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The climate crisis demands urgent global action. Green technologies—like solar panels and clean cookstoves—have the potential to transform lives and protect the planet but remain out of reach for many in developing economies. Can carbon markets make them more accessible?
Voluntary carbon markets (VCMs), where companies purchase carbon credits to offset greenhouse gas emissions, are rapidly gaining traction. These markets hold immense potential to enable the adoption of green technologies among low-income households on the frontlines of climate change and improve their lives.
In this episode, we take a deep dive into VCMs to hear from ATEC about their pay-as-you-go electric cookstoves, which aim to decarbonize cooking through verifiable tech, how Gold Standard issues carbon certifications, and why CGAP sees a promising role for financial services in supporting more inclusive carbon markets.
This is Season 2, Episode 5 of CGAP's podcast, Inclusive Finance Frontiers.
Featured Voices
- Ben Jeffreys, CEO, ATEC
- Vikash Talyan, Senior Director of Standard Development and Innovation, Gold Standard
- Max Mattern, Senior Financial Sector Specialist, CGAP
Listen and subscribe for free on your favorite platform. To learn more, visit www.cgap.org. To share feedback, connect with us at podcast@cgap.org.
Transcript
Max Mattern: The projects that are actually designed to either remove carbon from the atmosphere or avoid potential emissions, the majority are now located in developing countries. And the demand for these credits that are produced by these carbon projects are mostly in the industrialized, the developed world. And so what this represents is an opportunity to channel climate finance directly to those who need it most.
Lamis Daoud: The climate crisis is intensifying, and that demands urgent global action. The UN warns we must remove 6 billion tons of carbon from the atmosphere—but, with fast rising temperatures, time is running out.
Despite rapid advancements in green technologies like renewable energy and regenerative agriculture, which are increasingly common in the U.S. And europe, they remain inaccessible for many in developing countries. The UN also warns that a majority of developing nations will miss out on the benefits of the green technology boom if the international community and national governments don’t act quickly.
So how do we ensure a truly inclusive, green future for all? One solution may be right in front of us: carbon markets.
Hello and welcome to this episode of inclusive finance frontiers, a cgap podcast. I’m your host, lamis Daoud.
Today, we’re talking voluntary carbon markets, or VCMs. You might think of them as carbon credits or carbon offsets, that companies can voluntarily purchase through marketplaces to reduce their unavoidable greenhouse gasses – or GHG
While a bit complicated, a VCM is actually much like a commodity marketplace: buyers, sellers, and brokers. But in this case, what is being traded is carbon.
It goes a bit like this:
Project developers invest in initiatives that either remove carbon from the atmosphere or avoid the release of greenhouse gases. Such green technologies and practices can be anything, from big hydro plants to community-based projects like solar panel installations and clean cookstoves.
For voluntary carbon markets, these initiatives are certified by accredited non-governmental and non-profit organizations, which then issue carbon credits. These credits can in turn be purchased by companies and other organizations seeking to voluntarily offset their ghg emissions.
Demand for carbon is strong and expected to grow. In 2020, the value of global carbon credits purchased was valued at just over $500 million us dollars. In 2021, it reached almost $2 billion… and within the next decade, it’s expected to rise sharply, with estimates reaching between $10 and $40 billion dollars.
Suffice it to say, it’s a growing market in carbon credits.
Despite its expected growth, there are lots of challenges ahead for voluntary carbon markets, not least of which is the intense debate within the climate community over their effectiveness.
Today, we’re going to hear from experts in the field to learn more about voluntary carbon markets, how they work, and what the potential can bring to low-income communities around the world. We’ll hear from those who are actually putting the work into practice in developing nations, and the challenges and opportunities ahead. Put simply… for a solution to scale globally and help those who need it most, it needs to reach the last mile.
Lamis Daoud: One company working in Cambodia and Bangladesh and selling carbon credits is ATEC Global. ATEC -- short for appropriate technology – is on a mission to decarbonize cooking through biodigesters, clean cookstoves and technology. It designs its products alongside the households and communities it wants to serve... An important step to ensure that its products are solving problems effectively. We spoke with Ben Jeffreys, their CEO.
