Coffee farmers struggle to profit from berries as Sh20b in carbon credits ‘rots’

Coffee farmers are missing out on Sh20 billion that could be tapped from their crop.

Coffee plantations minimise the concentration of greenhouse gases in the atmosphere, which gives farmers an opportunity to earn $1 (Sh102) per coffee tree.

This means that for every acre, which holds about 500 trees, a farmer can take home Sh51,000 a year simply for growing the crop. And there are additional payouts for using environmentally friendly fertiliser.

“Kenya has about 150,000 hectares of coffee, and each can accommodate 1,250 coffee trees. So every year, we are missing out on close to Sh20 billion,” said Job Kareithi, the CEO and lead consultant at Capacity Building Consultants.

Mr Kareithi headed a task force appointed to find ways to improve the viability of carbon credit farming in the coffee sector, and it has just handed in its report.

Heavy industrialisation

The concept of being paid for protecting the environment from greenhouse gases, such as carbon dioxide, methane and nitrous oxide, dates back to Japan’s 1997 Kyoto Protocol.

The Protocol, an international treaty, was an extension of a United Nations framework on climate change that sought to commit countries to reduce greenhouse gas emissions by at least 5 per cent. Today, about 180 countries have ratified the treaty.

Over time, however, countries have responded differently, with Australia, for instance, introducing carbon credit taxes in July 2012. As of the 2014-15 financial year, all Australian companies emitting more than 25,000 tonnes of carbon dioxide, or that supply or use natural gas pay the government $A25.40 (Sh1,842) per tonne of gas.

Due to heavy industrialisation, developed countries contribute a higher percentage of greenhouse gases to the atmosphere than nations with low industrial activity.

This led to the idea of carbon credit, which was intended to fairly distribute the costs of emissions. Under the system, an activity that removes one tonne of carbon dioxide earns one carbon credit.

An open market system allocates monetary value to these credits. Countries that produce greenhouse gases beyond a certain limit buy carbon credits from those that meet or fall below the limit.

Kenyan farmers growing crops like coffee and tea help reduce greenhouse gases, which is where the task force on carbon credit farming comes in.

The team was appointed last year by then Agriculture Cabinet Secretary Felix Koskei.

“The [carbon credit farming] programme is very popular in developed economies where governments compensate farmers for their efforts to bring down the effects of global warming,” Kareithi said.

Nakuru County plans to pioneer implementation of the team’s report, which proposes farmers earn at least $1 per coffee tree. In the pilot project, the task force recommends involvement of 60,000 farmers on 45,000 hectares of coffee plantations.

However, the national government is supposed to co-ordinate a nationwide payment system for the programme under the Carbon Farming Initiative (CFI).

“CFI is normally structured as a government programme that enables farmers earn carbon credits. The government buys these credits in the form of compensation,” he said.

The proposal is to have farmers compensated at the end of a contracted phase, which can be between one and five years. An audit report will give the details of carbon captured.

And because petrochemical firms, steel makers, power generators, automobile makers, electro-mechanical firms and airlines in developed countries are struggling to operate within emissions caps, Kareithi said there is a huge market for Kenya’s surplus carbon credits.

Target economies would include Germany, Japan and the US.

“During winter, Germans, for instance, burn a lot of coal and this spoils the air with carbon dioxide. To address this, they have to buy carbon credits, which we can comfortably sell,” he said.


However, efforts to develop this money-minting sector have been slow at best.

In the 2010-11 financial year, President Uhuru Kenyatta, who was at the time the Finance minister, allocated Sh2 billion for high-impact environmental conservation programmes.

“In order to mainstream policies and strategies towards the financing of our conservation effort, my ministry, working with three relevant ministries, will develop a carbon credit investment framework,” he promised in his June 2010 Budget speech.

The framework was supposed to outline the modalities of carbon credit registration, revenue sharing and accountability, as well as identify areas to be funded by the resources generated.

Mr Kenyatta described Kenya as “well placed to emerge as a regional carbon emission trading hub” and announced plans to set up an Emission Trading Scheme (ETS) in Nairobi to pioneer the carbon market in Africa.

Five years later, not much progress has been made.

But there have been some beneficiaries of carbon credit trade.

KenGen, Mumias Sugar, East Africa Portland Cement and Kenya Power have reaped from developed economies by negotiating one-on-one with international buyers.

Mumias Sugar became the first Kenyan firm to sell carbon credits when in 2010 it announced it was going to earn Sh22 million from the sale of 43,000 tonnes of carbon dioxide. It sold its carbon credits to Japanese Carbon Finance.

Electricity producer KenGen sells its credits through the World Bank’s Emission Reduction Purchase Agreements (ERPAs). Between 2013 and 2015, the firm earned Sh270 million.

In 2010, Kenya Power entered an agreement with Standard Bank, which purchased 700,000 carbon credits to fund a clean energy project to replace kerosene lamps with LED lamps in Tanzania.

To spread this revenue stream across more companies, Rogito Nyangeri, the Nairobi Securities Exchange’s head of strategy and research, said last month that the bourse had completed 65 per cent of the requirements needed to introduce a carbon market.

The formal trading board is expected to make it easier for firms to sell their carbon credits.

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