Carbon Credit Agreement (Kenya)
CARBON CREDIT AGREEMENT
This Carbon Credit Agreement ("Agreement") is entered into on [Agreement Date] between [Seller Name], Company Registration No. [Seller Registration Number], KRA PIN [Seller KRA PIN], of [Seller Address] ("Seller" / "Project Developer"), and [Buyer Name], Registration No. [Buyer Registration Number], of [Buyer Address] ("Buyer").
This Agreement is made pursuant to the Climate Change Act, 2016 (Kenya), the Environmental Management and Co-ordination Act (EMCA), 1999, and in accordance with the Paris Agreement (2015) and the UNFCCC framework governing internationally transferred mitigation outcomes.
1. Carbon Project
1.1 Project Name: [Project Name] 1.2 Project Type: [Project Type] 1.3 Project Location: [Project Location] 1.4 Project Area: [Project Area] hectares 1.5 Verification Standard: [Verification Standard] 1.6 Registry Project ID: [Project Registration Number] 1.7 Vintage Year(s): [Credit Vintage Year]
1.8 The project has received (or is in the process of receiving) approval from the Climate Change Directorate (Ref: [CCD Approval Reference]) under the Climate Change Act, 2016 and the National Climate Change Action Plan (NCCAP). NEMA Environmental Review Reference: [NEMA Review Reference].
2. Sale and Purchase of Carbon Credits
2.1 Subject to the terms of this Agreement, the Seller agrees to sell and transfer to the Buyer, and the Buyer agrees to purchase and accept, [Number of Credits] carbon credits (tCO2e) at a price of [Price Currency] [Price Per Credit] per credit, for a total contract value of [Price Currency] [Total Contract Value].
2.2 Each carbon credit represents one metric tonne of carbon dioxide equivalent (tCO2e) of emissions reduced or removed from the atmosphere as verified under the [Verification Standard] standard.
2.3 Delivery Method: [Delivery Method]. The Seller shall deliver the credits to the Buyer's designated registry account on or before [Delivery Date].
2.4 The Buyer shall make full payment of [Price Currency] [Total Contract Value] on or before [Payment Due Date]. Payment shall be made by bank wire transfer to the Seller's designated account.
3. Corresponding Adjustments and Article 6 Compliance
3.1 Corresponding adjustments under Article 6 of the Paris Agreement required: [Corresponding Adjustments Required].
3.2 Where corresponding adjustments are required, the Seller shall obtain all necessary authorisations from the Government of Kenya through the Climate Change Directorate prior to transfer of the credits to the Buyer. The Seller shall ensure credits are authorised for use towards the Buyer's Nationally Determined Contribution (NDC) or voluntary cancellation as applicable.
3.3 The Seller warrants that the credits have not been, and shall not be, double-counted, double-claimed, or used to satisfy any other obligation.
4. Representations and Warranties
4.1 The Seller warrants that: (a) the Seller has full authority to sell the credits; (b) the credits are validly registered under [Verification Standard]; (c) the credits are free from encumbrances and prior sales; (d) the project complies with the Climate Change Act, 2016 and EMCA, 1999; (e) all community benefit-sharing obligations under the Forest Conservation and Management Act, 2016 (for forestry projects) have been satisfied.
4.2 The Buyer warrants that it has the authority to enter into this Agreement and that the purchase is for legitimate carbon offsetting or investment purposes.
5. Governing Law and Dispute Resolution
5.1 This Agreement shall be governed by and construed in accordance with the [Governing Law].
5.2 Any dispute arising out of or in connection with this Agreement shall be referred to [Dispute Resolution].
5.3 Notwithstanding the governing law, all project activities in Kenya shall comply with Kenyan environmental, land, and community laws, and any regulatory approvals issued by NEMA or the Climate Change Directorate.
Signatures
IN WITNESS WHEREOF, the parties have executed this Carbon Credit Agreement on the date first written above.
Seller / Project Developer
________________
Signature
Buyer
________________
Signature
Witness
________________
Signature
What Is a Carbon Credit Agreement (Kenya)?
A Carbon Credit Agreement in Kenya governs a credit facility, defining the lender's and borrower's rights over the life of the loan.
The Climate Change Amendment Act No. 20 of 2023 introduced Kenya's domestic carbon market framework, requiring that all carbon credits generated from projects on Kenyan soil receive approval from the National Environment Management Authority (NEMA) and the Climate Change Directorate before sale. The amendment also established the requirement that the Government of Kenya receives 25% of carbon credits generated from community land projects as a benefit-sharing mechanism under Article 6.2 of the Paris Agreement (UNFCCC). This requirement created significant controversy in 2023 and 2024, with international carbon market developers initially withdrawing from Kenyan projects before the government clarified the application of the 25% levy.
