Impact Financing for Clean Cooking Energy Transitions: Reviews and Prospects

Abstract

Achieving universal access to clean cooking requires a significant mobilization of capital to close the current funding gap of around US$7 bn per year. The clean cooking landscape has changed considerably with substantial innovation in terms of technology, business models, and services. The transition towards higher-tier, modern energy cooking (MEC) solutions provides key opportunities for innovative financing models to scale MEC globally. Transitions from cooking with polluting fuels to MEC have significant positive impacts on the environment, gender equality, and health. Impact Finance to monetize these co-benefits for MEC solutions is widely seen as an outstanding opportunity to channel funding into MEC transitions. However, except for climate funding, opportunities to channel finance for wider impact SDG benefits arising from MEC have proved challenging to realize in practice. This article explores in detail two new approaches which are taking advantage of features of digital technology to overcome some of these obstacles. It adds to the recent debate around climate finance for clean cooking and presents key learning lessons from developing and piloting the ‘Metered Methodology for Clean Cooking Devices’ as the current most accurate approach to estimate carbon savings for MEC and the ‘Clean Impact Bond (CIB)’ which aims at monetizing health and gender-co-benefits. The paper demonstrates how robust methodologies can help to accelerate funding for MEC and calls for joint approaches to standardize and streamline climate and outcome finance approaches to enhance their impact by making them more accessible for a wider range of MEC technologies, geographies, and projects.

1. Introduction: A Changing Clean Cooking Landscape

Access to clean cooking as a central element of the Sustainable Development Goals (SDGs) remains a key challenge for 2.8 billion people, mainly in the Global South. Despite the pledge to achieve access to reliable, affordable, and modern energy for all by 2030, more than 30 percent of the global population is still cooking with polluting fuels and solid biomass. With an increase of around 12 percent since 2012, it is unlikely that universal access to clean cooking solutions will be achieved by 2030 under current plans. This would leave around 2 billion people still reliant on polluting cooking fuels and devices [1].

The World Bank [2] identifies the different contexts in which households are cooking and the type of MEC technologies, fuels, and business models that might be appropriate for each. Proportions vary by country, but there are key differences between rural and urban populations, with the former often poorly connected to distribution networks for modern energy (notably electricity, but also LPG), while an increasing number of urban dwellers are grid-connected, and yet a large proportion still cook with solid biomass fuels. Rural electrification via central grids proceeds slowly, but mini-grids have emerged as important providers of electricity access. Companies are now starting to design their mini-grids to accommodate higher power uses, such as electric cooking, to maximize the utilization of their infrastructure. Similarly, higher-capacity Solar Home Systems are starting to emerge and could be valuable for less densely populated regions. The most challenging segment is those households who spend time gathering cooking fuels rather than paying for them commercially. But as a recent review [3] suggests, affordability remains a problem for many low-income sectors, whilst measuring progress is complicated by the pervasiveness of stove stacking behaviors, as revealed in a wide-ranging review by Shankar et al., 2020 [4].

The devastating consequences of the continued usage of polluting fuels such as biomass or kerosene at scale span across several SDGs. Cooking with non-sustainable wood fuels on inefficient stoves alone emits around one gigaton of CO₂ per year, which amounts to around 2.6 percent of global CO₂ emissions [5]. Another major concern of cooking with solid biomass is the generation of ‘Black carbon’, the ‘black’ optically absorbing component of carbonaceous aerosol particles in the atmosphere caused by incomplete combustion of solid fuels, which has a significant impact on global warming and causes multifaceted health problems including cancer, lung diseases, and cardiovascular problems [6]. It is estimated that a quarter of global black carbon emissions are caused by the burning of solid fuels in residential areas [7]. The negative health impacts of cooking with polluting fuels are causing a wide range of health problems, mainly among women and children, as they are most exposed to household air pollution (HAP) and contribute to around 4 million premature deaths annually, according to the WHO [8]. Women and girls are also carrying the main burden of cooking and fuel management, mainly associated with the collection and processing of biomass, which is time and labor-intensive, limits their opportunities for productive, educational, or recreational activities, and generates significant health risks, for example, related to injuries or heavy lifting [9].

It is estimated that the lack of access to clean cooking creates a global cost of around US$2.4 trillion per year, with health care costs accounting for around US$1.4 trillion, US$0.8 trillion for lost productivity of women, and US$0.2 trillion for environmental degradation, translating to a societal cost of around US$1000 for every person with no access to clean cooking [10].

