Carbon markets incentives will define Kenya’s e-mobility race

As managing climate change becomes more urgent, it is increasingly important for governments to explore innovative ways to incentivise sustainable practices in line with their Nationally Determined Contributions (NDCs) under the Paris Agreement.

In recent years, there has been a growing concern over the environmental impact of transportation, particularly the rising carbon emissions from conventional vehicles. Transportation accounts for a fifth of the global carbon emissions with 75 percent of those emissions coming from road travel.

In the Kenyan context, the government submitted its NDC on December 28, 2016, where among other pledges, it committed to accelerate the use of low-carbon and efficient transportation systems and to reduce its reliance on fossil fuels.

In the most recent efforts to align with global environmental standards, the National Environment Management Authority (Nema) has called for public comments over the draft Environmental Management and Coordination (Air Quality) Regulations, 2023.

The tool, among other proposals, seeks to regulate air quality by monitoring emissions from factories and motor vehicles. Therefore, the transition to electric mobility (E-Mobility) is pivotal for Kenya to reduce its carbon emissions.

Seven years after Kenya’s NDC submission, it has become crucial for the government to explore innovations to incentivise the adoption of electric mobility (e-mobility).

Among these solutions, carbon markets have emerged as a powerful tool to trigger and accelerate the uptake of e-mobility. Carbon markets provide a compelling mechanism to drive the transition towards cleaner transportation by linking the reduction of carbon emissions with financial incentives.

To accelerate this shift, voluntary carbon markets (VCMs) present a unique opportunity. By linking the purchase of carbon offsets with the promotion of electric vehicles (EVs) and charging infrastructure, VCMs can provide powerful incentives for individuals and businesses to embrace e-mobility.

Carbon markets operate on the principle of assigning a financial value to activities that reduce emissions. VCMs allow individuals and organisations to offset their carbon emissions. Participants can buy carbon offsets, which are credits generated by projects that reduce or remove greenhouse gas emissions.

These credits represent a measurable reduction in emissions and can be used to compensate for an equivalent number of emissions produced elsewhere.

The voluntary carbon markets are growing quickly in Kenya with various participants aligning themselves to take advantage of the budding market. Recently, 16 Saudi Arabian companies bought 2.2 million carbon credits at a Kenyan auction at a price of $6.47 (Sh918) per credit.

The VCMs, therefore, offer a flexible and market-driven approach to encourage the adoption of e-mobility. By aligning the purchase of carbon offsets with e-mobility initiatives, individuals and organisations can offset their emissions while directly supporting the growth of electric vehicles and associated infrastructure.

Additionally, VCMs can reward local EV manufacturers by providing them with an opportunity to profit from carbon offsets attributed to their lower carbon footprint.

Critical barrier

One of the critical barriers to e-mobility adoption is the availability of charging infrastructure. The government can accelerate a solution to this problem by providing regulatory and tax incentives around the development of charging stations.

Additionally, VCMs can play a significant role in addressing this challenge by directing a portion of the revenue generated from carbon offset sales toward the development of charging stations.

By supporting charging infrastructure projects, voluntary carbon market participants can contribute to the expansion of a reliable and accessible charging network, making EVs a more viable option for a wider range of consumers.

Companies, particularly those committed to sustainability, can leverage voluntary carbon markets to enhance their environmental stewardship efforts and promote e-mobility. By offsetting their emissions through carbon credits, businesses can demonstrate their commitment to reducing their carbon footprint and invest in e-mobility initiatives.

This may include fleet electrification, employee incentive programmes for EV adoption, or collaborations with charging infrastructure providers. Voluntary carbon markets enable companies to align their sustainability goals with tangible actions, fostering a greener transportation landscape.

VCMs also offer an avenue for raising awareness and educating consumers about the environmental benefits of e-mobility. Through marketing and communication, participants in VCMs can highlight the positive impact of EVs on carbon reduction and emphasise the role of carbon offsets in supporting e-mobility.

Such efforts contribute to building a culture of sustainable transportation, encouraging more individuals to choose electric vehicles.

To maximise the potential of voluntary carbon markets in driving e-mobility uptake, collaboration and the establishment of industry standards are crucial. Stakeholders, including carbon market platforms, EV manufacturers, charging infrastructure providers and policymakers, must collaborate to develop transparent mechanisms for verifying and tracking emissions reductions.

Industry standards can ensure the credibility and integrity of carbon offsets linked to e-mobility, further enhancing consumer confidence in the process.

Successful implementation will, without a doubt, require collaboration, industry standards, and consumer education. Through these collective efforts, voluntary carbon markets can unleash the potential of e-mobility, helping to build a greener future and combat climate change.

Mugambi is a tax adviser with KPMG Advisory Services Limited (kmugambi@kpmg.co.ke). The views are personal.