Friday, April 19, 2024

The effects of private sector incentives on climate change financing in Kenya


Climate Change is one of the most significant challenges of the 21st century. The Sustainable Development Goals and Paris Agreement reaffirm that development cannot continue without tackling climate change and boosting environmental sustainability. Transitioning to a low-carbon, climate-resilient development path will require significant investment and innovation and a shift in decisions and investments by governments and the private sector

Kenya is already feeling the adverse effects of climate change from the widespread recurrent droughts and floods and rising sea levels that are impacting people, the economy and the environment across the country. Climate change will negatively impact Kenya’s future development trajectory and achievement of the goals of Kenya Vision 2030 – the long-term development blueprint

Climate change is the most significant challenge for any economy and society. The ability to adapt to the impacts will be critical for human well-being.

The National Climate Change Action Plan 2013-2017 estimates that the economic cost of floods and droughts associated with climate change is equivalent to 2%-2.8% of GDP each year

The private sector can play different roles in climate change adaptation and mitigation. The includes

  1. Adapt to climate change
  2. Finance adaptation of others
  3. Support others through products and services for resilience.

In recognition of the threats posed by climate change and other environmental challenges facing the world, which are accelerating at a faster rate, Governments, civil society, and private sectors are taking over from the push that was created by Paris Agreement and the global sustainable development goals in race to addressing climate change.

Countries around the world are committing to addressing climate change and the environmental risks it presents. The private sector plays a critical role in accelerating the country’s ability to achieve the SDGs and the targets laid out in the nationally determined contributions.

Achieving Kenya’s NDC requires resources from multiple sources and channels, including public and private, both from national and international sources. To mobilise the required resources, the Government must put in place the necessary enabling environment to attract climate-friendly investments in the critical sectors of the economy;

The Kenyan government provides various forms of incentives to Kenya private to accelerate the sector’s efforts in addressing climate change concerns. Examples of these incentives include Land, Subsidies and tax rebates.

The private sector has a crucial role in closing Kenya’s investment gap. Therefore, implementing incentives and subsidies to create a more attractive enabling environment for private investment in the transport, forestry, water, land use, and waste sectors is critical. For example, implementation of the proposed incentive schemes in the national strategy for achieving and maintaining over 30% tree cover by 2032.

The effects of private sector incentives on climate change financing in Kenya include:

  • The private sector has been adequately involved in the advocacy, piloting, testing and deploying climate innovations such as climate-smart agriculture. The sector has been the voice for climate action and mobilized resources towards the modernization of the agricultural sector. Agriculture in Kenya has been threatened by the increasingly devastating impacts of climate change. Initiatives by the private sector have raised awareness of the importance of embracing new innovations. Through the adoption of climate-smart agriculture techniques, Kenya has the potential to turn climate risks into opportunities, consequently increasing its food basket and further enhancing its economic diversification.
  • Climate technology and transfer: Kenyan corporates are actively tackling climate change risks and promoting the adoption of sustainable initiatives. For example, East African Breweries is developing varieties of sorghum that are drought resistant. They are also providing extension services to their farmers to enhance maximum productivity. These species are not impacted by frequent droughts as a result of climate change.
  1. Supporting and accelerating the uptake of climate technology: Most corporates have also embraced harnessing clean, renewable technologies such as solar and wind. These technologies contribute to the reduction in the emission of greenhouse gases into the atmosphere. The demand for these technologies has created an opportunity for financial institutions to provide and prioritize the funding mechanisms for these technologies.
  2. Funding Research and development programs to support climate change technology: The private sector players in Kenya have partnered with research institutions like Universities to fund various research projects to mitigate the adverse impacts of climate change. For example, Jomo Kenyatta University of Science and technology have developed tissue-cultured bananas which are resistant to drought and pest and fast maturing. This has enhanced the increase in the pool of funding for climate-related research projects by private sector players and development partners.

The incentives in private sector climate financing provide various adaptive strategies, which include:

  1. Employment opportunities
  2. Innovations
  3. Country’s economic growth
  4. Increased revenues
  5. Improved standards of living.

The facilitation of the private sector to finance climate through the provision of incentives will play a vital role as emerging markets and developing economies seek to curb greenhouse gas emissions.

Dr. Edward Mungai
Dr. Edward Mungai
The writer, Dr. Edward Mungai, is a global sustainability expert. He is the Lead Consultant and Partner at Impact Africa Consulting Ltd (IACL), a leading sustainability and strategy advisory in Africa. He is also the Chief Editor at Africa Sustainability Matters. He can be contacted via

Read more

Related News