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MAKING CARBON FINANCE WORK FOR CLEAN COOKING
Carbon finance has been an important driver of clean cooking in recent years and is seen by many stakeholders as the most promising route for scaling up investment. Carbon finance is essentially a results-based financing mechanism, financed through the global market in carbon credits. Payment is linked to veri- fied emission reductions, achieved by replacing inefficient cooking devices with clean ones. Clean cooking is an attractive investment for carbon financiers, given its ability to combine emissions reductions with other benefits such as improve- ments in health and gender equality. Clean cooking companies can use carbon finance to lower their prices and scale up their businesses. It also facilitates their access to commercial finance. While the potential is large, there are issues that need to be resolved to unlock car- bon finance at the scale needed. One challenge is reaching international agreement on a common methodology for calculating and verifying the value of credits. This is made challenging by the wide range of possible clean cooking solutions, each with different emissions characteristics. Investors are cautious, given that some previ- ously negotiated carbon offsets proved to be overestimated. 123 The Clean Cooking and Climate Consortium (4C) is a partnership formed to ad- dress this challenge. It is leading a sector-wide effort to develop a new method- ology for crediting emission reductions from cookstove projects. In July 2024, 4C released the draft of a new methodology for crediting emission reductions from cooking projects under the name “Comprehensive Lowered Emission Assessment and Reporting (CLEAR) Methodology for Cooking Energy Transitions.” It is open for public comments. 124 It is the first methodology to be applicable to all cook- ing transition scenarios, including metered and non-metered fuels. 4C intends this new methodology to become the standard for cookstove projects under the Paris Agreement (Articles 6.2 and 6.4) and the voluntary carbon market. It is accompa- nied by efforts to build trust in clean cooking credits such as through the develop- ment of a code of conduct among project developers to ensure that clean cooking credits are high quality. A second challenge is finding cost-effective means of verifying emission reductions. The verification requirement is pushing companies to adapt their business models, take on new costs such as sensors for measuring use and emissions and additional staffing to ensure accurate recording and verification of customers. While there is value to the companies in these investments, they may not be sustainable without continuing carbon finance. Companies therefore face difficult choices as to wheth- er to assume long-term access to carbon finance or to develop strategies for tran- sitioning out of business models driven by the demands of carbon finance.
123 The Economist (Dec 2023) Can the carbon- offset market be saved?, https://www.economist. com/finance-and-economics/2023/12/20/can-the- carbon-offset-market-be-saved 124 Clean Cooking Alliance, CCA-led 4C Releases Draft Comprehensive Clean Cooking Carbon Methodology, published July 1, 2024, https:// cleancooking.org/news/cca-led-4c-releases-draft- comprehensive-clean-cooking-carbon-methodology
4. OPTIONS FOR SCALING UP CLEAN COOKING
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