The Climate Change (Carbon Markets) Regulations, 2024

Section 1. Citation Section These Regulations may be cited as the Climate Change (Carbon Markets) Regulations, 2024.

Section 2. Interpretation Section In these Regulations unless the context otherwise requires— “annual social contribution” means sharing of annual benefits accruing from carbon projects; “community carbon project” means a carbon project undertaken on community land; “community development agreement” means an agreement which outlines the relationships and obligations between the proponents of a project and the community in public and community land where the project is being developed; “compliance carbon market” means the regulated market where carbon credits that represent certified emissions removals or reductions of greenhouse gases in the atmosphere are traded; “land-based carbon project” means any project that involves activities related to land use, land management and ecosystem conservation or restoration that is aimed at reducing greenhouse gas emissions or enhancing carbon sequestration; “non-land based carbon project” means any activity that reduces greenhouse gas emissions or remove carbon dioxide from the atmosphere and employ technologies that do not require land for their execution and include household or institutional green technologies such as hand-held solar lighti...

Section 3. Object of the Regulations Section provide a framework for implementation of carbon projects;

Section 4. Application Section voluntary carbon markets; and

Section 5. Carbon markets principles Section each transaction in a carbon project results in the additional reduction or removal of greenhouse gas emissions;

Section 6. Prohibition against double counting Section The Designated National Authority shall, upon request by a project proponent, apply corresponding adjustments to carbon projects under these Regulations to ensure that there is no double counting of mitigation outcomes.

Section 7. Designated National Authority Section provide key information to project proponents in carbon projects;

Section 8. Climate Change Directorate Section advise the government on measures and the control of carbon market activities being carried out by stakeholders in order to ensure compliance to these Regulations;

Section 9. Multi-sectoral technical committee Section 9(1) There is established a multi-sectoral technical committee consisting of membership drawn from ministries, counties, departments and agencies comprising of all sectors of the Intergovernmental Panel on Climate Change to provide technical advice to the Designated National Authority on carbon project assessment. Section 9(2) The members of the multi-sectoral technical committee established in sub-regulation (1) shall be nominated by the respective sector Cabinet Secretaries and the Council of Governors. Section 9(3)(a) energy; Section 9(3)(a)(i) energy; Section 9(3)(a)(ii) transport; Section 9(3)(a)(iii) agriculture; Section 9(3)(a)(iv) forestry and land use; Section 9(3)(a)(v) industrial processes and product use; or Section 9(3)(a)(vi) waste sector; Section 9(3)(b) meet the requirements of Chapter Six of the Constitution. Section 9(4) The Cabinet Secretary shall, through a notice in the Gazette , appoint the members nominated under sub-regulation (2) . Section 9(5) The Cabinet Secretary shall review the membership of the multi-sectoral technical committee, once every three years.

Section 10. Ad hoc committees Section 10(1) The Designated National Authority shall appoint project specific ad hoc committees of not more than five members drawn from the multi-sectoral technical committee established under regulation 9 . Section 10(2)(a) review project design documents and provide recommendations to the Designated National Authority; and Section 10(2)(b) provide technical advise to the Designated National Authority on carbon projects. Section 10(3) Members of the ad hoc committee shall be paid such allowances as may be determined by the Designated National Authority in consultation with the Salaries and Remuneration Commission.

Section 11. NationalRegistrar Section The head of the Designated National Authority shall be the National Registrar of the National Carbon Registry established under section 23G of the Act.

Section 12. Functions of theRegistrar Section keep, maintain and update the registers provided for under section 23G(3) of the Act;

Section 13. Sector carbon registries Section 13(1)(a) energy; Section 13(1)(b) transport; Section 13(1)(c) agriculture; Section 13(1)(d) forestry and land use; Section 13(1)(e) industrial processes and product use; and Section 13(1)(f) waste. Section 13(2) The registries of the sectors under sub-regulation (1) shall be headed by sector Registrars who shall be appointed by the Cabinet Secretary.

Section 14. Functions of a sectorRegistrar Section keep, maintain and update a sector register of their respective carbon projects;

Section 15. Carbon trading Section Each carbon credit shall be traded in accordance with the provisions of section 23C of the Act.

