Welcome to the inaugural issue of our carbon market bulletin, your go-to resource for tracking climate regulation, and sustainability trends across Africa and beyond. In this edition, we spotlight Kenya’s launch of new green finance tools, a landmark court ruling halting a massive offset project, and South Africa’s carbon tax hike. Across Asia, countries are scaling up carbon storage infrastructure and expanding carbon market support. Globally, concerns over credit quality, regulatory tightening, and corporate climate accountability are reshaping the future of voluntary carbon markets.
Snapshot – Key developments at a glance
- Kenya launches a green finance taxonomy and climate risk disclosure framework
- Isiolo ruling halts a major soil carbon project over rights violations
- South Africa increases carbon tax and adjusts credit usage rules
- Shell faces criticism over failed Chinese offset projects
- Cookstove credits fail to meet new global integrity standards
- South Korea streamlines access to overseas carbon credits
- Malaysia and Indonesia position themselves as future CCS hubs
- EU simplifies sustainability reporting and reforms CBAM
- IMO approves draft net-zero shipping framework
- UN progresses on operationalising the Article 6.4 carbon market
- African startups benefit from green seed funding initiatives
Africa
Kenya: Regulatory updates
CBK unveils green finance tools to guide low-carbon investment shift
The Central Bank of Kenya has finalised a green finance taxonomy and a climate risk disclosure framework as part of a broader push to align the banking sector with sustainable investment goals. Developed with the European Investment Bank, the tools aim to enhance transparency, support low-carbon development, and help banks report climate-related risks in a standardised way, making it easier for investors to identify institutions advancing the green transition. See more here.Â
Key tax changes impacting the carbon sector – Finance Act 2025
The Finance Act 2025, effective from 1 July 2025, introduces several measures likely to affect carbon and environmental projects:
- Excise duty on direct air capture machines
A 25% excise duty is now imposed on imported fully built and semi-built direct air capture machines, a significant cost increase, as these machines were previously duty-free.
- Restriction on carrying forward tax losses
Tax losses can now only be carried forward for five years (previously unlimited). This limits the ability of carbon project companies often reliant on long-term investment allowances to fully utilise tax losses, potentially leading to increased tax exposure.
- Withdrawal of timber-related tax deductions
Deductions related to the cost or value of standing timber and timber rights have been removed. This means timber income will now be taxed on gross receipts rather than profit, increasing the tax burden and potentially resulting in tax liabilities even when operating at a loss. The change could face constitutional challenges due to fairness concerns.
To read our detailed analysis of the changes introduced through the Finance Act, 2025 click here. A condensed summarised version of the key changes introduced through the Finance Act, 2025 is also available here.
Kenya has become the first African country to launch a national REDD+ Registry
The Kenya REDD+ Registry, a digital platform for tracking verified forest-based emissions reductions and carbon credits, was launched on 28 July 2025. Supported by the UK (via UK PACT) and Conservation International, the registry will be hosted in the UK for two years as Kenya builds local capacity.
Complementing the registry, the Nesting Guidelines were introduced to allow smaller projects by communities, NGOs, and private entities to align with national accounting, this is an essential step for engaging in global markets under Article 6 of the Paris Agreement.
This development is designed to enhance transparency, prevent double counting, and promote equitable benefit-sharing with forest communities, while positioning Kenya as a regional leader in credible and scalable REDD+ implementation. See more here.
Kenya: Legal case update
Osman & 164 others v Northern Rangelands Trust & 8 others [2025] KEELC 99 (KLR)
In Isiolo County, indigenous communities successfully challenged a massive soil carbon project covering 10% of their land. They argued it lacked consent, environmental assessments, and proper consultation. In January 2025, the Environment and Land Court ruled in their favour, halting two conservancies and ordering the land returned. The project claiming to remove 50 million tonnes of carbon has also been suspended from issuing credits. The case highlights rising scrutiny of carbon offset schemes and their impact on local rights. See more here and here.
South Africa hikes carbon tax and introduces key changes to carbon credit framework
As of January 2025, South Africa raised its carbon tax rate from ZAR 190 to ZAR 462 per tonne. From January 2026, the allowable use of carbon credits will also expand, rising to 10% for fugitive and process emissions, and 15% for combustion emissions. The Carbon Offset Administration System accepts credits from the Clean Development Mechanism, the Verified Carbon Standard and Gold Standard. By February 2025, eligible credits were trading at USD 8.25 per tonne on the Johannesburg Stock Exchange. See more here.
Electric vehicle push gains momentum amid challenges in Ethiopia
Ethiopia has emerged as one of Africa’s most electrified vehicle markets, tripling electric vehicle (EV) adoption in the past two years. Backed by policy shifts including tax exemptions, import incentives, and plans for local assembly, the Government aims to reduce fossil fuel dependence, curb urban pollution, and improve energy security. However, implementation faces challenges: limited charging infrastructure outside major cities, high upfront costs, and uneven rural access threaten to slow progress. Ethiopia’s EV experience illustrates both the potential and complexity of scaling clean transport solutions in low-motorisation, low-income contexts. See more here.