Kenya is one of Africa's leading carbon credit markets, with significant projects in reforestation under the Forest Conservation and Management Act No. 34 of 2016, improved cookstove programmes verified under the Gold Standard, renewable energy projects verified under the Verified Carbon Standard (Verra), and REDD+ (Reducing Emissions from Deforestation and Forest Degradation) programmes supported by the UN Framework Convention on Climate Change (UNFCCC). The Kenya Forestry Service (KFS), under the Forest Conservation and Management Act No. 34 of 2016, issues tree growing licences and approvals for forest-based carbon projects.
Certification standards for Kenyan carbon credits include: the Verified Carbon Standard (Verra VCS), the Gold Standard for the Global Goals (GS4GG), the Plan Vivo Standard for community land projects, and the Climate, Community and Biodiversity (CCB) Standards for co-benefit projects. Each standard requires independent third-party verification by an accredited Validation and Verification Body (VVB) — such as Bureau Veritas, Intertek, or SGS — before credits can be issued and listed on a carbon credit registry.
A Kenya Carbon Credit Agreement differs from a simple sales contract in several important respects: the subject matter (carbon credits) is intangible, the quality and quantity of credits depend on ongoing project performance and periodic verification, and the buyer may require representations about the additionality, permanence, and non-double-counting of the credits. The High Court Commercial Division handles contractual disputes, while environmental disputes may also come before the Environment and Land Court (ELC) under Article 162 of the Constitution of Kenya 2010.
The legal framework governing the Carbon Credit Agreement (Kenya) in Kenya draws on several key statutes and regulatory bodies. Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Parties executing a Carbon Credit Agreement (Kenya) in Kenya should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Climate Change Act No. 11 of 2016 sets the foundational requirements.
When Do You Need a Carbon Credit Agreement (Kenya)?
A Kenya Carbon Credit Agreement is required or strongly recommended in several circumstances involving the generation, sale, or purchase of carbon emission reductions.
A Carbon Credit Agreement is required when a project developer in Kenya — operating a reforestation project in the Mt. Kenya ecosystem, a cookstove distribution programme in western Kenya, or a solar energy project in the arid and semi-arid lands (ASALs) — has received carbon credit certification from Verra, Gold Standard, or another approved standard body, and wishes to sell the verified credits to a corporate buyer seeking to offset their greenhouse gas emissions.
A Carbon Credit Agreement is needed when a community land management committee, group ranch, or cooperative society under the Community Land Act No. 27 of 2016 enters into a long-term arrangement with a carbon project developer for the conservation of community forest or rangeland. The Climate Change Amendment Act No. 20 of 2023 requires that community land projects document the benefit-sharing arrangement — including the government's 25% share and the community members' share — in a written agreement.
A Carbon Credit Agreement is required when a Kenyan company, public institution, or county government wants to purchase carbon credits to offset its greenhouse gas emissions and demonstrate climate commitment to international clients, investors, or the Environmental, Social and Governance (ESG) reporting framework applicable to its sector.
A Carbon Credit Agreement is needed when a foreign carbon credit buyer — a multinational corporation, investment fund, or voluntary carbon market intermediary — wants to acquire Kenyan-origin carbon credits and requires a Kenya-law governed agreement that allocates risk between the parties for delivery, verification delay, project failure, and changes in Kenyan regulatory requirements.
A Carbon Credit Agreement is required when a Kenyan bank or development finance institution — such as the Kenya Development Corporation (KDC) or Stanbic Bank Kenya — provides project financing to a carbon project developer on the security of future carbon credit revenues, and requires a forward purchase agreement or offtake agreement as security for the loan.
A Carbon Credit Agreement is needed when a Kenya green bond issuer under the Capital Markets Authority (CMA) green finance guidelines wants to link the use of proceeds to verified carbon reduction projects and requires a documented carbon credit purchase commitment to substantiate the green credentials of the bond.
What to Include in Your Carbon Credit Agreement (Kenya)
A Kenya Carbon Credit Agreement governing the sale and purchase of verified carbon credits under the Climate Change Act No. 11 of 2016 and UNFCCC Article 6 mechanisms must include the following essential provisions.
Parties and Project Description: Full legal names, BRS registration numbers, KRA PINs, and addresses of the seller (project developer or credit originator) and the buyer. A description of the carbon project generating the credits — project type (reforestation, renewable energy, cookstoves, REDD+), location (county and GPS coordinates), project start date, project area in hectares, and the certification standard (Verra VCS, Gold Standard, Plan Vivo) under which credits are generated.
