A recent story in The Hindu Business Line explores how Shell Foundation and Envirofit are reducing the cost of cookstoves for end-users by leveraging the sale of carbon credits.
Providing improved cookstoves affordably is a challenge for all organisations working in the IAP space. As Shell Foundation and Envirofit learned in the Indian and African markets, simply building awareness of the problem and providing a strong product offering aren’t enough. If the stoves aren’t priced competitively relative to the traditional alternatives, they simply won’t sell.
Manufacturers need to lower costs of production but price sensitivity is so great that this may not be enough, certainly not in the short-term. So how else to reduce the price to end-users? Government and charity subsidies are helpful – but to operate at scale a more stable form of cost offset is required. By leveraging carbon credits to offset manufacturing costs, Shell Foundation and Envirofit aim to provide a reduction in the retail price of cleaner cookstoves.
Pradeep Pursnani, Business Director of Shell Foundation’s cleaner cookstoves programmes, explains:
“In Africa, we found a lot of demand for the clean charcoal burning stove, but affordability was a big question. So, to help bring down its cost, we started a Shell Foundation Envirofit Carbon Fund with a corpus of up to $1 million. The Fund is independent and technology agnostic and will provide tailor-made solutions to stove manufacturers, women's groups and MFIs to make sale and purchase of stoves affordable. The fund will now be enhanced to $5 million to cater to India as well. A stove that costs around Rs 1,500 would be available for around Rs 1,000 to rural families."
Explaining how the carbon credits model for offsetting cookstove costs works, Pradeep continues:
“Stove manufacturers sell the reduced emission stoves at a discounted price, and recover the difference from sale of carbon credits. Though the stoves have the advantage of product quality, manufacturers are likely to see carbon revenues only flow in after 2-3 years. This means the manufacturers are left short of working capital. This is where Shell Foundation will step in. Its carbon fund for stoves will fund the subsidy and later recover it from carbon credits sales that it generates on the same stoves.”
This new method of partially offsetting manufacturing costs should make cleaner cookstoves accessible to a much wider market. This will allow more households to benefit from a reduction in IAP and more efficient cooking, while providing wider environmental benefits for all in terms of reduced emissions.
Read the full story on: Carbon credits to bring down cost of clean stoves for rural poor
