Voluntary Carbon Markets Funneled $42 Million Into Clean Cookstoves in 2011: Report

COLOGNE | Germany | 8 June | Indoor pollution from coal-, dung- and wood-burning stoves and fire pits kills nearly two million people each year – including half of all children under the age of five who die from pneumonia – according to the World Bank.

Stoves and fire pits also generate hundreds of millions of tons of carbon emissions every year, which contributes to climate change and, ironically, has provided a vital role for funding the technology, according to the most recent State of the Voluntary Carbon Markets Report, which was released here last week.

According to the report, carbon funding for clean cookstoves soared at least 40% in 2011, with voluntary carbon markets providing at least $42 million for clean cookstove projects, in part because credits from projects that distribute clean cookstoves commanded an average price of $13.20 per ton of carbon dioxide equivalent reduced (tCO₂e). That’s more than $3/tCO₂e higher than the market average, the report says.

“You could potentially see billions of dollars flowing into this space over the coming years,” says Simon Bishop of the Global Alliance for Clean Cook Stoves, a two-year-old consortium of more than 350 entities that aims to distribute more than 100 million clean cookstoves by the year 2020. The report shows that scores of alliance members have used carbon finance to underwrite their activities, and Bishop says scores of others are looking to follow suit.

“Carbon finance can be used to tackle a whole variety of barriers that currently prevent the adoption of clean-cook stoves,” he says. “It can be used to improve the design of stoves, to run awareness-raising campaigns, and to support a whole variety of activities that bring down cost so that millions of more homes could potentially afford them.”

How They Work

Most clean cookstoves use the same inputs that people are used to – coal in cities and wood in the countryside – and they deliver efficiencies by concentrating the fire, as we saw when we visited the World Bank’s clean cookstove demonstration in Cologne:

The Economics

Locally-produced ceramic stoves that burn 40% less fuel cost anywhere from $20 to $60, and higher-end stoves can run to $100 – a pittance for most people in the developed world, but a month’s salary for people across the developing world.

That’s where carbon markets come in. An improved cookstove can last up to five years and reduce carbon emissions by up to three tons per year, says Bishop. That means carbon finance can more than cover the cost of individual stoves.

“You’re talking about up to 15 tons of revenue for a cook stove that can cost $30 – $100,” he says. “If you can get 15 tons of carbon revenue from a $30 cookstove, even at $4 per ton, that’s still double the cost of the actual stove in terms of carbon finance returns, and clearly if markets recover, the returns could be much higher.”

The Challenges

But carbon projects aren’t easy to launch. Just getting one off the ground costs anywhere from $150,000 to $200,000 and requires tedious validation and verification. What’s more, the newer stoves often require training and education – two key reasons it’s taken so long for this sector to ratchet up.

The report attributes the surge to new accounting methods that make it easier to aggregate lots of small actions, and to controversial rules that recognize avoided emissions from new cookerstoves.

Beyond the challenges of carbon accounting, cookstoves face what Bishop calls the “the four As”: accountability, awareness, availability, and affordability.

On the accountability front, he points out there are no globally recognized standards for clean cookstoves. On the affordability front, the best-performing stoves are still the most expensive. On the awareness front, most people still don’t realize how much pollution cookstoves generate. And on the availability front, stoves are heavy, fragile things that are difficult to transport a challenge made even worse by the fact that one size does not fit all.

“You need a wide range of stoves to meet local fuel available, different family sizes, and differing food tastes,” says Bishop. “This means entrepreneurs need portfolio of products, and that’s hard to do, especially for an infant industry with low capacity.”

The Role Of Carbon Finance

This is the first year that the State of the Voluntary Carbon Markets report tracks credits from clean cookstove projects as a unique category, and the report shows clean cookstoves 4% of global market share. In previous years, cookstoves were classified by survey respondents according to their underlying technology – as biomass or energy efficiency projects. As cookstoves attracted broad international attention in 2011, however, authors felt it was fitting to analyze these projects in their own right.

Clean cook stove technologies transacted 3.2 MtCO₂e in 2011, primarily from Africa-based projects utilizing Gold Standard guidance. While a comparison with 2010 data is not possible, this volume is 40% greater than transacted volumes tracked for energy efficiency and biomass combined in 2010 and so represents significant progress made in Africa’s traditionally project-challenged environment.

Projects that have been up and running for years are for the first time seeing large-scale credit issuance. Suppliers report that in the last year, supply of issued cook stove tonnes has begun to catch up with demand. They suspect that demand will continue to keep pace, too, as corporate offsetters increasingly consider cook stove credits to be a “catch all” CSR strategy – that unites humanitarian, environmental, and in some cases investment opportunities under one offset purchase.

Nevertheless, cook stove projects continue to face their own set of barriers to implementation, which include setting the right user price for the right stove – thus enabling continual and frequent use of the technology – and establishing sustained distribution channels through partners and programs that can deliver the stoves and provide proper monitoring services and training for end users.

“[The] distribution channel is the biggest missing link for post-2012 market actors,” says Erik Wurster of UpEnergy Group, one of a few cook stove pioneers that also include E+Carbon (which Wurster co-founded) and Impact Carbon. “Proper distribution channels are the critical ingredient for geographically disbursed projects such as cookstoves.”

As cook stove projects shifted from marginal to mainstream, they maintained a premium against the average market price. It remains to be seen, however, if they can retain this price as potentially large credit volumes come online. Suppliers of these offsets believe so, explaining that – much like forestry – the high price not only reflects the cost to implement and maintain the projects, but also corporates’ desire to support projects with community health and other social benefits.

“Even more than the emissions reduction element,” says ClimateCare CEO Edward Hanrahan, “buyers of [credits from] some of our projects are interested in supporting the reduced incidence of pneumonia from the use of cookstoves, or the purification of water and eradication of waterborne disease from the use of the LifeStraw. Projects like these are where we expect to see undersupply come through again next year.”

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