Carbon Credits Specification: The total volume of carbon credits to be sold in metric tonnes of CO2 equivalent (tCO2e), the vintage year (the year in which the emission reductions were achieved), the unique serial numbers of the credits on the relevant carbon registry (Verra Registry, Gold Standard Registry), and whether the credits carry any co-benefit certifications under the Climate, Community and Biodiversity (CCB) Standards.
Regulatory Compliance: Confirmation that the carbon project has received all required approvals from the Climate Change Directorate, the National Environment Management Authority (NEMA), and the Kenya Forestry Service (KFS) where applicable. Representation that the government's 25% benefit share under the Climate Change Amendment Act No. 20 of 2023 has been allocated and will be set aside at the time of credit issuance.
Price and Payment: The agreed price per tCO2e in KES or USD (noting that many international carbon credit transactions are denominated in USD with payment converted through the Central Bank of Kenya (CBK) forex regime), the total consideration, the payment schedule, and the mechanism for price adjustment if the volume of verified credits differs from the estimated volume.
Verification and Delivery: The verification schedule — the dates on which independent VVB verification will be conducted to confirm the emission reductions claimed — and the procedure for credit delivery upon successful verification and issuance of credits on the registry. The seller's obligation to retire or transfer credits to the buyer's registry account on completion of payment.
Representations and Warranties: Seller's representations that the credits are additional (would not have occurred without the carbon finance), permanent (not subject to reversal), verified, not double-counted, not previously sold or retired, and compliant with applicable Kenyan law and the certification standard's requirements.
Risk Allocation and Buffer Pool: The allocation of risk for project under-delivery — for example, if the project generates fewer credits than projected due to drought, fire, or community conflict. Most carbon standards require a buffer pool (typically 10% to 20% of projected credits) to cover unforeseen reversals. The agreement should specify whether the seller or buyer bears the risk of shortfall beyond the buffer.
Governing Law and Dispute Resolution: This agreement shall be governed by the laws of Kenya. Disputes shall be referred to arbitration at the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995 (revised 2022), with Kenya as the seat of arbitration. The forms-legal.com Carbon Credit Agreement template assists Kenyan project developers and buyers in documenting transactions in compliance with the Climate Change Amendment Act No. 20 of 2023, NEMA requirements, and international carbon market standards. Carbon project developers seeking large-scale investment should also consider a Joint Venture Agreement to formalise the partnership between community landowners and project developers.
Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010.
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note = {Free legal document template}
}Frequently Asked Questions
Carbon credits in Kenya are regulated by the Climate Change Act No. 11 of 2016, as amended by the Climate Change Amendment Act No. 20 of 2023. The Amendment Act introduced Kenya's domestic carbon market framework: all carbon projects operating on Kenyan soil must be approved by the Climate Change Directorate under the Ministry of Environment, Climate Change and Forestry, and by the National Environment Management Authority (NEMA). The Amendment Act also requires the Government of Kenya to receive 25% of all carbon credits generated from community land projects as a benefit-sharing mechanism linked to Kenya's Nationally Determined Contribution (NDC) under the Paris Agreement (UNFCCC Article 6.2). Forest-based carbon projects are additionally subject to the Forest Conservation and Management Act No. 34 of 2016, administered by the Kenya Forestry Service (KFS). Land-based projects on community land must comply with the Community Land Act No. 27 of 2016 and require free, prior, and informed consent (FPIC) from the affected community. The Environment and Land Court (ELC) — established under Article 162 of the Constitution of Kenya 2010 — has jurisdiction over disputes involving land used for carbon projects. Carbon credit transactions are also subject to the income tax provisions of the Income Tax Act (Cap. 470) and VAT obligations under the Value Added Tax Act No. 35 of 2013.
The Climate Change Amendment Act No. 20 of 2023 introduced a requirement that the Government of Kenya receive 25% of all carbon credits generated from projects on community land in Kenya. The rationale is that Kenya's community forests, rangelands, and other natural assets generate the carbon sequestration value underlying the credits — and the government, as custodian of the national interest, should receive a share. In practice, this means that for every 100 tCO2e of verified carbon credits issued from a Kenyan community land project, 25 tCO2e are allocated to the government's account and cannot be sold by the project developer. This levy significantly reduces the commercial returns available to project developers and sparked controversy in 2023 when several international carbon project developers suspended Kenyan operations. The government subsequently issued clarifications about how the 25% is calculated and when it applies. Project developers structuring Carbon Credit Agreements under Kenyan law should obtain current legal advice from an Advocate of the High Court of Kenya specialising in environmental law on the precise scope of the levy, the procedures for government credit allocation, and any agreed offtake arrangements between the government and the project. The Climate Change Directorate publishes guidance on its portal, and the National Environment Management Authority (NEMA) issues project-specific letters of authorisation.