As around a third of all wood fuels are unsustainably harvested, the lack of access to clean cooking causes substantial levels of forest degradation, which accelerates climate change and worsens its impacts for communities already suffering the worst impacts of climate change in the global South [1].

The funding commitments for clean cooking of around US$133 million per year in 2019 compare poorly with the estimated investment needed to achieve universal access to clean cooking by 2030 of US$8 billion per year [11]. The cost for a universal transition to MTF [12] higher tier (4–5), modern energy cooking solutions that would meet WHO indoor air quality standards could be as high as US$148–156 billion annually [13]. Hence, the enhanced mobilization of funding into the clean cooking sector is vital to come at least somewhere close to fulfilling the commitments entailed in the SDGs by 2030, let alone providing modern energy for all.

Traditionally, investment into clean cooking as part of the energy sector was almost entirely sourced from international public funding for improved lower-tier biomass cookstoves (ICS). Over the past few years, however, the sector has experienced significant change with the emergence and growing viability of modern energy cooking (MEC) solutions and technologies, including electric cooking, biogas, (bio)LPG, and ethanol with a review of the technical, economic, human, and environmental benefits and impacts of delivering emerging MEC solutions presented by Leach et al. [14]. Due to technological progress, innovative business and consumer financing models, and improved supply chains, higher-tier MEC technologies are becoming increasingly affordable and more widely accessible to lower-income populations, who, until recently, were largely limited to ICS [15].

New players such as electricity companies (utilities), mini-grid developers, and solar home system (“SHS”) companies are entering the market with technological innovations generating reduced appliance costs and improved efficiency and performance, which also open up new sustainable development financing opportunities including improved options for outcome-funding.

The sector is becoming more profitable and has strong potential for scaling up. The UN (2023) [16] identify two main priorities to achieve scaling: firstly, political commitment at the highest levels, both donor national governments increasing development aid related to clean cooking, and recipient governments prioritizing action, in particular within their own energy planning and within climate action plans. Secondly, very large and rapid increase in public investment in clean cooking to leverage private investment, including via climate finance.

The increased mobilization of private sector finance is needed to complement the funding efforts by traditional multilateral development banks (MDBs), which lack the capital to solely fund the clean cooking transition [15]. The opportunity to enable private sector investment through innovation has been facilitated by the approval of a new carbon certification methodology for metered clean cooking devices in 2022 [17].

2. Aims and Methods

Achieving SDG 7—universal access to clean energy, including clean cooking—by 2030 requires accelerated funding efforts beyond grant funding. The substantial transitions within the clean cooking sector can potentially facilitate the monetization of positive impacts and co-benefits and thus help to scale up access to modern energy cooking. These innovative financing strategies require robust and reliable methodologies that efficiently measure outcomes and co-benefits, meet outcome buyer demands, and can be scaled across different markets and MEC technologies. In a previous paper [18], several of the authors of this paper reviewed the role of evidence-based financing mechanisms (such as RBF programs) in supporting the growth of the sector.

Numerous studies [19,20,21] have shown how changing to Modern Energy Cooking (MEC) can have very strong positive impacts across a range of environmental, economic, and social outcomes. These, in particular, cover SDG 1 (Poverty and Decent Work), SDG 3 (Health), SDG 5 (Gender Equality), SDG 7 (Affordable and Clean Energy), SGG 13 (Climate Action), and SDG 15 (Environment). Most impact funders and donors track the impact of their investments against the SDGs [22].

Impact Finance, whereby funds pay for verified climate and other SDG impacts, is widely seen as an outstanding opportunity to channel funding into MEC transitions, especially where they can be combined with private sector activity as a means to catalyze further resources [23]. However, with the exception of climate funding in the form of carbon credits, opportunities to channel finance for wider impact SDG benefits arising from MEC have proved challenging to realize in practice [23], mainly due to the absence of techniques to cost-effectively measure impact outcomes accurately.

This article explores in detail two new approaches, which inter alia are taking advantage of features of digital technology to overcome some of the obstacles to meeting this challenge. As these digital capabilities are a very recent development in the clean cooking appliances available in the developing world, there has been very little detailed analysis of how financing mechanisms can take advantage of these references. Our paper is the first review. This article is intended to provide practical insights into opportunities to develop financing instruments to take advantage of these new technical developments.

