At 18%, the transport sector, especially road transportation, is a significant contributor to greenhouse gas (GHG) emissions in Kenya. This is primarily attributed to the prevalent use of fossil fuels in vehicle propulsion systems. As such, the government aims to implement a low-carbon and efficient transportation system as a mitigation measure (Ministry of Environment and Forestry, 2020).

One of the strategic initiatives is decarbonising the transport sector through a shift from fossil fuel-powered to electric-powered vehicles. An increased emphasis on electrifying the transportation sector has the potential to play a pivotal role in attaining Kenya’s goal of reducing emissions by 3.46 MtCO2e relative to the established baseline by 2030. To achieve this, annual carbon emissions from the transport sector need to be limited to not more than 0.4 MtCO2e per year on average.

In 2022, total domestic transport sector emissions in Kenya amounted to 12.60 MtCO2e, with road transport accounting for 98% of the sectoral emissions (Transport Sector Climate Change Annual Report 2021-2022, Ministry of Roads and Transport).

Kenya’s decarbonisation of the transport sector is a key climate change mitigation strategy in line with its long-term emission reduction targets. As such, several mitigation measures in the sector have been put in place to achieve the 2030 goal. One of the targets is to increase the adoption of e-mobility by having an annual 5.0% share of registered vehicles being electric (Ministry of Energy, 2020).

Therefore, Kenya has an opportunity to leverage Debt-for-nature swaps in its quest for e-mobility and environmental sustainability.

A look into debt-for-nature swaps

Debt-for-nature swaps are financial mechanisms where a portion of a country’s debt is forgiven in exchange for environmental conservation efforts. More than US$100 billion of debt in developing countries could be freed up and spent on restoring nature and adapting to climate change (International Institute for Environmental Development, 2024). Currently, Kenya’s domestic and foreign public debt stands at a staggering $80 billion. 

Debt-for-nature swaps are a crucial but underused tool for addressing three major problems facing developing countries: crippling debt, the impacts of climate change, and biodiversity loss. If a country and its creditors agree to a swap, a portion of that nation’s debt can be written off in exchange for achieving specific, measurable, and traceable outcomes in climate or nature projects. Debt-for-nature swaps are viewed by many as a win-win where the country reduces its external debt while benefiting nature and environmental groups involved in the deal, and banks profit from selling the debt. 

Ecuador is a leading example of the benefits of debt-for-nature swaps. The country is the world’s biggest user of these swaps, as Credit Suisse helped the government buy back around $1.6 billion of debt for $644 million. This saved the country around a billion dollars in repayments over 17 years (Reuters). The old debt was replaced with a cheaper-to-service $656 million “Galapagos Bond”  that will mature in 2041 and is insured by the US International Development Finance Corporation. 

Strategic pathways to tap into the swaps to finance e-mobility and the benefits

Kenya has an excellent opportunity to kill two birds with one stone. Financing e-mobility through debt swaps will enable the country to meet its environmental commitments while simultaneously reducing its debt burden.  

1. Reducing carbon emissions

One of the primary goals of the swaps is to reduce environmental degradation. E-mobility promotes cleaner transport options and will help Kenya reduce its carbon footprint. This aligns with global climate goals and can serve as evidence of environmental commitment in debt swap negotiations. E-mobility decreases reliance on fossil fuels and reduces air pollution, which is particularly important in urban areas where pollution often impacts public health and ecosystems. 

2. Attracting green financing

E-mobility initiatives often attract green finance, including international funding aimed at environmental sustainability projects. Kenya can tie e-mobility programmes to debt swap proposals to showcase its commitment to green transformation. This could help negotiate more favourable terms for debt forgiveness while securing external financing from climate funds, international institutions, and private investors interested in sustainable development. 

3. Preserving natural ecosystems

A shift to e-mobility can help reduce the need for infrastructure development in sensitive ecosystems. In many developing countries, the need for roads and highways to support fossil-fuel-based transportation often threatens biodiversity and forest cover. By promoting electric vehicle (EV) use, particularly buses, motorcycles, or bicycles in urban and peri-urban areas, Kenya can reduce the pressure to develop new infrastructure, thus preserving natural habitats and ecosystems that are critical for biodiversity conservation.  

4. Promoting sustainable economic growth

E-mobility presents opportunities for Kenya to participate in the global green economy, creating new industries related to the production, maintenance, and servicing of EVs. This creates jobs, enhances energy independence, and promotes innovation while reducing external energy dependencies. Tying these economic growth opportunities to debt-for-nature swap programmes can provide a dual benefit of financial stability (through debt relief) and environmental progress, showing creditors a clear path toward sustainable development. 

5. Leveraging renewable energy integration

E-mobility naturally pairs with the push for renewable energy. For the swaps to work effectively, many deals often require countries to reduce reliance on non-renewable energy sources. The use of EVs, when powered by renewable sources like solar, wind, or hydropower, can be an integral part of the broader strategy to reduce fossil fuel consumption. This can form the basis for negotiating debt reductions in exchange for scaling up renewable energy infrastructure tied to transportation systems. 

6. Regional and global cooperation

E-mobility transition programmes can be used as stepping stones for regional cooperation, which is often a requirement for large-scale debt swap deals. For example, electric buses or cars in one country can lead to cross-border environmental benefits, such as reduced pollution across shared ecosystems or watersheds. This kind of cooperation can attract multilateral support and may incentivise creditors to engage in debt-for-nature swap agreements, particularly where transnational environmental benefits are evident. 

7. Reducing pressure on foreign exchange reserves 

Kenya spends significant portions of its budget on importing fossil fuels. E-mobility reduces this dependency, freeing up resources that can be allocated towards debt servicing, economic development, or other pressing social needs. The reduced need for fuel imports will strengthen the financial standing of the country, allowing it to better negotiate swap terms or use saved revenues to invest in more green initiatives.

8. Building infrastructure for a low-carbon economy

Investing in e-mobility helps in building supporting infrastructure such as EV charging stations, smart grids, and renewable energy generation. These infrastructures not only support cleaner transportation but can also facilitate other environmental and economic benefits, such as greater energy efficiency and decarbonisation. By demonstrating these long-term investments, Kenya can strengthen its case for debt-for-nature swaps by showing a clear trajectory toward a low-carbon future.

 Conclusion

Shifting to e-mobility provides a practical, multi-dimensional pathway for Kenya to enhance its position in debt-for-nature swaps. By aligning transportation reforms with environmental conservation, Kenya will not only meet the criteria for debt relief but also pave the way for sustainable economic growth and reduced environmental degradation. This strategy offers a win-win for both creditors and debtor nations, fostering long-term financial and environmental resilience.