Clean cookstove carbon markets to remain bifurcated in medium term: workshop

Clean cookstove carbon markets are witnessing a greater divide between projects that display more affinity with Sustainable Development Goals and those that still harbor a multitude of concerns from governance bodies, bringing about a premium market in the process, experts said at the 24th annual IEA-IETA-EPRI workshop in Paris.

Workshop attendees pointed out examples of cookstove projects that best aligned with the broader SDGs. The main goal is to standardize the market, although it was recognized that these projects have different financing structures and pricing premiums as a result.

“There are additional pricing, premium prices, in those projects that offer some kind of communication, some kind of certification, some kind of monitoring in relation to the development impact within the host country, the sustainable development angle, and that information is very important to their decisions in investing in the voluntary carbon market projects,” one market expert said.

With these criteria fulfilled, a clean cookstove carbon credit would have priced in premiums that could be sold on secondary markets for willing buyers. However, financing for these projects is not presented as completely risk-averse, as there is uncertainty about whether private financing will pursue these templates when the value driver of a carbon credit generated is the ton of carbon offset.

“Many of these projects need the finance upfront from an investor or from somebody to get the ball rolling, but knowing if these premium projects reflect the true delivery cost on the ton of carbon is not fully known within context because markets naturally aim to secure the best price possible,” experts said.

As a result, attendees foresaw the bifurcation of premium projects against others as remaining in the near to mid-term, but there was hope that further standardization could be met over time.

Cookstove markets under pressure

With a high volume of surplus in the market and slowing retirements, clean cookstove projects face increased scrutiny to adjust to criticisms leveled against their structure.

Attendees pointed out five major flaws: projects are non-additional in that they would have happened regardless, projects overestimate emissions reductions, carbon leakage (where biomass saved by cleaner stoves is repurposed elsewhere), equity and community impact (how the revenue is distributed), and sustainability (whether carbon credits generated are used to help grow the clean cooking market).

Governance bodies such as the Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI) will be given a significant role. Experts suggest that further guidance from the ICVCM on Core Carbon Principles tags will be crucial in determining how far off alignment among project integrity really is.

In addition, the International Civil Aviation Organization will determine the eligibility of clean cookstove projects for the CORSIA scheme by around November, with experts saying on the sidelines they were "cautiously optimistic" they will be included.

Until then, demand is likely to remain soft, with unilateral interest clearly difficult to generate from market buyers in higher-integrity credits, which are the anchor for clean cookstove markets to flourish.

“As long as buyers are only willing to pay below $10/mt, it’ll be difficult to streamline higher quality cookstove credits. Without a minimum standard for these projects, it will be hard to enable the commoditization phase of clean cookstove markets,” a panelist said.

The Platts Household Devices current year price assessment fell to a record low in the trading week ended Sept. 27 amid continued subdued buying interest in the sector.

Platts, part of S&P Global Commodity Insights, assessed the price at $3.50 per metric ton of CO2 equivalent on Sept. 26 -- the lowest level since Platts launched the assessment on June 14, 2021. However, the price increased slightly on Sept. 27, ending the week assessed at $3.60/tCO2e.