Carbonated credits or sparkling tax traps?

Carbon credit scheme collapses.

Coal snap: Koko Networks earned credits by mitigating the deforestation caused by charcoal production.

Christine Mungai in Nairobi

Clean cooking company Koko Networks sent an abrupt message to customers last weekend announcing it would shut down operations, closing a business that had become one of Kenya’s largest players in the global carbon-credit market.

Behind the closure is a dispute over carbon finance. Before shutting down on 31 January, Koko was generating close to $120-million a year – not from selling clean-energy stoves but from selling carbon credits. It marketed about six-million credits a year, which were supposedly earned from avoiding deforestation when its Kenyan customers replaced firewood with its clean cooking fuel. Each credit was worth about $20 on the international markets. The carbon credits revenue was central to Koko’s model. It subsidised low-cost clean cooking fuel for about 1.5-million households in Kenya.

For an actual forest to remove carbon from the atmosphere that is equivalent to six-million credits, it would have to be so big that it covers half the land area of Rwanda.

Carbon credits are a big deal in Kenya. The country accounts for just more than 20% of Africa’s marketed carbon credits, the largest percentage. President William Ruto has repeatedly promoted carbon trading as a future export earner and a way for local communities to benefit from climate funds. At the United Nations’ big climate meeting in 2022, COP27, he launched the African Carbon Markets Initiative. At the Africa Climate Summit in 2023 he said carbon markets should benefit communities, not intermediaries.

That political push led to tighter rules. New regulations introduced in June 2024 imposed a $4 levy per credit, required 25% of revenues to go to the state, and directed half of the fees to a national climate fund. For Koko, this meant an estimated additional cost of more than $24-million a year. The company argued the changes made its Kenya operations financially unviable.

Koko Networks is incorporated in Mauritius. Sources close to the talks between the company and the Kenya government said the latter was intent on capturing more tax and fee revenue from carbon trading, particularly when companies operating in Kenya are registered abroad.

The government has not publicly explained why talks with Koko collapsed. But sources familiar with the negotiations say last year’s shift in US politics was also a factor. Washington had actively been supporting Kenya’s carbon market, including through USAID-backed initiatives, during the tenure of former ambassador to Kenya Meg Whitman. After a change of administration in the US and Whitman’s departure, those arrangements came up for review.