Ben Jeffreys: If you look at, globally, people cooking with wood, it's still around half the world's population cook with some type of wood or biomass, and that releases around one gigaton of carbon emissions every single year. That's about 2% of global emissions, which is actually more than the global airline industry. So, solving this problem is actually one of the biggest environmental outcomes, and tangible, achievable environmental outcomes we can have in the global combat for global warming.
Lamis Daoud: But that’s not the only benefit. Solutions like those provided by ATEC hold the potential to improve the lives and livelihoods of millions across the developing world. ATEC’s cookstoves use a cook-to-earn model… piloted in 2023.
Imagine being a low or middle-income household that gets paid while you cook your own family meals because you are using technology that is better for the climate.
Ben Jeffreys: This is actually a commercial transaction that these households are undertaking. They're actually providing a service effectively of what our stoves are. One way to describe them is a carbon credit mining device that's actually sort of utilizing energy to be able to then verify an issue, a tokenized credit.
This is a huge inclusion piece. They can then connect in with global carbon markets, receive that benefit, help the planet, which they're on the forefront of climate change quite often for as well, and then that starts to open out other products and services and opportunities to them once they have that, sort of, global connection out there as well. So to us, it's a pretty exciting frontier.
Lamis Daoud: ATEC doesn’t just distribute clean cookstoves and hope that they make an impact. Its induction cookstoves are connected through sim cards and are 100% data-verified in real time. This allows ATEC to accurately track avoided emissions from the use of their cookstoves, issue carbon credits based on the data, and distribute revenues to users based on their actual contributions.
Using this data flow, customers can receive incentivized payments in mobile money accounts.
Ben Jeffreys: Quite often when it comes to providing a good cooking solution out to a household that's good for the environment and people, you quite often got the challenge of getting the fuel to the customer in a way that actually works. The beauty of electric cooking is you're basically piggybacking large scale infrastructure electrification that's happening in these countries. And it's happened very rapidly over the last few years.
You take somewhere like Bangladesh, 99% of households now have access to grid electricity. That's pretty consistent across most of asia now. What we saw as a big value was that ability to track every bit of usage, so the electricity consumption, and then utilize that to provide a fully verifiable and auditable carbon credit into markets, which we think is a very key component of really scaling carbon markets in the developing world over the next 20 years.
Lamis Daoud: ATEC’s modern energy cooking project has been validated by gold standard, a leading carbon standard organization. This signals a new digital era for clean cooking projects based on 100% verifiable usage data off of every device.
We spoke to Vikash Talyan, senior director at the aptly named “Gold Standard,” to learn more about VCM standard programs.
Vikash Talyan: Gold standard is one of the leading voluntary carbon market standard. Its role is to design and develop the methodologies and the standard for different kind of project that it certifies, to ensure that the project is designed as per its requirement and best practices that we have. And the impact that project is creating is measured accurately. The primary objective to establish Gold Standard was to ensure that every carbon market project not only reduce the GHG emissions but also goes beyond. It delivers the impact on ground and the project is designed following the best practices, to ensure there is no harm to environmental society.
… Cooking, lighting, access to water and waste management. These were the kind of project that we started with. Later on, we had the forestry and deforestation kind of activities and expanded the scope. But broadly, focus has always been to the project which delivers the impact on ground.
Lamis Daoud: So how does the certification process happen? How do they measure carbon and certify that a project is doing what it says it’s going to do while meeting a minimum standard of offset production or carbon removal?
Vikash explains it in two steps.
Vikash Talyan: The first step is the project design validation. When the project is started, at that point, there are two key requirements. One is that project must be designed in consultation with local stakeholders. Their opinions would be taken especially on the impact that project will deliver and any potential negative impact if it has, or it may cause, how that will be addressed.
