Energy access in displacement settings: a case for carbon finance
The United Nation’s Sustainable Development Goal (SDG) 7 aims to achieve access to affordable, reliable, sustainable, and modern energy for all. Although there has been significant investment in this sector, there are still about 4 billion people worldwide that do not have sufficient energy access, 80 million of which are forcibly displaced people (i.e., refugees, internally displaced people, stateless people, and asylum seekers)[1].
In many displacement settings, forcibly displaced people rely on firewood, charcoal, or other biomass burned on traditional, inefficient stoves for cooking. These traditional cookstoves emit large amounts of smoke when cooking, which in turn has a detrimental impact on health and indoor air quality. Women and children are often in charge of procuring fuel and carry heavy loads while traveling long distances; this puts them at risk of sexual and gender-based violence and takes away time for other productive activities including income-generating activities and education. The collection of firewood for cooking contributes to environmental degradation and incites conflict between displaced populations and host communities, especially in settings that have reached a crisis point in which there is no more firewood available in the local environment and no alternatives exist.
Therefore, energy access and specifically, access to modern energy cooking solutions in displacement settings are critical as they not only advance progress towards universal energy access, but also improved health and well-being, gender equality, climate action, peace and justice, and the elimination of poverty[2].
Woman in North Darfur, Sudan, with 4-day worth of firewood for cooking
Energy access has historically been excluded from humanitarian response and displacement settings due to limited availability of solutions, affordability, and lack of suitable business models. The aim of humanitarian aid is to provide instant relief to short-term crises, yet refugees and displaced populations can be housed in camps or other informal settings for generations without sufficient energy access.
Although dedicated initiatives are emerging, such as the UN-backed Global Platform for Action[3], a global initiative promoting actions that enable sustainable energy access in displacement settings, much remains to be tackled.
There have been increasing interventions involving the distribution of energy technologies for cooking, lighting, and other energy services, but few have focused on providing long-term solutions for modern energy cooking. This can be attributed to the fact that humanitarian funding is often politically motivated and short-term in nature, which means that funding and priorities can quickly change with donors and shifts in international relations. This often results in short-term solutions that do not meet the long-term energy needs in displacement settings. In addition, refugees face uncertainty surrounding their legal status and government policies that restrict their economic integration[4].
Energy Access and Carbon Finance
It is essential to implement new funding and delivery models for energy access in displacement settings, as donor funding is insufficient to tackle the challenge. More innovative financing is needed to scale up solutions and attract investment and participation from the private sector, who have traditionally viewed refugee camps and informal settlements as risky and unprofitable settings.
Promoted by the World Bank-administered Energy Sector Management Assistance Program (ESMAP), more knowledge is being generated and financing instruments are diversifying[5]. There is significant potential for private sector engagement in this context through carbon finance. Carbon finance is an innovative funding mechanism that places a financial value on carbon emissions. In displacement settings, emission reductions can be achieved through the use of fuel-efficient stoves or clean fuels. Each tonne of carbon dioxide (CO2) not emitted generates one carbon credit. Emission reductions take place when switching households and institutions (e.g., schools, hospitals, restaurants, bakeries) from a traditional technology (e.g., open fire or mud stoves with an assumed thermal efficiency of 10%) to either a more efficiency technology (e.g., improved firewood and charcoal stove) or to a different energy source (e.g., gas, solar thermal or electric, biogas, or biofuel).
Afaf Mohamed Ahmed Atroon switched from cooking with traditional stoves to cooking with gas, with the support of carbon finance in Sudan
These carbon credits can then be purchased by companies to offset or balance out their own emissions, or simply to contribute to financing development and climate actions based on results rather than activities. Carbon finance can increase the financial viability of projects or reduce investment risks by creating an additional revenue stream and enabling a transfer of technologies and technical know-how[6]. This mechanism allows for the (co-)financing of projects that bring about numerous social and environmental benefits in addition to a reduction in greenhouse gas (GHG) emissions. In this context GHG emissions reduction is often considered as a tool to channel development finance rather than the most important impact.
