Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized A Carbon Market Guidebook for Kenyan Enterprises Public Disclosure Authorized © 2024 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed by World Bank staff or external contributors in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution: Please cite the work as follows: World Bank Group and Kenya Private Sector Alliance, 2024. "A Carbon Market Guidebook for Kenyan Enterprises", World Bank, Washington, DC. All queries on rights and licenses should be addressed to the Publishing and Knowledge Division, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover Photo: Daniel Kandie/unsplash.com Graphic Design: Kane Chong A Carbon Market Guidebook for Kenyan Enterprises 02 A Carbon Market Guidebook for Kenyan Enterprises Table of Contents Acknowledgements Abbreviations and Acronyms Glossary Executive Summary 04 05 06 08 About this Guidebook 12 13 13 13 13 What is the purpose of this guidebook? Who should use this guidebook? Why was the guidebook developed? How was the guidebook developed? Context Global and regional context of carbon markets What are carbon projects and credits? What are the sources of demand and supply for carbon credits? Kenya and regional context Why does the carbon market matter for Kenyan enterprises? How have Kenya and Africa participated in the carbon market in the past? What area can Kenya grow its carbon market in? What are the challenges to growing the carbon market in Kenya? What trends will shape the next decade of the market? Chapter 1. Project Conceptualization and Design 1.1 How to determine if an activity is suitable to pursue carbon credits? Activities’ ability to avoid or remove emissions Carbon project types High-quality implementation Cost-benefit comparison 1.2 How to select the carbon credit standard and methodology to follow? Carbon credit standard selection Methodology selection 1.3 How to conduct a feasibility study of a carbon project? Technical feasibility Financial feasibility Legal and regulatory feasibility Organizational feasibility 1.4 How to prepare a project design document? Chapter 2. Project Financing 2.1 What are the expected costs to develop a project? Project conceptualization Project development and monitoring Credit issuance and sales 2.2 How to find suitable financing sources? Commercial financiers Development financiers 14 15 15 16 17 17 18 21 21 23 24 25 25 26 28 31 33 33 35 36 36 37 40 44 46 48 49 49 50 52 53 53 56 A Carbon Market Guidebook for Kenyan Enterprises Table of Contents 2.3 How to decide among the financing mechanisms? Types of purchase agreements (non-exhaustive list) Carbon derivatives-based contract (futures and options) Equity financing Debt financing Grant and donation financing 2.4 How to mitigate project risks to have lower financing cost? Project-specific risks Macro-level risks Chapter 3. Project Development and Monitoring 3.1 How to get a project listed? 3.2 How to validate a project? Documentation submission to a VVB Documentation review and site visit Validation report generation 3.3 How to register a project? 3.4 How to monitor a project? Carbon project monitoring plan Monitoring implementation Chapter 4. Credit Verification and Issuance 4.1 How to verify a project at the end of each period? Monitoring report submission VVB verification Registry review and approval 4.2 How to have credits issued? Issuance request Issuance levy 4.3