MECS has been closely involved in the development and piloting of an innovative methodology for certifying the reduction of carbon emissions for metered MEC devices. This methodology has been scientifically reviewed and classified as the most accurate carbon methodology for MEC fuel-switching projects [24]. MECS has also supported the piloting of a Development Impact Bond for a MEC project [25]. Both instruments are designed to help mobilize significant levels of concessional finance flows into the clean cooking sector by ‘selling’ specific outcomes to outcome buyers. This involvement presents the empirical basis for a more in-depth evaluation of the development of an outcome-funding methodology and its piloting in the MEC sector and indications for future developments and adaptations of similar approaches. The process-oriented evaluation will illustrate the different key development stages of each approach and highlight key stepping stones, arising gaps, and adaptation measures as prerequisites for accuracy, applicability, and scalability.

The key aims of this paper are to (1) set out the transitions within the clean cooking sector and the state of research on outcome finance, including recent debates around the credibility of carbon financing methodologies in the clean cooking sector, (2) illustrate the recent evolution of two such methodologies focusing on carbon, gender and health impacts, deriving key learning lessons and identifying gaps, and (3) comment on the impact and scale-up potential for MEC and an outlook including the positioning of MEC outcome funding within global carbon markets.

The evaluation presented in this paper is based on desk research, qualitative stakeholder interviews including clean cooking companies, certifiers, and outcome-buyers, as well as a MECS-internal review of the work supporting the development and implementation of the financing instruments evaluated in this paper.

3. Impact Financing for Clean Cooking Transitions—Terminology

To close the funding gap to achieve access to clean cooking, innovative financing instruments are increasingly important to attract public and private sector finance.

Terms used in innovative finance such as ‘Impact Funding’, ‘Results Based Funding’ (RBF), and ‘Outcome Funding’, however, are often used imprecisely, and similar terms may take on different meanings in a development context compared with commercial finance. Impact investments, for example, are made by commercial organizations to generate social and environmental impact along with a financial return. Impact funding includes a range of capital instruments, from foundation grants to ‘finance first’ investments intended to achieve a market-rate financial return and a positive impact that is intentional, additional, and measurable [26].

Development finance tends to consider impact funding as an alternative to commercial finance [27]. The World Bank Global Partnership for Results-Based Approaches (GPRBA), for instance, makes clear distinctions in the terminology it uses. In this context, RBF is considered a very broad category that includes a range of different funding approaches, including ‘Output Based Aid’, ‘Funding for Results’, ‘Impact Bonds’, ‘Results Based Climate Finance’ and ‘Performance Based Finance’ [28]. All RBF approaches tie the disbursement of financing or funding to the achievement of independently verified results. However, outcome-based financing is a type of RBF where funding is linked to specific metrics that are related to the immediate development goals or ‘outcomes’ instead of intermediary results, activities, or outputs [29].

In most contexts, it seems appropriate to use the terms outcome-based finance and outcome-based funding interchangeably, but for analytical purposes, a distinction between the two proves helpful: ‘Outcome Funding’ refers to payments received once the outcomes have been demonstrated. The issue then arises regarding describing the finance required to support the delivery of the services in the project for which the social or developmental outcomes are being targeted prior to the outcomes funding being received. Outcomes-based financing is then said to be the funds loaned or advanced to the service provider to enable the service provision to take place. The outcomes-based financier (‘investor’) is typically then repaid by the outcome funder when the agreed-upon outcomes are delivered [30].

Outcomes-based financing, even when narrowly defined, can itself take different forms, such as pay for success, social or development impact bonds, or outcome funds. Usually, the outcomes-based financing investor provides funds to the service provider until the outcomes are established. This allows the outcome payer, e.g., a government or other donor organization, to make payments only where specified outcomes have been achieved. This consequently transfers the implementation risk from the donor to the investor and the implementing organization. In some cases, organizations will meet the cost of delivery from their own resources or from funding that is not explicitly linked to outcomes payments.

Climate Finance, as a form of outcomes-based financing, plays an increasing role in the clean cooking sector [18,31]. The United Nations Framework Convention on Climate Change (UNFCCC) defines climate finance quite broadly as Finance that seeks to support mitigation and adaptation actions that will address climate change [19]. In the context of Modern Energy Cooking, the most relevant climate funding source until now has been emission reduction credits achieved largely through the Voluntary Carbon Market [18].