The second step is a verification check of the project's performance. That is basically how project has performed in the real-world condition. At this point also, a third party verifies the amount of GHG that project has delivered and the sustainable impact that project is basically delivered to the communities. The verification step is repeated every other year or at a more than a year timeframe, depending on what is the period included in the project verification. And a project can have monitoring for over 10 to 15 years, depending on the creating cycle of the project and can claim carbon credits and other impacts accordingly.
Lamis Daoud: ATEC’s certification and connection to global carbon markets has allowed the company to scale through wider adoption.
Oftentimes, and especially in developing nations, the barrier to entry for many customers is the initial cost of purchasing a product, even if it will save families money in the long run.
Max Mattern leads CGAP’s work on financial services for inclusive carbon markets. He explores how financial services can support climate mitigation, adaptation, and a just transition by opening the doors to voluntary carbon markets to low-income communities.
Max Mattern: One of the main reasons that we began to focus on the role of voluntary carbon markets is that what we see is that despite the fact that in many cases, because of technological innovations that are bringing down the costs of green technologies, despite that these remain out of reach for many people living in poverty and especially people who are living in harder to reach rural areas in lower and middle income countries. Although prices are coming down and these technologies are becoming more competitive cost-wise with incumbent carbon intensive alternatives, the fact is that the upfront cost, so the capital expense required to actually purchase these, is still prohibitively high.
Lamis Daoud: So what does this mean for households already struggling to pay their children’s school fees... Or put food on the table? It means they’re going to miss out on participating in and benefiting from voluntary carbon markets by opting for more incumbent polluting technology.
And if the masses aren’t demanding green technology because of the high price tag, businesses are not going to make the investments to provide them. This is a lose-lose situation. The customers lose out on a benefit and the environment suffers.
Max Mattern: The projects that are actually designed to either remove carbon from the atmosphere or avoid potential emissions, the majority are now located in developing countries. And the demand for these credits that are produced by these carbon projects are mostly in the industrialized, the developed world. And so what this represents is an opportunity to channel climate finance directly to those who need it most. And so we've seen through our research, through our conversations with key stakeholders in the carbon finance space, that there are emerging use cases where carbon revenues are being used to actually expand access to green technologies, more sustainable practices in ways that really do have incredible development benefits for people living in poverty.
Lamis Daoud: For companies like ATEC, which links their customers to financial services in their business model, it can really open the door to even more opportunities beyond contributing to a greener future.
Ben Jeffreys: Half the world's population is sitting through their current practices of cooking with wood on in our estimate, of $32 billion a year carbon market opportunity. So, that's a revenue stream that can be unlocked with the right technology and utilized by those households in the developing world to accelerate their development, but not through a handout or anything like that. So, that's super exciting. We think that's going to have a huge impact on the environment, but also, at the same time, a huge impact on the lives of households in the developing world too.
Lamis Daoud: Even more, the opportunities go further than big picture decarbonization. Where these clean cookstoves are being used, women are able to save time and reinvest that time and energy back into their households and communities.
Max Mattern: Because of gendered social norms, in many cases, household tasks, like say I'm collecting firewood for cooking and actually doing the cooking itself, those burdens often fall on women. And so by adopting greener technologies like clean cookstoves, we have evidence that it saves considerable time. So women have to spend less time going out from their homes to collect firewood. The actual act of cooking is quicker and more efficient. And so that frees up time for women to invest in their livelihoods.
Lamis Daoud: Clean cookstoves also improve health and longevity.
Ben Jeffreys: Cooking with wood is actually the leading cause of premature death in women. It kills around three and a half million women every year, and so it has a huge impact on health and also child malnutrition as well. So, being able to solve this not only helps the environment but will really create a stronger and robust household for the future as well.
Lamis Daoud: To ensure that low-income communities have access to green technologies and more sustainable practices, many businesses have models that rely on and are enabled by financial solutions.
