Why Kenya has missed Sh130b carbon credit cash

Zebras in Nyekweri-Kimintet community forest in Trans Mara, Narok county, on April 17, 2025. [Peter Muiruri, Standard]

Kenya’s poor data on forest cover is among the challenges behind the country’s unrealised Sh130 billion ($1 billion) revenue from carbon credit trading.

A report by the African Development Bank (AfDB) states that forestry as a sector contributes 3.6 per cent to the country’s gross domestic product (GDP).

However, the Country Focus Report 2025, notes poor inventory in Kenya’s forest accounting. “No valuation of carbon sequestration, outdated forest data and lack of inclusion in national accounts,” the report lists.

Carbon sequestration is the process of removing carbon dioxide from the atmosphere and storing it in either solid or liquid form. This is the backbone of carbon credit trading.

Through the planting of trees and having a good record of forest cover, an economy can tell how much carbon dioxide they have eliminated from the atmosphere.

These credits are then sold to industries whose activities release carbon dioxide into the atmosphere. Oil conglomerates are some of the largest buyers of carbon credits.

Countries like Kenya, are at a better place to rake an income from the sale of carbon credit, considering their low level of industrialisation which means they emit less carbon dioxide into the atmosphere compared to their forest cover.

The Abatable’s VCM Investment Attractiveness Index lists Kenya second after Columbia on carbon credit market attractiveness.

Forestry, together with agriculture and fishery, contributes 22.5 per cent to Kenya’s Sh16.2 trillion nominal GDP according to the 2025 Economic Survey Report by the Kenya National Bureau of Statistics (KNBS)

The report shows Kenya’s forest cover stands at 8.8 per cent of the country’s 59.1 billion hectares size. President William Ruto plans to plant 15 billion trees by 2032 as he seeks to improve the forest cover to 30 per cent.

“Update forest inventories, quantify carbon sequestration and integrate into GDP calculations,” the AfDB report recommends.  

The report released in July 2025 states Kenya’s carbon trading has a potential of Sh130 billion (1 billion). “Only Sh26 billion ($200 million) generated to date,” the report says, citing a weak regulatory framework and low corporate participation.

There are also challenges with the country’s institutional capacity even as AfDB acknowledged progress by KNBS and Kenya Forest Research Institute (KEFRI) on Natural Capital Accounting (NCA).

There are also plans for water resources account and finalisation of the Natural Plan for Advancement of Natural Accounting 2025-2028.

“Few trained experts; no dedicated NCA units in key ministries; weak integration into fiscal planning,” the report continues to list the challenges. “Train professionals, establish NCA units and embed carbon valuation in budgetary processes.”

The development bank also recommends that Kenya improve data collection and invest in a geographical information system (GIS) and remote sensing for natural capital tracking.

“Strengthen regulations, incentivise carbon credit generation, and engage the private sector,” the report states.

AfDB lists illicit financial flows estimated at Sh195.0 billion (USD 1.5 billion) annually among the challenges Kenya faces in leveraging its natural capital. These amounts are lost through activities such as illegal mining, logging, trade mis-invoicing and tax evasion.

“Weak policies, poor data systems, limited skilled personnel and institutional governance hinder Natural Capital Accounting (NCA) and the sustainable management of both renewable and extractive resources,” the report says.

It adds that climate threats, outdated resource data, and underdeveloped carbon markets further limit sustainable gains.

The report says that despite Kenya’s Natural Capital Accounting progress, carbon-adjusted GDP remains unavailable. “Key challenges include limited expertise, poor institutional capacity and low private sector involvement,” the AfDB report says.