In the following sections, this paper reviews the development and scaling-up potential of two different forms of RBF mechanisms for clean cooking in the climate finance sector—the development and piloting of the ‘Methodology for Metered and Measured Energy Cooking Devices’ (MMECD) approved by the Gold Standard [17] as a Carbon Financing instrument and the ‘Clean Impact Bond’ (CIB), an Outcomes-Based Finance instrument piloted by Cardano Development and their partners [32].

Impact bonds are outcomes-based contracts that utilize private funding from investors to cover up-front capital requirements for service delivery and focus on measurable outcomes rather than inputs and activities, which are described as different from traditional contracts. The explicit involvement of third parties in impact bonds differentiates them from other forms of outcomes-based contracts. Private investors fund development programs with Development Impact Bonds (DIBs), paid by third parties when the program is successful. In all cases, the outputs are agreed on at the beginning and are independently verified. It is expected that DIBs foster innovation, problem-solving, and adaptation due to their focus on outcomes instead of outputs. Two main forms of impact bonds are typically identified. With social impact bonds (SIBs), the outcome payer is the government and is located in the same country as service delivery. Development impact bonds (DIBs) are focused on international development with the outcome payer, therefore usually being a government aid agency, multilateral agency, or philanthropic organization [15,33].

The following section will explicitly focus on the relationship between clean cooking and carbon finance and will present a review of the first stages of developing and piloting a carbon finance methodology for metered clean cooking devices.

4. Clean Cooking and Carbon Financing

4.1. The Evolution of Carbon Finance for Clean Cooking

Carbon finance has been used to promote clean cooking in developing economies since the Clean Development Mechanism (CDM) started operating in 2006 as part of the flexible mechanisms under the Kyoto Protocol [34]. Clean cooking, alongside other household services, has also enhanced the remit of the earlier quasi-market-based payment for environmental services [35] limited to forestry and community operations. This has incentivized contributions of individual households, in fuller markets with clear property rights and evolving transaction costs, with further potential to include more SDG benefits as part of the growing impact financing market. The early CDM small-scale methodologies included both renewable energy [36] and energy efficiency [37] categories and their associated tools, such as for additionality [38] and default parameters [39]. Their implementation has been instrumental in building the sector, including through their adaptation by the voluntary carbon standards agencies, especially Gold Standard (GS). This has seen a wider application of innovative methodologies that can cater to large-scale and broader sectoral frameworks for both energy efficiency improvements and fuel/technology switches [40] and a simplified methodology [41] for micro-scale projects with reductions of less than 10,000 credits per year. Further, a methodology developed by Verified Carbon Standard allows the inclusion of fossil fuel baselines [42].

Domestic biogas and improved cookstove projects have overwhelmingly been the early recipients of carbon financing within the clean cooking sector [43]. Recent reports on the voluntary carbon market show an increasing concentration of projects in Asia and for domestic biogas, with 95 percent of the global voluntary issuances from clean cooking activities from five countries in Asia: China, Nepal, India, Vietnam, and Cambodia, with more than 80 percent issuances to domestic biogas solutions [34].

Carbon financing mechanisms have generated substantial funding from the clean cooking sector. Recent reports show, however, that aggregate global historical carbon finance flows to the clean cooking sector fall between US$60–150 million between 2013 and 2022 [44]. Hence, carbon financing still only provides a small portion of the overall commitments from different sources (see Figure 1 with the majority of the commitments being met by grants followed by debt and equity, largely for specific projects/countries, e.g., in Bangladesh and Kenya, and for LPG and domestic biogas.

Grants are mostly used as purchase subsidies to lower the cost, and the literature shows that their long-term use risks causing welfare losses due to path dependencies leading to technology and institutional lock-ins [45]. This is a particular concern for low-income developing countries where the political economy and lack of political will to innovate together with the strategic use of public finance can result in market inefficiencies [46,47], thus limiting the market’s willingness and ability to allocate funds and develop complementary financing. This phenomenon is also evident in the current ‘recycling’ of carbon revenues as traditional purchase subsidies to buy down the cost of cooking solutions by project developers [48]. Such ossified subsidy structuring leads to a scarcity in grant/public funding, ‘pork barreling’ (or the constrained allocation) of funds to regions/countries or technologies, and donor fatigue [49,50]. These poor blended finance designs can crowd out well-functioning markets [51] and, importantly, will result in restricted outcomes because of the less-than-optimal carbon finance flows across the value chain, especially to the credit generators [52,53], which then restrict incentives to engage in the optimal level of expected environmental activities. Hence, a critical review and adjustment of current climate and carbon financing approaches is required.

