COMMODITIES 2025: Outlook uncertain as cookstove developers seek to overcome integrity concerns

The future of cookstoves in the voluntary carbon market has become increasingly uncertain as developers face the sustained challenge of integrity concerns, market sources have said.

Integrity concerns rocked the household devices segment throughout 2024, causing a significant downturn in buying interest and driving greater illiquidity in the segment.

The Platts Household Devices Current Year price averaged $4.14/mtCO2e up until Dec. 18, 2024, down 36.8% year over year from an average of $5.66/mtCO2e in 2023, data from S&P Global Commodity Insights showed. The assessment reached a record low of $3.50/mtCO2e on Sept. 26.

"This is not a conventional market -- it is very opaque," a Europe-based developer told Platts, part of Commodity Insights, adding that it had become very difficult to predict any trends in buying interest.

A Canada-based trader echoed the sentiment, adding: "The only difference in terms of price between projects is a single buyer's preference."

As market participants look toward 2025, no clear consensus has emerged on whether there will be an uptake in demand for cookstove credits, but sources broadly concur that there is an urgent need to restore integrity to the segment if buying interest is to be restimulated.

Increased scrutiny

Concerns over the veracity of cookstove projects' carbon offsetting claims were brought into question in January following the publication of a study elaborated by researchers from the University of California, Berkeley.

"We conservatively estimate that the total amount of over-crediting across our sample's issued credits is [a factor of] 9.2, stemming from misalignment across numerous compounded factors," it stated.

According to the study, over-crediting resulted from exaggerated data on stove adoption and use alongside over-stated estimates on the impact of fuel collection.

On June 27, major carbon registry Verra suspended 27 projects developed by C-Quest Capital following allegations of overissued cookstove credits.

By October Verra had cancelled over 4 million credits implicated in said projects.

Restoring buyer confidence

Following increased scrutiny of the segment, market participants remain divided on how to restore buyer confidence in cookstove projects.

In November 2024 Verra released the VM0050 Energy Efficiency and Fuel-Switch Measures in Cookstoves v1.0 methodology, which quantifies and verifies emission reductions using improved cookstoves.

"I think VM0050 is in the right direction," another India-based developer said. "It competes with the TPDDTEC/MECD [methodologies from Gold Standard."

However, sources said that a shift to other stringent methodologies may be the solution.

"I think that if you look at the market overall -- a metered methodology should command a premium because there is more certainty on the number of credits being issued," the Europe-based developer said.

"There are more measures of immutability that can be applied [to cookstove projects]," a second India-based developer said, adding that the sector must adopt 100% monitoring of issuance data.

Other market participants have expressed skepticism toward metered cookstove methodologies however, citing elevated costs and the danger of promoting further mistrust in the segment.

"Metered methodologies are encouraging but there is a cost associated with doing it and investors are still shying away from doing this," a third India-based developer/trader said, adding that the capital investment required for developing these projects is not there.

"Constant monitoring assumes a lack of trust in the project itself and makes it more expensive -- the metered methodologies help, but they won't be the ultimate solution," a second Europe-based developer said.

Clarity awaited for CORSIA, CCP eligibility

In December 2024 ICAO confirmed that credits from four prominent carbon registries -- Gold Standard, Verra, Climate Action Reserve and Global Carbon Council -- are now eligible for the first phase of CORSIA, set to run from Jan. 1, 2024, through Dec. 31, 2026.

Notably, established cookstove methodologies AMS-II.G and/or VMR0006 were excluded from CORSIA eligibility.

Following the announcement, market participants expressed surprise at the narrow scope of approved methodologies, leaving them unsure of the implications for CORSIA phase 1 supply in the near term and the processes of transitioning to an approved methodology.

Furthermore, methodologies under the Efficient Cookstoves project category listed by the Integrity Council of the VCM, including the Gold Standard Simplified Methodology For Clean And Efficient Cookstoves, have undergone a multi-stakeholder assessment review process for Core Carbon Principle (CCP) approval.

The ICVCM has stated that assessments of methodologies relating to clean cookstove projects will be expected in early 2025.

Overall, the Household Devices segment is likely to continue to see sustained illiquidity in early 2025.

However, market participants are cautiously optimistic that greater integrity in the market resulting from a shift to metered methodologies and potential CCP eligibility to be announced in early 2025 may restore buying interest in this segment as the year progresses.

Additionally, the prospect of CORSIA Phase 1 eligibility for cookstove projects, dependent on the allocation of the relevant Letters of Authorization and Corresponding Adjustments, could inject some stimulus for a price recovery into the market.