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Existing Finance Models for
Improved & Clean Cookstoves &
Potential for Innovative Auction
Instruments
ECOWAS Sustainable Wood Energy Workshop
Cotonou, Benin 10 May 2016
AGENDA
1. Introduction & Key Considerations
2. Biomass Cookstoves Business Models
3. Examples of Existing Clean Cooking Funds
4. New Opportunities
5. Conclusions & Recommendations
Around 3 billion people cook and heat their homes
using open fires and leaky stoves burning biomass
(wood, animal dung and crop waste) and coal.
In ECOWAS almost
80% of the total energy
demand comes from
traditional biomass and
over 90% of the
population uses wood
and charcoal
Inefficient cookstoves are estimated to be
responsible for about 25 per cent of emissions of
black carbon, a short-lived climate pollutant.
Fuelwood, roots, agricultural
residues and animal dug all
produce high emissions of carbon
monoxide, methane, non-
methane hydrocarbons, nitrous
oxide and particulate matter.
Black carbon emissions are the
second most important
contributor to global climate
change, behind carbon dioxide.
Residential stove and fuel improvements and
switches offer the highest net benefits per cost
Because black carbon
remains in the atmosphere
for only a few days, reducing
black carbon emissions is an
effective near-term strategy
for slowing global warming
and avoiding some of the
most imminent climate
change tipping points,
alongside energy efficiency,
health and security benefits.
KEY CONSIDERATIONS Solid Fuel Cooking (1/2)
Health:
Broad range of health conditions associated with Indoor Air
Pollution
Burns suffered by women and children from traditional fuels
Chronic and acute diseases due to firewood and firewood
collection
Environment:
Black carbon emissions warming effects
GHG emissions due to the use of inefficient fuel production
and consumption
Forest degradation and deforestation due to fuel collection
KEY CONSIDERATIONS Solid Fuel Cooking (2/2)
Economic:
Loss opportunities for income generation from time spent on
fuel collection and time spent on cooking
Avoidable spending on fuel due to reliance on inefficient
fuels and stoves
Reduced access to education
Gender:
Disproportionate effect on women and children
Reduced leisure time
Gender-based violence during wood collection
The Climate and Clean Air Coalition
(CCAC)
is the only global forum whose mission is to
support the fight against SLCPs.
It is a partnership between states, international
organizations and NGOs.
110
PARTNERS 50 governments
16 IGOs
44 NGOs as of Dec 2015
HOUSEHOLD COOKING AND
DOMESTIC HEATING Household Energy Initiative
Reduce emissions of BC and other
SLCPs from use of solid fuels in
inefficient cook and heatstoves,
and provide cost-effective health,
environment, gender and
livelihoods benefits.
INITIATIVE COMPONENTS TO DATE Spark Fund grantees:
Two projects were selected for Spark funding
SimGas, East Africa (biogas)
SME Funds, Nigeria (ethanol gel)
Development of standards and testing protocols to provide
clear criteria for evaluating emission reductions of black
carbon, PM and other SLCPs
Creation of high-level advocacy and global education to
raise awareness
Upcoming: Field testing linking cooking performance with
public health and climate co-benefits
Upcoming: Market assessment to identify organizations
willing to pay for results related to the reduction of BC
LESSONS LEARNT
• Policy makers are looking for cost-effective solutions like clean
cookstoves that can deliver climate benefits with other health,
economic, environmental, and gender co-benefits;
• To ensure maximum climate benefits of clean cookstoves,
standards must include BC emission levels
• Clean cookstove entrepreneurs and enterprises are open to
reducing emissions of BC and SLCPs from their technologies
but need technical assistance and financing to do so
• Clean fuels are a critical piece of efforts to reduce emissions
from the household energy sector
• While climate is a driver for donors, economics and health
benefits motivate most consumers to buy cleaner and more
efficient stoves and fuels.
FINANCE INITIATIVE Financing Mitigation of SLCPs
Objective:
Bolster financial flows towards SLCP mitigation
Why?
Lack and fragmentation of financing is an obstacle to
implement scaled - up SLCP mitigation measures.