Sustainable finance in Africa
Tony Elumelu Foundation backs green and tech Startups with 2025 seed funding drive
At the start of the year, the Tony Elumelu Foundation in collaboration with UBA Kenya bank, launched the 2025 Entrepreneurship Initiative to support early-stage businesses and green ventures. The initiative, which ran until March 2025, offered entrepreneurs the opportunity to access up to USD 5,000 in seed capital, along with training and mentorship in business. The programmes offered under the initiative focused on technology-driven solutions and sustainable practices with a particular emphasis on artificial intelligence and environmental sustainability. See more here.
Asia
Malaysia and Indonesia back carbon storage as a practical path to lowering emissions
Malaysia’s state-owned oil company, Petronas, has signed at least 24 MoUs with nine countries to store their excess CO₂ emissions in depleted fossil fuel reservoirs off the coast of peninsular Malaysia and Borneo, in the gas-producing region of Sarawak. Petronas is focusing on decarbonisation initiatives, with particular emphasis on Carbon Capture and Storage (CCS). These projects are part of Malaysia’s broader energy transition strategy and its bid to become a CCS hub for Asia, a goal shared by neighbouring Indonesia. Experts consider both Indonesia and Malaysia as well-suited for CO₂ storage due to their abundance of depleted oil reservoirs and saline aquifers, which offer significant underground storage potential, attracting international clients driven by tightening emissions regulations and corporate decarbonisation commitments. See more here.
South Korea plans to expand overseas carbon credit support to meet 2030 emissions target
South Korea is boosting support for overseas carbon reduction projects to help meet its 2030 climate targets. It aims to secure 37.5 million international credits (12.8% of its emissions reduction goal) via Article 6 of the Paris Agreement cooperation. To streamline participation, projects can now submit a simpler Letter of Intent instead of a Letter of Approval. Financial support has also increased, with project funding raised to KRW 10 billion and feasibility study support up to KRW 500 million per case. See more here.
Global
Market trends: Voluntary Carbon Market Integrity in focus
Most cookstove carbon credits ruled out of quality scheme
Most carbon credits from cleaner cookstove projects will no longer qualify for the Integrity Council for the Voluntary Carbon Market (the Integrity Council) quality label unless stricter calculation methods are adopted. The Integrity Council rejected two widely used methodologies (citing insufficient rigor) which underpin the majority of existing cookstove credits, many of which originate from projects in the Global South. A third method, used by hundreds of projects, was withdrawn from review after Verra introduced an alternative approach. See more here.
Shell refuses to compensate failed carbon credits from controversial Chinese offset projects
Shell is under scrutiny for refusing to compensate over 1.6 million failed carbon credits tied to controversial offset projects in China. The credits, used to market ‘carbon neutral’ liquefied natural gas, came from methane-reduction schemes in rice paddies that Verra later found lacked integrity. Verra cancelled the projects in August 2024 and requested compensation from Shell’s Chinese subsidiary but has so far been unable to recover any credits. The case raises concerns about accountability in the voluntary carbon market. See more here.
Carbon markets tighten as new standards raise transparency and legal risks
Voluntary carbon markets are tightening in 2025 with two key developments: the launch of the Carbon Data Open Protocol to standardise carbon credit data, and a draft update to the SBTi Net-Zero Standard to improve emissions tracking and credit use. These efforts aim to boost transparency and align with global climate goals. As standards rise, companies face increased legal and reputational risks, prompting the need for stronger due diligence and climate disclosures. See more here.
Regulatory developments
EU Commission unveils major reforms targeting corporate sustainability reporting
On 26 February 2025, the European Commission unveiled two reform packages, Omnibus Packages I and II, aimed at simplifying corporate sustainability reporting. The reforms focus requirements on companies with the greatest environmental and social impacts, easing the burden on smaller firms. Omnibus Package I also seeks to improve reporting efficiency, strengthen the Carbon Border Adjustment Mechanism, and enhance access to EU investment opportunities. See more here.
UN supervisory body moves closer to operationalising Paris Agreement carbon market
At its February 2025 meeting in Bhutan, the Article 6.4 of the Paris Agreement Supervisory Body advanced efforts to operationalise the Paris Agreement carbon market. Key developments included accrediting the first entity to validate and verify projects, approving the transition of a clean energy program from the Clean Development Mechanism, and launching an interim registry. The Body also adopted a new additionality standard and reviewed baseline-setting guidance, with further work assigned to a technical panel. See more here.
IMO moves toward binding net-zero shipping framework
In April 2025, the International Maritime Organization (IMO) approved draft regulations to establish the world’s first legally binding framework combining a global marine fuel standard and greenhouse gas pricing for international shipping. The IMO Net-Zero Framework aims for net-zero emissions from ships by 2050 and will apply to large vessels over 5,000 gross tonnage, which account for 85% of the sector’s emissions.
The framework, set for adoption in October 2025 and entry into force in 2027, includes: (i) mandatory fuel intensity limits using a well-to-wake approach, (ii) economic measures requiring high-emitting ships to buy ‘remedial units’ and (iii) an IMO Net-Zero Fund to support low-emission technologies, innovation, and climate justice in developing countries. These measures mark a major milestone in aligning global shipping with international climate goals. See more here.