Section 16. Carbon project requirements Section comply with the provisions of the Act and these Regulations;

Section 17. Eligibility of a project proponent Section be a legal entity;

Section 18. Obligations of a project proponent Section 18(1)(a) the project costs; Section 18(1)(b) expected emission reductions or removals at the carbon project application stage; Section 18(1)(c) verified emission reductions and removal and estimated revenues at issuance; and Section 18(1)(d) adherence to all applicable legal requirements in operating carbon projects. Section 18(2) A project proponent who knowingly or willfully fails to provide information under sub-regulation (1) or under-values the estimated revenue commits an offence and shall be liable to the penalty provided under section 33(1A) of the Act.

Section 19. Environmental and social impact assessment Section 19(1) Pursuant to section 23D of the Act, each carbon project shall be required to undergo an environmental and social impact assessment. Section 19(2)(a) each ongoing carbon project shall be required to undertake an environmental audit; and Section 19(2)(b) each carbon project shall adhere to sector specific standards and safeguards.

Section 20. Certification, validation and verification Section 20(1) Each carbon project shall, prior to commencement, be subject to certification of international standards by a recognized international body and validation by an independent auditor and each result shall be verified for compliance with the Act and these Regulations. Section 20(2) A project proponent that contravenes this regulation commits an offence.

Section 21. Application for a carbon project Section 21(1) A project proponent who wishes to engage in a carbon project shall apply to the Designated National Authority for approval of the carbon project. Section 21(2)(a) in Form PCN set out in the First Schedule; Section 21(2)(b) accompanied by minutes of the proponent’s meeting approving the project; and Section 21(2)(c) accompanied by the fees specified in the Second Schedule. Section 21(3) Where the Designated National Authority is satisfied that the project proponent has fulfilled the requirements for approval under the Act and these Regulations, the Designated Authority shall within fourteen days of receipt of the application, issue a letter of no objection in the manner set out in the Third Schedule, to the project proponent. Section 21(4)(a) notify, in writing, the project proponent of the refusal; and Section 21(4)(b) provide reasons for such refusal. Section 21(5)(a) particulars provided in the application are incomplete; Section 21(5)(b) appropriate safeguards for environmental protection have not been provided; and Section 21(5)(c) project proponent is in violation of any provision of the Act and these Regulations. Sect...

Section 22. Project design document Section 22(1) A project proponent shall, within twelve months of obtaining the letter of no objection under regulation 21(3) , develop a project design document and submit the project design document to the Designated National Authority. Section 22(2) Subject to sub-regulation (1) , the project proponent may, through a written notice to the Designated National Authority, request for an extension of time, stating the reasons for delay to develop and submit the project design document. Section 22(3) The Designated National Authority may grant an extension of time of not more than twelve months to the project proponent to develop and submit the project design document after being satisfied with the reasons provided for the extension. Section 22(4)(a) the requisite national and county government approvals; Section 22(4)(b) a stakeholder report; Section 22(4)(c) a community development agreement for land-based carbon projects on public and community land in the manner set out in the Fourth Schedule; Section 22(4)(d) a project validation report; and Section 22(4)(e) the fees set out in the Second Schedule. Section 22(5)(a) a detailed description of the...

Section 23. Authorisation Section 23(1) A project proponent may request the Designated National Authority for authorisation of international transfer of mitigation outcomes as provided in the Sixth Schedule. Section 23(2) Upon receipt of the request under sub-regulation (1) , the Designated National Authority may, with the approval of the Cabinet Secretary, authorise the international transfer of mitigation outcomes in the manner set out in the Seventh Schedule.

Section 24. Commencement of a carbon project Section 24(1) A project proponent undertaking a carbon project shall, within twelve months of receipt of the letter of approval, commence the implementation of the carbon project activities. Section 24(2)(a) request for additional time to commence the implementation of the project activities; or Section 24(2)(b) issue a notice to the Designated National Authority withdrawing its intent to continue with the project.