Activities:
Black Carbon Finance Study Group (led by the World Bank)
Finance Innovation Facility – FIF (led by UNEP-FI)
Pilot Auction Facility for Methane and Climate Change
Mitigation –
http://www.pilotauctionfacility.org/content/second-auction-
videos
Subsidies play a very important role in developing
cookstoves markets – With a few exceptions, business
models use subsidies to reduce the cost of stoves to end-
users.
Role of carbon finance – for the most part, the subsidies
come from carbon finance
Given the recent downturn in carbon markets, businesses
and organisations (unless they have a direct private buyer)
put themselves at risk if carbon finance is the cornerstone
of their business model.
Source: Building Business Cases to Reach Scale: A Study on Biomass Cookstove Business Models in Asia and Africa (geres, GIZ, 2014)
OVERVIEW OF CLEAN AND
IMPROVED COOKING ECOSYSTEM
Source: The State of the Global Clean and Improved Cooking Sector (ESMAP, GACC, July 2015)
Government agencies/Programs
- Implement policies
- Manage subsidies/incentives
for stove distribution
- Support market
transformation
Donors:
- Support setting up market in
weak or non-existing
markets
- Support national level
change through focal points
NGOs:
- Support commercialization
and sustainability of market
- Provide support to market
players (training, education,
dissemination of coosktoves)
Fuel and stove suppliers
- Develop new designs
- Produce stoves
- Distribute stoves at regional
and country levels
Finance providers
(commercial banks, MFIs,
MDBs, impact investors):
- Develop innovative finance
models
- Finance project developers
Research & testing centers:
- Innovate new designs
- Execute lab and field
testing of stoves
- Conduct market studies,
M&E
Coordinating Platforms
- Coordinate diverse
actors for joint-advocacy
and resource
mobilisation
- Disseminate, aggregate
and provide knowledge
and standards
FINANCING NEEDS Manufacturers vs. consumers
Financing need ($) Purpose Challenges
Manufacturers &
fuels suppliers
250,000 – 10m Initial capital for R&D
and assets production
Working capital
Trade finance for
inputs
Substantial capital
required for scaling
up production
MSMEs = the
“missing gap” in
emerging economies
Distributors
25,000 – 2m Trade finance for
imports
Working capital for
growing distribution
network
Lack of collateral
High interest rates
Missing middle SMEs
Retailers 300 – 10,000 Working capital to
purchase stove for
sale or rental
Capital to extend
credit to end users
Few financial
institutions focus on
RE microfinance
Missing middle
MSMEs
Consumers 5 – 100 (up to $
1.5k for
biodigesters)
Upfront costs of
stove/biogas digester
Upfront costs are
often too high for
clean tech.
Source: The State of the Global
Clean and Improved Cooking
Sector (ESMAP, GACC, July 2015)
FINANCING GAPS Supply vs. demand side
Supply side: Capital investment & working capital
Key constraints: small size and informality of operations make
the investment seem too risky for commercial banks. The low-
profit nature of the business limits access to commercial capital.
Demand side: Lack of willingness to pay
Key constraints: Lack of awareness of health impacts &
access to finance
FINANCING SOLUTIONS FOR
SUPPLIERS – PARADIGM SHIFT
Early efforts mainly donor driven (ODA)
1990’s: For-profit initiatives succeeded in achieving
sustainability and disseminated clean technologies
while generating local economic value (triple bottom-
line)
EXAMPLES OF SUCCESSFUL BIOMASS
COOKSTOVES BUSINESS MODELS (1/2)
Atmosfair, Rwanda
The carbon revenues are used to reduce the price of the
Save80 stove for end-users. Furthermore carbon revenues
help to bring more stoves to refugees and to communities
adjoining the camps.
http://carbonfinanceforcookstoves.org/connect/profile/2014/
EXAMPLES OF SUCCESSFUL BIOMASS
COOKSTOVES BUSINESS MODELS (2/2)
ClimateCare, Gyapa stoves, Ghana
Carbon finance is used to support local business through
working capital support, marketing, business and technical
training and capital investment.