The most recent GS cooking methodology for Metered and Measured Energy Cooking Devices (MMECD) [17] aims to capture innovations in the sector with the growing availability of low-cost usage-metering technologies leading to digital usage data and its integration into digital MRV (Monitoring, Reporting, and Verification) systems, thereby reducing costs and enhancing accuracy. Going forward, carbon financing will increasingly fit higher-tier electric cooking solutions, given the emphasis on developing electricity infrastructure with synergies in decarbonizing other sectors, e.g., electric vehicles, and the greater ease of integrating digital innovations with electricity use than with the liquid and gaseous fuels [54]. Enhanced efforts are also expected to be taken in Southern Africa, supported through new initiatives such as the Africa Carbon Market Initiative [55] and driven by the gap in access to clean cooking solutions and population growth [44].

4.2. Carbon Finance and MEC—The Methodology for Metered and Measured Energy Cooking Devices (MMECD)

4.2.1. Development and Adjustment of the MMECD

This section discusses the experience in the development of a new digitally enabled methodology for carbon reductions as a Carbon Financing instrument form of RBF. Within Gold Standard’s suite of methodologies, versions of the TPDDTEC (Technologies and Practices to Displace Decentralized Thermal Energy Consumption) [40] have been in use for calculating the carbon emission reductions achieved by more efficient cook stoves for more than ten years. Measurements are taken of fuel used in the baseline and again with the new stove in the project period, and the emission reductions are calculated. This information is then written up in the prescribed form of a “Project Design Document” and taken through the Gold Standard accreditation process, which includes community consultation, monitoring, and third-party review. The outcome is the issuance of ‘Verified Emission Reductions’(VER), which can be sold by the project to generate additional revenue to support project activities.

The method for calculating emission reductions is predicated on estimating the amount of fuel saved in a sample of households and then multiplying this by the stove population. The surveys of baseline households using traditional cooking methods such as firewood or charcoal and with-project kitchens using MEC solutions, therefore, must be detailed and conducted to a specified precision and confidence level. These surveys are typically carried out in 100 households or more, with cooking fuel use measured over several days. The exercise must be repeated at a specified frequency but no later than every two years. It is time-consuming, expensive, and open to errors, particularly in data collection in challenging environments.

The move to MEC solutions offers the chance for a change of approach in calculating emission reductions. Some MEC solutions are already installed with in-built data collection for time and energy used, supporting classic Pay-As-You-Go functions, and the hardware and software for achieving this are relatively inexpensive.

In July 2020, MECS appointed Climate Care to develop a different approach to calculating carbon credits for MEC devices based on measuring the actual energy use for cooking with the new device throughout the project period. A conversion efficiency is then applied to this to determine the ‘delivered useful energy’, and then, consistent with the general CDM approach [56], the efficiency of the traditional cooking devices in the baseline is applied to calculate the equivalent use of traditional cooking fuels avoided. Appropriate emission factors are applied, and the emission savings are calculated. Fuel stacking is automatically accounted for, as the metered usage of the project device shows cooking alongside any stacking. The aim of the new methodology is to make the process of determining emission reductions a) simpler by reducing the amount of survey work required and b) more accurate, as it is based on actual fuel used, not a statistical approximation. The new methodology complies with the wider set of GS rules and, where possible, draws on existing methodologies (e.g., defining emission factors). Version 1.0 of the Methodology for Metered and Measured Energy Cooking Devices (MMECD) was published in October 2021 [17].

Having developed the new methodology, MECS and Climate Care (now Climate Impact Partners) are taking on a project using the new methodology for registration with the GS. The e-cooking program by ATEC Australia-International Pty Ltd. (ATEC, Victoria, Australia) is distributing patented induction cookstoves in Bangladesh and Cambodia, replacing a mix of biomass and fossil fuels used for cooking by households.

The first version of the MMECD is based on a comparison of the efficiencies of the baseline and project devices in delivering a certain amount of cooking. This is a well-established approach that has been used in numerous carbon credit methodologies for improved cookstoves, with the Water Boiling Test (WBT) [57] as the standard method to determine device efficiency.