Section 26. Progress report Section 26(1) A project proponent shall prepare and submit to the Designated National Authority an annual progress report as set out in the Ninth Schedule. Section 26(2) A project proponent who fails to submit the report under sub-regulation (1) commits an offence.

Section 27. Cancellation of approval Section for failure to commence the project activities within the stipulated time where it is a public carbon project ;

Section 28. Multiple community development agreements Section 28(1) Where a project proponent is required to enter into a Community Development Agreement with more than one community in a county, it shall enter into a separate agreement with each community in that county. Section 28(2) Where a carbon project spans more than one county, the project proponent shall have a separate Community Development Agreement with each community in the different counties.

Section 29. Annual social contribution Section 29(1)(a) land-based projects shall be at least forty per centum of the aggregate earnings of the previous year less cost of doing business; and Section 29(1)(b) non-land-based projects shall be at least twenty-five per centum of the aggregate earnings of the previous year less cost of doing business. Section 29(2) The annual social contribution shall be included in the Community Development Agreement set out in the Fourth Schedule. Section 29(3) A private carbon project on private land shall not be required to disburse the annual social contributions under section 23E(5)(b) of the Act. Section 29(4) The management and disbursement of the benefits for the community shall be undertaken by a community project development committee in the manner set out in the Community Development Agreement.

Section 30. Funds to be paid into the Climate Change Fund Section fifty per centum of the corresponding adjustment fees set out in the Second Schedule; and

Section 31. Dispute resolution Section Any dispute arising under these Regulations shall be resolved in the manner provided under section 23H of the Act.

Section 32. Confidentiality Section 32(1) A person who obtains information in the performance of their duties under these Regulations, shall not disclose any information classified as confidential to an unauthorised person. Section 32(2) A person who contravenes the provisions of sub-regulation (1) commits an offence and shall be liable, on conviction, to a fine of not exceeding twenty thousand shillings or to imprisonment for a period not exceeding six months or to both. Section 32(3) Nothing under this Regulation shall prohibit a person from disclosing information to another person so far as it is required or permitted under these Regulations or any written law.

Section 33. Liability Section Where any damage to the environment or to human health is caused by a carbon project, the project proponent responsible for that particular carbon project shall be liable for the damage caused.

Section 34. Non-transferability Section 34(1)(a) a transfer is required upon change of control or full transfer of ownership of the project proponent; and Section 34(1)(b) the proposed new project proponent meets the requirements under these Regulations. Section 34(2) Where a project proponent transfers a letter of no objection or a letter of approval under this regulation, the person to whom it is transferred to and the person transferring shall jointly notify the Designated National Authority in writing of the transfer, not later than thirty days after the transfer. Section 34(3) Where no joint notification of a transfer is given in accordance with sub-regulation (2) , the registered holder of the letter of no objection or a letter of approval shall be deemed, for the purposes of these Regulations to be the project proponent. Section 34(4) A transfer of a letter of no objection or a letter of approval under this regulation shall take effect on the date the Designated National Authority approves the transfer. Section 34(5) A person who contravenes any provisions of this regulation commits an offence.

Section 35. Fiscal and non- fiscal incentives Section 35(1) Subject to section 26 of the Act, the Cabinet Secretary may in consultation with the Cabinet Secretary responsible for finance, provide fiscal incentives to project proponents to support the development of carbon projects. Section 35(2) The Cabinet Secretary may provide non-fiscal incentives to support the development of carbon projects.

Section 36. Guidelines Section The Cabinet Secretary may issue operational guidelines for the effective implementation of these Regulations.

Section 37. General penalty Section A person who contravenes the provisions of these Regulations for which no specific penalty has been provided under these Regulations or any other written law, commits an offence and shall be liable on conviction, to a fine of not exceeding twenty thousand shillings or to imprisonment for a term not exceeding six months or to both.

Section 38. Transition Section A project proponent engaged in a carbon project before the coming into operation of these Regulations, shall comply with the provisions of these Regulations within two years of commencement of these Regulations: Provided that an ongoing carbon project shall undertake an environmental audit within six months of commencement of these Regulations.