Largest social impact of any cookstove program in the
world. http://carbonfinanceforcookstoves.org/connect/profile/2324/
EXAMPLES OF INNOVATIVE BIOMASS
COOKSTOVES BUSINESS MODELS
Project SURYA, India
Technology enabled model with mobile payments to end-
users and embedded mobile control technology
Inyenyeri, Rwanda
Social enterprise which provides pellet stoves, cross-
subsidizing rural/urban customers.
Impact investors (ex. Acumen, Omidyar Network)
Commercial financial institutions (ex. Deutsche Bank)
Concessional finance (MDBs, bilateral development banks)
Credit guarantee schemes (ex. USAID)
Microfinance institutions (ex. FINCA)
EXAMPLES OF EXISTING CLEAN
COOKING FUNDS AND FACILITIES (1) Global Alliance for Clean Cookstoves Spark Fund
Spark grants of up to $500K target the specific capital and
capacity building needs of venture and growth stage
enterprises with less than $500,000 - $1 million in revenue
EXAMPLES OF EXISTING CLEAN
COOKING FUNDS AND FACILITIES (2) Deutsche Bank Clean Cooking Working Capital Fund
The fund will deploy working capital loans and loan
guarantees to enterprises that are not able to access more
traditional forms of debt financing.
This fund will make available 3–5 year flexible financing of
$100,000–400,000 with interest rates of less than 10
percent. The aim is to operate the facility for 7–10 years,
and to grow and adjust it over time based on the needs of
the sector as it continues to mature.
EXAMPLES OF EXISTING CLEAN
COOKING FUNDS AND FACILITIES (3)
BIX Fund
The Base of the Pyramid Exchange Fund (BIX Fund)
provides upfront finance to social enterprises looking
to deliver and monetize social and environmental
impact.
EXAMPLES OF EXISTING CLEAN
COOKING FUNDS AND FACILITIES (4)
USAID Loan Guarantee Facility
In November 2014, USAID and SIDA launched a
facility that will guarantee up to $100 million in
private financing to support the development of
household technology products – including
cookstoves, solar lanterns and water filters.
OPPORTUNITIES
1. NAMA – Sectorial strategies
Nationally Appropriate Mitigation Action
Interest for sector level activities
Certification, technical norms, etc
2. (I)NDC – Integration in national strategies
Intended Nationally Determined Contribution
Definition of national priorities and mitigation and
adaptation objectives
Some countries have cookstoves in their INDCs
OPPORTUNITIES (continued)
3. COP – Reinforcing carbon markets
COP20 Lima, COP21 Paris,COP22 Marrakesh
Paris agreement, soft but overall commitment, potential
markets, the importance of private enterprise
4. GCF – Mitigation and adaptation finance
Green Climate Fund
USD 100 billion / year
Interest in cookstoves, gender impact and RBF
Several cookstoves initiatives already under way
OPPORTUNITIES (continued)
5. Health RBF
Gold Standard Black Carbon methodology – reduction
potential
aDALYS methodology – PM 2.5 exposure
6. Global Alliance for Clean Cookstoves
Enterprise Development and Investment Programs
Women’s Empowerment Fund
GLOBAL ALLIANCE FOR CLEAN
COOKSTOVES
Spark Fund
Capacity Building
Facility
Catalytic Small
Grant Fund
Facility to scale
up Commercially
Viable
Enterprises
Pilot Innovation Fund, Women’s Empowerment Fund
Working Capital
Fund
RECOMMENDATIONS
Cookstoves business models vary according to the
type of initiative being implemented (NGO, private,
social business, …) – so do the investment needs!
Important to consider:
- business phase (start-up vs. scale-up)
- market readiness
- existing regulatory framework (ex. Rwanda)
- local socio-cultural context
Thank you!
ccac_secretariat@unep.org
@CCACoalition | facebook.com/ccacoalition
www.ccacoalition.org
Yekbun Gurgoz
Finance and Cookstoves Initiative
Coordinator
yekbun.gurgoz.affiliate@unep.org
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