During the first half of 2022, concerns emerged amongst some device and project developers that the MMECD would not be able to fully reflect the high energy performance of emerging technologies for electric cooking. Of particular concern was the Electric Pressure Cooker (EPC), which cooks very efficiently and has proven to be highly attractive in Africa and SE Asia. Results from many cooking trials show that an EPC can use as little as one-fifteenth of the energy to cook a dish as needed using a traditional biomass stove [58]. The WBT efficiency of the biomass stove might be 16 percent [59]. It would be unreasonable to propose that the EPC is 0.16 × 15 = 240 percent efficient.

The WBT essentially measures efficiency as the amount of energy required to raise a unit of water to boiling point, plus the latent heat of vaporization for the mass of water boiled off in 45 min, all divided by the energy input to the device. A pressure cooker is effectively an insulated pan and lid, in which the rate of steam escape is minimized/controlled, causing the pressure inside the pan to increase, which raises the boiling point of the contents, typically to around 112 °C. Cooking involves raising the temperature of the food until chemical reactions take place; those reactions usually happen faster at higher temperatures, and the higher temperatures also allows the heat to penetrate throughout the food more quickly. Thus, the higher pressure in an EPC means the food cooks at a higher temperature and, therefore, more quickly. Therefore, the EPC is delivering a different ‘energy service’ than the traditional cookstove it is replacing, and a comparison of WBT-derived efficiencies is meaningless. When MECS raised these concerns, Gold Standard acknowledged that they had not anticipated the methodology being used for an EPC. They rapidly issued a consultation with stakeholders, seeking appropriate solutions.

The WBT documentation [57] provides a valuable discussion of the sources of heat loss during cooking and a critical assessment of the ability of the specified thermal efficiency to represent the energy performance of different cooking devices and suggests that thermal efficiency measures are somewhat limited, especially the simmering test. An advisable alternative is the measurement of the amount of fuel required for a particular process, known as ‘specific consumption’. Consequently, MECS proposed an alternative calculation route, using the ratio of specific energy consumption for the project device and baseline devices rather than a ratio of the efficiencies. This reflects practice in earlier CDM methodologies [56] in which the specific consumption can be used, with measurement using Controlled Cooking Tests or Kitchen Performance Tests [60]. This proposal gathered broad support from stakeholders, and GS implemented a revised version 1.1 of the methodology, allowing calculation via case 1 using efficiencies or case 2 via specific energy consumption where the e-cooking device includes further features that affect the energy consumption for cooking, like pressure, and where it is not possible to determine thermal efficiency or useful energy by methods such as the Water Boiling Test (WBT). GS applies the MECS analysis [58] for default values for specific energy consumption, with minor clarifications being made in the current version 1.2 [17].

A key lesson from the MMECD development is that e-cooking encapsulates a very diverse portfolio of technologies and cooking types, far beyond the simple hotplate commonly thought of. Insulation is key to improving efficiency; pressurization can further reduce the useful energy required. Air fryers, effectively small convection ovens, have been the hot topic for efficient cooking in Europe’s cost of living crisis [61] and, as another device capable of cooking multiple dish types, may well gain traction in LMICs. Test methods and standards, and outcome methodologies, will therefore have to remain aligned and updated in relation to the requirements of these new technologies.

4.2.2. Piloting the MMECD for E-Cooking: Insights and Learning Lessons

The pilot for the MMECD was launched by ATEC in collaboration with MECS in early 2022, with the initial documentation being submitted in May 2022 to Gold Standard (GS) and SustainCert, which also included two comprehensive rounds of stakeholder consultations (NGOs, consumers, governmental organizations). The project was listed by GS in October 2022, and after a number of iterative rounds of validation review, the project now awaits certification, which is expected to be granted later in 2023. The pilot was launched as a core of ATEC’s business strategy with the goal of shaping the model into customer usage centric for the digital Monitoring and Verification (dMRV) methodology and to support the company’s expansion into different markets in Asia and Africa.

The initial ‘lot’ for the project includes around 6000 units of induction stoves for Cambodia and Bangladesh for the first year of the credited project, with a market outlook of 230,000+ credit-supported units for Bangladesh and 148,000+ for Cambodia until 2025. The project has secured an initial fixed pricing for carbon of around US$8 per t/CO₂ for the first year, which is expected to rise to between US$14 and 15 within the next few years, depending on market development. The pilot is expected to generate around US$50,000 in carbon credit revenue during the first year, and within the next ten years, the carbon revenue is expected to rise significantly. It is further expected that successful crediting will lower the purchase cost of induction stoves for the consumer by around 50 percent, aiming at an increased uptake at optimized affordability levels and improved unit economics. The use of digital GSM—global sim-based usage measurement for each device has also allowed ATEC to develop the ‘Cook-to-Earn’ pilot project in collaboration with MECS, which measures the direct impact of carbon-credit financed incentive payments on usage levels. Utilizing the ‘Pay-as-you-go’ technology ATEC is using for current induction stove customers; incentive payments are to be made directly into the mobile money account of the user [62].

