NSE Eyes Carbon Credits Marketplace

By Kepha Muiruri For Citizen Digital

The Nairobi Securities Exchange (NSE) is seeking to establish a carbon credits exchange as part of ongoing initiatives to diversify its product portfolio for investors.

The bourse is looking to partner with the already established carbon credit exchanges to develop the framework for exchanging carbon credits in the country.

On Monday, the NSE signed a memorandum of understanding with the AirCarbon Exchange Group as part of spearheading processes to create the marketplace during the unveiling of the Nairobi International Finance Centre (NIFC).

“Kenya has a great opportunity for developing carbon credits if you look at forestry, geothermal, water and agriculture. The opportunities are immense but a lot of players in that area do not know how to monetize the opportunities,” said NSE CEO Geoffrey Odundo.

“So we are coming in as the NSE to take the leadership mantle and help build capacity and understanding on the potential of trading carbon credits.”

Carbon credits describe permits that allow holders to emit a specific volume of carbon dioxide or other greenhouse gases.

Companies are usually awarded credits allowing them to release greenhouse gases to a certain limit but may sell any unneeded credits to another company for monetary gain.

Already, electricity generating company KenGen has been selling its stock of carbon credits at other global marketplaces with the aim of reaping from its gains in mitigating pollution.

According to AirCarbon Exchange Group President and Chief Operating Officer (COO) Kevin Iwanaga, Kenyan firms have the opportunity to raise capital through the sale of held carbon credits at a marketplace as he underlines his firm’s and NSE’s mutual interest in setting up the exchange.

“A big part of the strategy in Kenya is there is significant opportunity and potential for large scale projects in Kenya such as reafforestation, land restoration, direct air capture of storage technologies. This would help mobilize capital flows much quicker from investors around the world and to get it to companies who need financing,” he said.

Trading in carbon credits or emissions trading is set out in Article 17 of the Kyoto Protocol and aims to reduce overall emissions around the globe.

The setting up of carbon exchange in Kenya is set to be boosted by new tax provisions anchoring the creation of the emissions marketplace under the NIFC with firms setting up the exchange set to receive a discounted income tax rate of 15 per cent.

On Monday, the NIFC lifted off with Prudential Insurance as the debutant firm in the hub.

The NIFC nevertheless expects a growth in participants based on recent incentives passed in the 2022 Finance Act including certainty in the charging of capital gains tax (CGT).

“The biggest issue has been demonstrating the fact that we have a framework. Firms wanted to see what incentives are there and they can now see that,” said NIFC Acting CEO Oscar Njuguna.