generated electricity.

Since 2010, KenGen has registered six Clean Development Mechanism (CDM) projects under the United Nations Framework Convention on Climate Change (UNFCCC). These projects include the Olkaria II Geothermal Expansion Project, Redevelopment of Tana Hydro Power Station, Optimisation of Kiambere Hydro Power Project, Olkaria IV Geothermal Project, Olkaria I Units 4&5 Geothermal Project, and Ngong Wind.

The company has consistently generated and sold carbon credits, with significant issuances over the years. For instance, in September 2021, KenGen received clearance to sell 4.6 million tonnes of carbon emissions, with a potential value of up to KSh 4.6 billion, depending on market prices. Earlier, in July 2021, the company was poised to earn approximately KSh 119 million from the sale of 550,981 carbon credits.

Law and Policy on Carbon Markets in Kenya

Kenya has recently established a regulatory framework for carbon markets to bring order to a previously unregulated sector. The Climate Change (Carbon Markets) Regulations, 2024, gazetted on June 7, 2024, under the Climate Change Act 2016, provide a comprehensive framework for the implementation of carbon projects. These regulations aim to encourage greenhouse gas emission reduction, support Kenya's Nationally Determined Contribution (NDC) under the Paris Agreement, and ensure that carbon projects contribute to national sustainable development.

Key provisions of the regulations include requirements for independent third-party validation and verification of projects, adherence to specific standards and safeguards, and alignment with national laws and policies. Notably, land-based projects on public or community land are mandated to allocate at least 40% of their earnings to community development, while non-land-based projects must contribute 25%, with an additional 25% directed towards the Climate Change Fund. The National Environment Management Authority (NEMA) is tasked with conducting environmental impact assessments and audits for all carbon projects.

Furthermore, KenGen was appointed to the Multi-Sectoral Technical Committee (MSTC) on November 22, 2024, a body tasked with developing Kenya's carbon market framework and providing technical guidance to NEMA on assessing carbon projects.

Stakeholder Perspectives

Analysts and stakeholders are urging for increased clarity on timelines, costs, and safeguards within the carbon market. The recent incident with KenGen's tender underscores the importance of robust and transparent processes to maintain investor confidence and ensure equitable benefits for all parties involved, particularly local communities. The Climate Change (Carbon Markets) Regulations, 2024, are seen as a crucial step towards addressing past concerns about the credibility of carbon credits and ensuring that communities benefit from these projects.

Risks and Implications

The exclusion of a high-priced bidder due to a technicality in the tender process raises concerns about potential revenue loss for KenGen and, by extension, for national development initiatives. Such incidents can deter potential investors and undermine confidence in the fairness and transparency of Kenya's carbon market. Without clear and consistently applied tender guidelines, there is a risk of legal challenges and reputational damage for public entities involved in carbon trading.

What to Watch

The public and stakeholders will be closely watching how KenGen addresses the concerns raised by the recent tender. Future tenders for carbon credits will be scrutinised for adherence to the new Climate Change (Carbon Markets) Regulations, 2024, particularly regarding transparency in the bidding and evaluation processes. The role of the Multi-Sectoral Technical Committee (MSTC) in shaping and enforcing these frameworks will also be critical in ensuring a robust and equitable carbon market in Kenya.