Despite presenting a significant opportunity for scaling e-cooking, the project faced several challenges, which are mostly related to the novelty of the approach. The actual timeline of the project pilot for certification of 14 months so far is longer than anticipated, which is critical in terms of the timeline of a maximum of 12 months for the reversal claim of carbon credits after the certification and was mainly due to the iterative feedback rounds, the requirements of updating and adjusting existing documentation to the new methodology and technology as well as COVID-related challenges. It is estimated that a similar project could be certified within five to six months as the pilot provided an important push in setting and updating the requirement documentation and baseline data.

The project entailed a steep learning curve for ATEC and its partners. For example, with regard to setting default values, calculating the Fraction of Non-Renewable Biomass (fNRB) was challenging due to the different default values between the UNFCCC default values [54] and academic result values and the lack of concrete information in terms of wood-fuel use in different countries which required increased efforts and capacity on the side of the project implementer [63,64]. Hence it is key to decide at an early stage which default values will be used. Secondly, comprehensive stakeholder consultations are a key element of the certification process and require extended documentation and clarity for all stakeholders involved. The depth of the process and documentation requirements had been underestimated at the start of the project, and it became clear that these processes require specific attention and clarity at the outset to avoid delays and re-iterative feedback rounds with the certifier.

Thirdly, the application of the DMRV system and the integration of the appliance usage dashboard with live-usage data into the certification and credit issuance process is a steppingstone towards greater accuracy of carbon credit issuance, efficiency, and streamlining of the process. This can result in time and cost savings as manual data verification is replaced by a digital solution as well as increasing buyer interest by demonstrating accuracy in terms of data and emission reductions.

While the MMECD does not (yet) immediately entail a direct focus on gender- and health impacts, there are significant opportunities to monetize these co-benefits through an accurate and stringent methodology which will be discussed in the next sections.

5. Gender Impact Funding in the Clean Cooking Context

5.1. Clean Cooking, SDGs, and Gender

Cooking and firewood collection are mostly undertaken by women and girls in the global south. Cooking with polluting fuels has significant impacts on women and children; they spend considerable time collecting firewood [65], they walk long distances carrying heavy weights [66], and spending more time exposed to harmful smoke from polluting fuels and stoves [8,23], limiting women’s capacity to engage in productive and leisure activities and preventing girls from going to school [8,66]. The adoption of MEC solutions can deliver co-benefits for women while achieving SDG 7—universal access to clean energy [67]. MEC solutions can reduce the burden of fuel collection, reduce the risk of sexual violence during firewood collection, save time, and open women’s opportunities for education and employment [12,67]. Furthermore, enhancing women’s capacity as active agents of change rather than being beneficiaries only can increase the adoption of MEC technologies.

The SDGs are interlinked in many ways, directly and indirectly [65]. For example, SDG 6 Target 6.21 provides direct evidence for the interconnections between SDG 5 (gender equality) and SDG 6 (clean water and sanitation) by highlighting the importance of understanding the needs of women and girls to achieve access to adequate and equitable sanitation [68]. Similar connections have largely not yet been acknowledged for SDG 5 and SDG 7, and none of SDG 7 targets include special considerations or gender-specific indicators for the needs of women regarding access to modern energy services or clean cooking [69]. Data on energy is rarely disaggregated by gender [62]. The lack of formal recognition of SDG 7 and SDG 5 linkages and gender-specific data delayed the development of indicators to monitor progress. Understanding the intersections of energy and gender is needed to bring attention to missed opportunities for the progress of SDG 5 and SDG 7 [65] and using the gender lens on energy data collection is key to achieving gender equality in the energy sector [69]. Mapping synergies and trade-offs between SDG 5 (gender equality) and access to MEC is crucial to accelerate access to clean cooking and closing the gender gap.

