Influence of Institutional Capacity on Economic Viability of Voluntary Carbon Credit Markets in Kenya
DOI:
https://doi.org/10.53819/81018102t5457Abstract
Kenya's agriculture and forestry sectors present significant opportunities for climate change mitigation and rural income generation through voluntary carbon credit markets. However, these markets remain economically unviable for many smallholder farmers and forestry enterprises because average carbon prices of USD 10 per ton remain far below the USD 100 per ton threshold required for land-based projects to generate positive financial returns. The study determined the influence of institutional capacity on the economic viability of voluntary carbon credit markets in Kenya. It was anchored in Policy Implementation Theory and guided by a pragmatist research philosophy. A cross-sectional mixed-methods survey was conducted across four agroecological regions: Western, Eastern, Central and Coastal Kenya. Stratified random sampling yielded 361 valid questionnaire responses from smallholder farmers and forestry enterprise representatives, while 25 key informants from the National Environment Management Authority, the Climate Change Directorate and carbon project developers were purposively sampled for interviews. Data were analysed using descriptive statistics, Pearson correlation and ordinary least squares regression. Institutional capacity had a positive and statistically significant correlation with economic viability (r = 0.727, p < 0.001) and was a statistically significant positive predictor of economic viability (B = 0.224, β = 0.387, t = 8.384, p < 0.001). Thus, a one-unit increase in institutional capacity was associated with a 0.224-unit increase in economic viability. The study concludes that institutional capacity is a critical determinant of economic viability in Kenya's voluntary carbon credit markets. It recommends that the Government of Kenya prioritise institutional capacity building, particularly satellite-based monitoring, reporting and verification and county-level staffing, as a high-return policy intervention for improving smallholder economic outcomes under the Climate Change Carbon Markets Regulations 2024.
Keywords: Institutional capacity, economic viability, smallholder farmers, Kenya, Climate Change Carbon Markets Regulations 2024
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