What innovative financing is needed to unlock access to clean cooking in Africa?

Financing for clean cooking is relatively rare in Africa. But last April, the start-up Burn managed to raise $12 million to develop its activities in sub-Saharan Africa. Carbon financing was obtained from Key Carbon (formerly Carbon Neutral Royalty) to implement its clean cooking solutions in the Democratic Republic of the Congo (DRC), Kenya, Zambia, Uganda, Tanzania and Nigeria.

This is undoubtedly the largest funding granted since early 2024 to a clean cooking solutions provider in sub-Saharan Africa. At the moment, this sector attracts very few institutional investors. Among the few that have come forward in recent years is the European Union (EU), which has provided €12.5 million to Zambia as part of the Modern Cuisine Fund for Africa (MCFA) launched by Sweden to support private companies that develop and sell clean foods. kitchen services.

Using carbon credits

In the absence of traditional funding to support access to clean cooking, relatively new solutions are re-emerging. These include carbon credits. According to carbon finance experts, a carbon credit is a unit equivalent to one ton of carbon dioxide (CO2) avoided or hijacked. For example, a tree planting project that sequesters 10,000 tons of CO2 could lead to the allocation of 10,000 carbon credits if it meets a number of criteria, including measurability, permanence, verifiability, uniqueness and additionality.

Read also- AFRICA: Aera and Ecosphere+ will sell carbon credits for clean cooking

These carbon credits can be purchased by companies, local authorities and even individuals committed to a voluntary approach to finance climate-friendly projects. “For companies, this is generally part of a strategy to offset their emissions (…). “Companies can purchase carbon credits directly from project developers or through specialized companies that hold a portfolio of carbon credits (traders), but they have no role in the implementation of the projects.” explains Grégoire Guirauden, co-founder of Riverse, a Paris-based start-up specialized in carbon credits.

A controversial solution

Except the use of carbon credits is sparking protests almost everywhere in the world, including Africa. The controversy arises from the complexity of verification, especially for projects that supposedly prevent deforestation. Worse still, carbon credits would slow down the necessary process of decarbonizing the activities of certain large polluters.

Read also- In Africa, “the carbon market will give carte blanche to polluters”

In an interview with Afrik21 a few months ago, the executive director of Greenpeace Africa stated that the development of the carbon market in Africa “will give carte blanche to polluters.” In fact, “allowing multinationals to acquire carbon credits is almost a license to pollute,” says Oulie Keita. This position further undermines the use of carbon credits, which appear to be boosting access to clean energy in East Africa.

Financing through green bonds

In recent years, several players have positioned themselves in the trade of carbon credits for clean cooking on the continent. This is the case of the Swiss Gold Standard, which now works in collaboration with the Clean Cookery Alliance (CCA) and the United Nations Framework Convention on Climate Change (UNFCCC). There is also French negotiator Aera, which is working on clean cooking with nature-based offset solutions provider Ecosphere+.

Players in the clean cookstove sector are also interested in the potential of green bonds, which have generated $2.2 trillion in issuance worldwide in 2022. According to the African Development Bank (AfDB), Africa It represented only 1% of the financing. In this context, Burn launched the first green bond issuance in the clean cooking sector south of the Sahara. The proceeds of the bond, for a total of 10 million dollars, will allow the start-up to increase the production capacity of environmentally friendly stoves at its Ruiru plant, located more than 25 kilometers from Nairobi, the capital of Kenya.

An estimated investment need of 8 billion dollars

At the same time, the company plans to open a new factory in Lagos, Nigeria’s largest city with an estimated population of more than 20 million. Burn intends to increase its production capacity from 400,000 to 600,000 units per month for the sub-Saharan market. These investments are necessary to recover the ground lost in recent years. Around the world, funding for access to clean cooking has lagged behind. However, 2.4 billion people still use polluting stoves and fuels to cook their food.

According to the World Bank, 900 million people in sub-Saharan Africa lack clean, modern energy for cooking. This situation favors deforestation and causes the loss of 35 billion dollars a year in costs of wood, charcoal and paraffin. In a report published in August 2023, the AfDB and the International Energy Agency (IEA) estimate that $8 billion will need to be invested each year until 2030 to achieve universal access to clean cooking in Africa. In 2022, investment in clean cooking in Africa surpassed the $200 million mark for the first time, according to the CEC. There is still a long way to go.

Jean-Marie Takouleu

Related Articles

Back to top button