Kenya Relies on Energy and Transport Taxes Over Green Levies

Kenya is among the top African countries in collecting environment‑related tax revenue, driven mainly by transport and energy levies rather than pollution or natural resource taxes, according to revenue data that highlights the country’s fiscal stance on climate‑linked taxation. In 2023, environment‑related taxes, largely made up of excise duties on petroleum products, amounted to about 2.1 percent of GDP, split between energy and transport taxes, while pollution and resource levies yielded no revenue, placing Kenya behind peers with more diversified green tax regimes. The emphasis on fuel and transport levies — such as excise duties and related charges — underscores the government’s use of existing fiscal instruments to mobilise revenue despite limited deployment of price mechanisms that discourage carbon‑intensive activity. This approach contrasts with more advanced economies, where pollution and emissions taxes form a larger share of such revenues and act as stronger incentives for behavioural change.

Data from the Organization for Economic Co‑operation and Development shows other African economies are similarly constrained in green levies, but some, like Seychelles, record higher environment‑related tax ratios thanks to significant energy and transport taxation. The limited use of pollution and resource taxes points to untapped fiscal potential, especially as Kenya seeks to finance climate adaptation, energy transition and waste management initiatives. Draft green fiscal policy frameworks propose new levies and incentives, including potential changes to transport fuel taxation and mechanisms to promote sustainable waste management, but these remain at the planning stage. As pressure increases on governments to align fiscal policy with climate commitments, how Kenya expands its green tax mix could influence investment flows and support for sustainable infrastructure without raising headline income tax rates.