January 28, 2015

Quick Guide to Carbon Credits for Funding Global Development Engineering

The carbon credits marketplace may have money for device inventors, infrastructure builders and other hardware-based ventures in developing countries.

When Manna Energy Limited demonstrated that its water treatment program in Rwandan villages was reducing greenhouse gas emissions, the social enterprise became eligible for carbon credits to finance part of the rollout in 2010. Rwandans in the region had purified their water by boiling it before using Manna’s technology. With careful monitoring, Thomas and his colleagues were able to prove that people used their devices as intended and offset wood-fire emissions.

Thomas has since applied a similar tactic to his work with the global health organization DelAgua.

“We use carbon credits as a ‘pay-for-performance’ mechanism. DelAgua is financing the deployment of several hundred thousand cookstoves and water filters, and we’re only repaid when we demonstrate that they have been properly used and had an impact,” Thomas told E4C. “This is a shift from current charity models that do not have built-in incentives to ensure ongoing success. I think it’s possible to shift the donor community to a “pay-for-performance” model that increases the efficiency of donor dollars through paying implementers only for demonstrated impact, rather than promises.”

[For the interview please see Five questions with Evan Thomas.] 

We’re only repaid when we demonstrate that the cookstoves and water filters have been properly used and had an impact.

As Thomas’ experience shows, the carbon credits marketplace may have money for certain kinds of global development programs. The news may interest device inventors, infrastructure builders and other hardware-based ventures in developing countries. The right hardware that fits criteria defined in the Kyoto Protocol in 2007 may be eligible for funding as a UN Clean Development Mechanism.

The size of the market is large and growing. By 2020, there may be as much as $2 trillion per year available in the carbon economy, according to projections by financial institutions such as the World Bank and IMF.

So far, however, only 2 percent of the trade has been available to Africa. The reason in part is that African countries have been very light emitters of greenhouse gases as a result of their poor economies, as Thomas explains in this discussion paper published in September 2012 at the Global Water Forum.

African economies are improving and their emissions are climbing with them. The fact has not escaped the carbon-credits marketplace managers, and they have addressed it by offering carbon credits for stopping future emissions before they happen.

Applicants for carbon credits must prove that their hardware reduces greenhouse gas emissions or stems future emissions before they happen. And the program must fall in line with other stipulations, some of them somewhat politically charged. A counter-intuitive example is that reducing deforestation is not enough for eligibility, at least not yet. Deforestation was a topic discussed in December in Lima at the global conference on climate change action in the Peruvian capital and it might come online as a priority for funding in the future.

For small-scale projects, Thomas suggests this guideline at The Gold Standard (pdf).

And for more on Thomas’ experience, please see his paper published in March 2014 in PLOS One and his E4C webinar, Rio +20 Sustainable Energy for All.

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