The National Treasury is planning to introduce a congestion charge that will be paid by polluting companies and motorists.

According to a proposal paper by the National Treasury, the congestion charge will also be used to fight traffic snarl ups in major urban areas like Nairobi.

In a document labeled the National Green Fiscal Incentives Policy Framework, the Treasury, did not specify how much motorists will pay as congestion tax set to target urban centers such as Nairobi, Mombasa, Kisumu, Eldoret and Nakuru.

”The government will explore the development of a congestion charging scheme in the cities, as a source of revenue for greening the sector,” says the document.

If adopted, Kenya will follow in the footsteps of European countries, such as London, where the Congestion Charging Scheme was launched to reduce the volume of moving vehicles.

Initially, the scheme covered a 22 square kilometer area but had almost doubled in size in February 2007.

Under the Treasury plan, companies will also be hit by a new tax for every tonne of carbon they emit from their plants if a government proposal to protect the environment is adopted.

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The government will set a price that emitters must pay for each ton of greenhouse gas emissions they emit. Businesses and consumers will have to take steps, such as switching fuels or adopting new technologies, to reduce their emissions to avoid paying the tax.

Companies, especially manufacturing plants, face a fresh carbon tax to encourage them to cut emissions.

The Treasury says the Carbon taxes levied on coal, oil products, and natural gas in proportion to their carbon content will hasten the switch to clean energy and promote the polluter-pays-principle, which requires polluting firms to bear the costs of managing or preventing environmental damage.

“Recognising the ability of carbon taxes to both cost-efficiently reduce greenhouse gas emissions and also to provide a revenue stream that can be used to meet broader government objectives, the government will explore the viability and design of a carbon tax in Kenya,” says the Treasury.

“Correct carbon pricing will send a right signal to markets and private investors which is pivotal in creating an enabling environment for private investment.”

The Treasury says that the next steps will be to design the carbon tax in the budget, decide its rate, who to pay and how to allocate the revenues raised.

Several countries, regions, and local governments worldwide have a carbon tax or something similar to an energy tax related to carbon content.

As of 2021, 35 carbon tax programs have been implemented worldwide. For example, British Columbia has had a carbon tax since 2008.

South Africa became the first African country to implement a carbon tax in 2019. In 2006, Boulder, Colorado, became the first U.S. city with a direct voter-approved carbon tax, and other cities are exploring the idea.