If your engagement with carbon markets starts and ends in an office, it’s easy to underestimate how hard it is to scale a carbon project. Easy to overlook the challenge of managing local political and economic vagaries, as well as the ever-shifting demands of carbon markets. Easy to underprice the total value created when a project succeeds—and the rippling losses when a project fails.
My colleague Stewart and I recently traveled to Kenya, Rwanda, and South Africa with one goal: to better understand the work of developers on the ground. The trip brought us in contact with a wide range of stakeholders: from politicians and financial institutions, to cookstove and clean water developers, to the communities they serve.
Bigger than CLIMATE FINANCE
While government representatives rightly stressed the importance of climate finance as a vital source of international investment, it was in speaking with developers—visiting sophisticated manufacturing plants, seeing the benefits of clean cooking and better water filtration—that we grasped the true impact of that investment. The health benefits alone should be enough to open the floodgates.
Some carbon-market debates are put into perspective after seeing smoke billow out of a 6×6-foot room that houses a family of five, their children inhaling the smoke—all the while knowing a clean cookstove, which costs less than a family meal for my own team of five, could make a radical difference to theirs. That’s a compelling co-benefit.
Detached from the reality, however, we end up embroiled in technical conversations about various fNRB rates while ignoring the material outcomes. For families with access to clean cookstoves, the advantage is not “involvement in a carbon project.” It’s healthier children, less time collecting firewood, and more money saved.
This is not an argument for doing away with the technicalities (which remain an important lever for achieving market integrity) but a reminder of what’s at stake. We desperately need to return to the heart and soul of why these projects need carbon markets to work.
the true cost of project failure
Conversely, it’s impossible to overstate the staggering economic, humanitarian, and environmental damage that can be unleashed by one bad actor. Such was the case of C-Quest, the legacy of which has set back cookstove development for all the projects and in all the regions we visited.
This was a clear example of market failure: one that should have been detected earlier and, once uncovered, addressed head on. Instead, serious accusations were swept under the rug by the very organizations responsible for upholding transparency and credibility. The sector is still reeling in the aftermath, with conscientious developers struggling to differentiate their high-quality projects for an audience thousands of miles away.
Financial institutions are beginning to bridge the gap, and we met with a number of banks building structured finance vehicles to support developers. Though common in other markets, tailoring these solutions for carbon markets is complex work for credit committees. Many are still grappling with the question of whether a carbon credit is a fungible asset. Still, their pace and progress is a promising sign for projects here.
ACKNOWLEDGE FLAWS, BUILD SOLUTIONS
The trip reinforced two of my long-held beliefs: First, that we do have the solutions; and second, that our attempts to build the perfect system (and ignoring issues when they do arise) is stifling life-saving action and investment. No market has developed without mistakes. Humans are fallible. But if we act with purpose, acknowledge our mistakes, and respond by improving, changing, evolving, we can—forest by forest, stove by stove—set our planet on a different course.
I’m deeply grateful to the many developers who took the time to show us their work, to the people who led us from factory floors to remote villages, and to everyone who helped us see what it really takes to build a viable business when the target never stops moving.
We still have work to do to convince investors, particularly those in the Global North, that carbon markets can be profitable and stable. But the potential returns are enormous, and capacity is steadily growing. I return to the UK more fired up than ever before—a combination of excitement that we can support this market as it scales, and conviction we have the right tools to help scale it.