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04 Jun 2024

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

clean cooking, renewable energy, climate change
Jean Marie Takouleu
clean cooking

While the electricity sector is attracting more and more funding, clean cooking remains the poor relation of the energy transition in Africa. The sector does not seem to be attracting any major financial backers. That's why players in the sector are now turning to innovative financing. Afrik21 takes stock at the Energy Access Investment Forum (EAIF 2024).

Financing for clean cooking is relatively rare in Africa. But last April, the start-up Burn succeeded in raising 12 million dollars to develop its activities in Africa south of the Sahara. The carbon financing was raised from Key Carbon (formerly Carbon Neutral Royalty) to roll out its clean cooking solutions in the Democratic Republic of Congo (DRC), Kenya, Zambia, Uganda, Tanzania and Nigeria.

This is undoubtedly the largest financing granted since the beginning of 2024 to a provider of clean cooking solutions in sub-Saharan Africa. For 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 for Zambia as part of the Modern Cooking Facility for Africa (MCFA) launched by Sweden to support private companies that develop and sell clean cooking services.

Using carbon credits

Faced with the lack of traditional funding to support access to clean cooking, relatively new solutions are resurfacing. These include carbon credits. According to carbon finance experts, a carbon credit is a unit equivalent to one tonne of carbon dioxide (CO2) avoided or sequestered. For example, a tree-planting project that sequesters 10,000 tonnes of CO2 could give rise to the allocation of 10,000 carbon credits if it meets a number of criteria, including measurability, permanence, verifiability, uniqueness and additionality.

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

A controversial solution

Except that the use of carbon credits is provoking an outcry almost everywhere in the world, including Africa. The controversy stems from the complexity of verification, especially for projects that are supposed to prevent deforestation. Worse still, carbon credits would slow down the necessary process of decarbonising the activities of certain major polluters.

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

Financing via green bonds

In recent years, a number of players have positioned themselves in carbon credit trading for clean cooking on the continent. This is the case of the Swiss Gold Standard, which is now working in partnership 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 cooking sector are also interested in the potential of green bonds, which have generated $2,200 billion of issuance worldwide in 2022. According to the African Development Bank (AfDB), Africa accounted for just 1% of the funding. It is against this backdrop that Burn has launched the first green bond issue in the clean cooking sector south of the Sahara. The proceeds of the bond, totalling $10 million, will enable the start-up to increase the production capacity of environmentally-friendly stoves at its Ruiru plant, located more than 25 km from the Kenyan capital Nairobi.

An estimated investment requirement 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 over 20 million. Burn aims to increase its production capacity from 400,000 to 600,000 units per month for the sub-Saharan market. These investments are needed to make up for the lost ground of recent years. Worldwide, funding for access to clean cooking has lagged behind. Yet 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 encourages deforestation and leads to the loss of 35 billion dollars a year in expenditure on wood, charcoal and paraffin. In a report published in August 2023, the AfDB and the International Energy Agency (IEA) estimate that 8 billion dollars will have to be invested each year until 2030 to achieve universal access to clean cooking in Africa. In 2022, investment in clean cooking in Africa passed the 200 million dollar mark for the first time, according to the CCA. There is still a long way to go.

This blog is authored by Jean Marie Takouleu, a writer with Afrik21. It is originally published on Afrik21

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