Kenyan carbon credits are certified under several internationally recognised standards, each suited to different project types. The Verified Carbon Standard (Verra VCS) is the most widely used globally and in Kenya — it is applicable to forestry and land use projects, renewable energy, and methane capture, and credits are listed on the Verra Registry. The Gold Standard for the Global Goals (GS4GG), managed by the Gold Standard Foundation in Geneva, is favoured for projects with strong sustainable development co-benefits, such as cookstove distribution programmes in rural Kenya that simultaneously reduce carbon emissions, improve indoor air quality, and reduce deforestation pressure. The Plan Vivo Standard is specifically designed for smallholder and community land projects — it is used in some Kenyan pastoral and agroforestry programmes. The Climate, Community and Biodiversity (CCB) Standards provide additional certification for social and biodiversity co-benefits and can be layered on top of Verra VCS credits. The Kenya Forestry Service (KFS) under the Forest Conservation and Management Act No. 34 of 2016 requires forest-based projects to comply with national forestry regulations in addition to international certification standards. All standards require periodic independent verification by an accredited Validation and Verification Body (VVB) — such as SGS, Bureau Veritas, or SCS Global Services — before credits are issued and listed on the relevant registry.
Yes. Carbon credit sales in Kenya are subject to income tax under the Income Tax Act (Cap. 470), administered by the Kenya Revenue Authority (KRA). The proceeds from selling carbon credits constitute trading income for a project developer that regularly generates and sells credits — taxable at the corporate income tax rate of 30% for resident companies. For individuals and entities selling credits as a one-off transaction, the proceeds may be treated as a capital gain under the Eighth Schedule, subject to Capital Gains Tax (CGT) at 15% of the net gain under the Finance Act 2023. The Value Added Tax Act No. 35 of 2013 treatment of carbon credit sales in Kenya is not definitively settled — some transactions are treated as financial instruments and therefore exempt from VAT, while others may be treated as taxable services. Carbon project developers should obtain a KRA private binding ruling on the VAT treatment of their specific transactions before entering into large-scale Carbon Credit Agreements. Foreign currency receipts from international carbon credit buyers must be declared to the Central Bank of Kenya (CBK) under the foreign exchange regulations, and withholding tax obligations may apply to cross-border payments. The Institute of Certified Public Accountants of Kenya (ICPAK) has published guidance on the accounting treatment of carbon credits for Kenyan entities.
A buyer purchasing Kenyan carbon credits should conduct thorough due diligence on three levels before executing a Carbon Credit Agreement. First, regulatory due diligence: confirm that the carbon project has received approval from the Climate Change Directorate and the National Environment Management Authority (NEMA) under the Climate Change Amendment Act No. 20 of 2023; verify that the government's 25% benefit-share allocation has been documented; and confirm compliance with the Forest Conservation and Management Act No. 34 of 2016 for forest-based projects and the Community Land Act No. 27 of 2016 for community land projects. Second, project and verification due diligence: review the project design document (PDD), the most recent independent verification report from the accredited Validation and Verification Body (VVB), the credit registry listing showing the serial numbers and volumes of issued credits, and the project's monitoring, reporting, and verification (MRV) plan. Third, legal and title due diligence: confirm the seller's legal right to sell the credits (ownership of the project and the credits), the absence of prior encumbrances or pledges on the credits, and the chain of title from the project to the seller. For credits sourced from community land, confirm the existence of a free, prior, and informed consent (FPIC) document signed by the relevant Community Land Management Committee under the Community Land Act No. 27 of 2016. A Non-Disclosure Agreement should be signed before the seller shares project documentation during the due diligence process.
Yes. A Kenya Carbon Credit Agreement can designate international or domestic arbitration as the dispute resolution mechanism, and awards are enforceable in Kenya and internationally. The Arbitration Act No. 4 of 1995 (as revised in 2022) governs domestic and international arbitration in Kenya. The Nairobi Centre for International Arbitration (NCIA) is Kenya's primary institutional arbitration centre and regularly administers disputes in commercial sectors including energy, natural resources, and environmental finance. Kenya is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, meaning arbitral awards issued in Kenya (or in other signatory countries) are enforceable against assets in over 160 jurisdictions. For Carbon Credit Agreements involving international buyers from Europe, North America, or Asia, the parties may also designate the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), or the Singapore International Arbitration Centre (SIAC) as the arbitration institution — all of whose awards are enforceable in Kenya under the New York Convention. The governing law of the agreement should be specified as Kenyan law or another agreed system of law. The Environment and Land Court (ELC) in Kenya retains jurisdiction over disputes involving Kenyan land rights forming part of a carbon project, and this jurisdiction cannot be ousted by an arbitration clause.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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