For cooking energy solution projects, carbon finance is usually used in the following ways:
Pay for all the capital and operational costs of distributing improved technologies;
Subsidise a portion of the cost of the improved technology to make it affordable to the target population; or
Pay, finance or subsidy to various degrees the capital and operational expenditures required to expand the project: raise awareness through billboard, radio and TV adverts or local door to door sensitisation; expand marketing channels by paying for last mile distribution costs in areas with lower population density; provide consumer finance through micro-loans for stoves and other investment; and finance the expansion of production and storage facilities.
Not all interventions may benefit from carbon finance, but it is particularly impactful in displacement settings that arose from previous and not ongoing conflict. These displacement settings see decreasing amounts of both media attention and international aid, and could particularly benefit from carbon finance. In addition to generating additional emission reductions, projects would need to check a few additional boxes to benefit from carbon finance.
In terms of carbon certification standards, the Gold Standard is known for its work expanding the reach of carbon finance for energy access in various settings (e.g., for large, small and micro-scale interventions; or more recently for stoves including metering)[7]. The Verified Carbon Standard (VCS), the largest issuer of voluntary carbon offsets, also enables cookstove projects to benefit from carbon finance, although mostly those distributing improved firewood stoves[8]. The figure below shows the number of registered projects (in dark green) and the credits issued for these (in light green and in million tonnes of CO2), by each registry.
It would usually take 18 months for design certification or resgistration (point where a project is officially authorised to issue a carbon credit for each tonne of CO2 equivalent reduced, monitored and audited) and another 6 to 18 months to deliver a first batch of carbon credits.
Somes issues are specific to displacement settings and carbon finance, which include:
The temporary nature of the settings. Most carbon finance sponsors cover at least some of the project costs of implementation and carbon certification and monitoring, based on their expected return. Knowing that a cooking technology is expected to last between 2 and 8 years, if households relocate, this would often mean it is no longer feasible to track their emission reductions and would result in a shortfall of carbon credits issued and revenue for the sponsor.
The lack of infrastructure and higher costs. Many refugee and displacement settlements are isolated or difficult to reach and often occur in settings with little infrastructure (e.g., roads, fuel storage facilities), making the distribution of goods and the fuel supply chain challenging to establish. These limitations would result in higher project implementation costs. Other factors driving costs up may include the lack of implementation partners in the target area(s) or the need for military escorts to move around.
Providing upfront capital. Carbon finance is by nature a result-based financing tool, which means that financial sponsors are usually reluctant to pay for the activies to be implemented, which they may consider too risky. However, without such upfront capital deployment, such projects could not take place.
Carbon finance also offers a range of opportunities, which includes:
Lean costs structure. The costs associated with implementing such projects are often seen in light of the funding that can be generated from the sale of carbon credits. As such, projects tend to focus on activities that are highly efficient in meeting the main project goal (e.g., delivery emission reductions). This in effect tends to reduce the costs of such projects, compared to a project that would be funded through a traditional aid donor.
Continuous improvement. Once the project is up and running, carbon finance requires a range of parameters to be monitored through quantitative tests and qualitative surveys. While traditional development projects include monitoring to some degree, parameters to be followed closely for carbon-funded projects enable them to improve over time (e.g., reduce usage of baseline cooking device, implement activities to enable users’ money saving, scale up fuel retailing channels, etc.). The multiple surveys conducted throughout the project lifespan also enable collection of precious information about the beneficiary socio-economic dynamics and allow a better understanding of their concerns and preferences.
Contribution to SDG 17 – Partnership for the Goals. While the private sector is often reluctant to collaborate with the public sector, carbon finance can be seen as a simpler instrument for both cooperation and contribution to SDG 17. The public and aid sector are well aware their funding is insufficent to tackle all the development issues and private sector funding can be leveraged through carbon finance.
Case Study: Solar Cooking in Chad
Darfuri Woman using the Cookit distributed by ADES in the camp of Iridimi, Eastern Chad
The solar cooking in Chad project is funded by FairClimateFund and implemented by local NGO ADES, with the technical support of HAMERKOP. It focuses on the distribution of a simple, patent-free stove called the CookIt. These solar cookers were initially distributed in 2005, at the time Darfur refugees fled Sudan and crossed the border into Chad. The project began on funding from international donors that gradually dried up. Without the sale of carbon credits, the project would have been discontinued and households would have gone back to cooking on traditional open fires with firewood. In 2012, the project was continued in the Iridimi refugee camp, through the funding provided based on the expectation that emission reductions from the CookIt could be claimed and sold onto the voluntary carbon market. The beneficiaries transferred the ownership of their emission reductions to the project in exchange for highly subsidised CookIts, training on how to use these cookers, and the creation of employment for local production of stoves.