Ben Jeffreys: Obviously, the stove costs money, we do want people to put in a little bit, but people put in a small contribution, typically 10 to $20. And then the rest of the stove, which generally works out around, sort of, a cost of around about $80 to $90, is then project financed with carbon finance. And so, when the people get the stove, that first, sort of, goal is for them to start using the stove. We provide incentives and other options there to support that and to be able to pay off the financing on that stove initially. And then for us is the ability then to continue that relationship because that's done in the first few years where they actually sharing the revenue of the carbon credits that are generated over time and receive them as direct payments into their mobile money account.
Lamis Daoud: According to Max, financial services can enable participation in voluntary carbon markets, but voluntary carbon markets can also enable advancements financial inclusion in terms of its breadth, depth and utility, or value-add.
Max Mattern: For most of these customers, this was the first formal financial service that they had interacted with. This was the first time that they were getting formal credit. And we saw some of CGAP’s partners, we worked to think about how do you actually leverage that new credit history, that new relationship with formal financial services to really expand and deepen their financial inclusion.
These are not financial services just for consumption loans or what have you. These are financial services that are helping people to improve the health and overall well-being of their families.
Lamis Daoud: It’s green tech. It’s financial inclusion. And it’s moving to scale. Now, ATEC operates in 13 countries around the world and works with local distributors who have a deep understanding of local markets.
Ben Jeffreys: We sell that predominantly to existing distributors in markets rather than setting up our own entity in the country. And we think that's really necessary in order to be able to hit the scale of solving and decarbonizing cooking over the next 20 years. We can't do it alone. Working with those local distributors, they have the understanding of the local market conditions, they have the understanding... quite often, existing customer databases from, say, a pay-go business or another cooking-related or product-related business, that they can then support that fast adoption of electric cooking out into those markets. And then that's sort of supported or underpinned, by a large-scale, carbon project that makes it affordable and attractive to be able to rapidly adopt the technology.
Lamis Daoud: But with all this optimism in opportunity, Max warns against the social impact credit trap. There’s a fine line between financial services empowering low-income customers and harming them through over-indebtedness, non-transparent loan terms and predatory practices... Even if we’re talking about financing for a green transition.
Max Mattern: We need to ensure that first of all, customers are only taking on the amount of debt when we're talking about credit that they can afford. We need to make sure that there's transparency in how those loans are being marketed to customers. And I also think that it's important to note that responsible lending is just good business practice when it comes to green asset financing.
We need to make sure not only that the technologies or services that we're providing actually realize the benefits that we've promised, right? With all of these benefits of a green transition, the important thing is that once a household actually does purchase and invest in a new technology or practice, it should actually have those benefits. Otherwise, we're just expecting people to pay to mitigate emissions and address a climate crisis that they largely had no role in creating in the first place.
Lamis Daoud: Also, measurement and accountability remain crucial in this equation, as vikash at gold standard knows so well.
Vikash Talyan: As carbon market is evolving, stakeholders are becoming more familiar with the needs of such an element in overall design of the project. There is a willingness to further improve current practices and also ensure that carbon market project delivers the meaningful impact on ground. There are several voluntary carbon market standards already working for almost two decades in this domain. This collaboration, among all the carbon market players, is more learning from each other, raising the bar further, to ensure that every carbon market project contributes to climate change issue. And also, it follows the best practices to have robust monitoring around the sustainable development impact on ground. So all in all, the collaboration is more to harmonize the approaches that are already there in the practice and also raise the bar overall.
Lamis Daoud: If inclusive voluntary carbon markets could finance a just transition, what should come next?
Max Mattern: So one of the things that we’re trying to do is to advocate for blended finance facilities or other approaches, patient capital, for example, to really provide some of these early-stage inclusive projects with the capital they need in order to scale.
The second thing that we're trying to do is to really more closely link the price of carbon to the social benefits that carbon projects provide. We have an obligation to ensure that that green transition, those mitigation steps have important social and development benefits.
Lamis Daoud: That’s all for today’s episode.
I want to thank our guests Ben, Max, and Vikash, for joining us to talk about a fascinating topic, and thank you so much for tuning into this episode of inclusive finance frontiers. I’m your host, Lamis Daoud.
For more information on our work on voluntary carbon markets and inclusive finance, please visit cgap.org.
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