The carbon credits are being sold to cover the cost of project management and carbon certification. In partnership with FairClimateFund, HAMERKOP was brought on as a partner in 2019 to take over project expansion and ensure its long-term sustainability through carbon finance. The project has since entered its fourth monitoring period, is expanding to a second refugee camp, and is certified under the Gold Standard for the Global Goals using the GS micro-scale Simplified Methodology for Efficient Cookstoves.
Case Study: Assessment of Cooking Practices in Displacement Settings in Cambodia
The UK aid-funded Modern Energy Cooking Services (MECS) programme supports the transition of low-income economies from biomass to the use of modern energy cooking services. While research has been previously conducted on energy access across low-income countries, there is a limited amount of data on energy access in displacements settings. Relatively little is known about the cooking practices used, the roles involved, and mechanisms used to cope with shortages in fuel, cooking appliances, and other aspects of livelihood that are affected during a displacement event (e.g., land-related conflict, urban development, extreme natural events such as flooding).
Cambodian woman preparing her family meal, captured during the MECS’s surveys conducted by HAMERKOP
Through developing a research tool and for a month in Cambodia, HAMERKOP carried out data collection to support MECS at gaining a better understanding of how displaced people and institutions (e.g., hospitals, schools, restaurants, bakeries, etc.) utilise energy for cooking. To gain insight into cooking practices in displacement settings in Cambodia, data was collected through conducting 300 surveys and focus group discussions amongst households and institutions in rural and urban areas of Cambodia where internally displaced peoples were known to have resettled.
While this assignment was not intended to lead to the development of a carbon project, some of the initial findings point in that direction. Displaced people face numerous burdens. One is the loss of their historical source of income and assets; another is the challenge to produce their own food due to the lack of land and the lack of access to savings and consumer finance to afford energy efficient and cleaner cooking technologies. In this context, carbon finance could provide for the support mentioned earlier in this article and enable modern cooking technologies to be accessible to these vulnerable populations.
HAMERKOP’s experts have more than 10 years of experience supporting projects in benefitting from carbon finance in displacement settings, conducting baseline assessments, designing interventions, selecting the most appropriate technologies, to certifying projects to the Gold Standard and providing strategic advice for their implementation.
Whether you are an international organisation or an NGO looking to benefit from carbon finance or an organisation looking for interventions to financially support over the long term, we can help, so reach out to us.
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[1] Source: Bisaga, I. & To, L.S. 2021. Funding and Delivery Models for Modern Energy Cooking Services in Displacement Settings: A Review. Link: Energies
[2] Source: Ibid
[3] Global Platform of Action website: https://www.humanitarianenergy.org/
[4] Source: Patel, L. & Gross, K. 2019. Cooking in Displacement Settings: Engaging the Private Sector in Non-wood-based Fuel Supply. Link: chathamhouse.org
[5] Source: Modern energy cooking: review of the funding landscape. Link: https://mecs.org.uk/wp-content/uploads/2022/02/Modern-Energy-Cooking-Review-of-the-Funding-Landscape.pdf
[6] Source: UNHCR. 2014. Carbon Financing. Link: https://www.unhcr.org/55005b069.pdf
[7] Source: Gold Standard’s Impact Quantification Methodologies. Link: https://globalgoals.goldstandard.org/400-sdg-impact-quantification/
[8] Source: VMR0006 Methodology for Installation of High Efficiency Firewood Cookstoves. Link: https://verra.org/methodology/vmr0006-methodology-for-installation-of-high-efficiency-firewood-cookstoves/
[9] Source: World Bank /Ci-Dev: https://ci-dev.org/sites/cidev/files/2020-11/CI-DEV_FRACTION%20OF%20NONRENEWABLE%20BIOMASS_R2.pdf and Modern energy cooking: review of the funding landscape. Link: https://mecs.org.uk/wp-content/uploads/2022/02/Modern-Energy-Cooking-Review-of-the-Funding-Landscape.pdf