5.2. Gender and Outcomes-Based/Carbon Funding for Clean Cooking

There is a growing interest in promoting gender equality in Voluntary Carbon Market (VCM) projects. Evidence shows that women’s empowerment in climate projects can improve climate outcomes in general [70]. The Intergovernmental Panel on Climate Change (IPCC) stressed the necessity for gender integration in climate finance and has taken steps to ensure gender integration across climate finance modalities [71]. Furthermore, there is an increasing group of impact buyers who are interested in high-integrity carbon credits that come with clear evidence of gender impacts [70]. The demand for carbon credits with gender impacts is expected to increase, and to ’meet buyers’ demands, and robust methodologies are needed to measure gender impacts [70]. To monetize gender co-benefits Gold Standard (GS) and the W+ Standard developed their own approaches to measure gender impacts. Verra is currently developing a new methodology to measure time savings from improved cookstoves that project developers can use to claim their contributions in relation to SDG 3, SDG 5, or SDG 7 under the Verra SD VISta program [42]. Project developers may develop or use any other methodologies to claim their contribution to SDG 5 under SD VISta, but they must adhere to Verra’s methodology approval process. For a bundle approach, Verra’s VCS projects may use the W+ Standard to demonstrate their contribution to SDG 5 [72]. The W+ Standard measures women’s empowerment across six domains (time savings, income and assets, health, leadership, education and knowledge, and food security) [73,74,75]. Under the GS certification, all projects must be ‘Gender Sensitive’; PDs can conduct deeper gender analysis to acquire the ‘Gender Responsive’ certification and claim their contribution to SDG 5 targets 5.1, 5.4, or 5. GS developed the SDG Impact Tool to monitor, quantify and verify projects’ contributions to SDGs [76]. The tool is widely used by PDs being the most rigorous and standardized tool. A review of GS, Verra, and WOCAN/W+ registries shows that the largest number of projects contributing to SDG 5 are certified by GS [72].

None of the existing methodologies were originally designed to quantify gender co-benefits of MEC projects apart from the Clean Cooking Alliance and the ICRW Social Impact Measurement Tool that was developed for clean and/or efficient cookstoves and fuels value chains in 2016 [77]. The tool requires further alignment with other co-benefits methodologies, and further modification might be required to capture the MEC gender co-benefit [78]. Existing methodologies were developed to measure gender impacts in other sectors, such as agriculture [79] and water, sanitation, and hygiene (WASH) services [68,80]. ‘Time-saving’ was the most common and measurable indicator that could be used to measure gender co-benefits of MEC projects. Measuring and monitoring social impacts is more difficult and requires more time, which might exceed the project duration. Therefore, MEC project developers prefer to use time-saving as an indicator to claim gender co-benefits, being the most efficient and measurable indicator so far, which means achieving one SDG 5 target out of nine sub-targets [81]. There is a lack of a unifying framework to measure and assess gender impacts for MEC solutions. Developing and applying a unifying framework that considers multiple dimensions, such as the ability to access MEC services and resources related to MEC, such as safety and freedom from violence, health, time-saving and labor equality, financial resources, and physical assets, knowledge and information, social capital, the ability to exercise agency and creating the enabling environment (social, political, economic and environmental contexts) for women’s participation in MEC transition is needed to monitor and promote gender equality and women empowerment in relation to clean cooking [69,82]. Designing policies and developing regulatory frameworks using context-based approaches is crucial to ensure that gender equality and women empowerment are being embedded in clean cooking at the local and national levels. Kenya has been pivotal in this regard as it was the first country in Africa to produce a gender policy to specifically address gender gaps and inequalities in the energy sector, including clean cooking, recognizing women’s needs, and enhancing their participation across the sector for a just and sustainable transition [83].

Due to the significant progress of the MEC sector, there is a potential to identify new domains and impact areas and develop measurement tools to enable project developers to capture and measure gender impacts of women’s engagement and participation in MEC value chains instead of using time savings as the sole proxy. The development impact bond (DIB), reviewed in this paper, is one innovative example of this upcoming practice.

To make a real change and promote gender equality in MEC projects, carbon crediting programs can encourage project developers to achieve more SDG 5 targets by providing higher prices for projects that contribute to more SDG 5 targets and provide clear guidance and technical support for PDs to demonstrate gender co-benefits. Labeling and ranking projects based on their contributions to SDG 5 is important to make these projects visible for carbon credit buyers who are interested in projects that achieve carbon reductions and contribute to gender equality and will enable carbon credit buyers to compare these projects and make better decisions.

6. Clean Cooking and Health

Health is the most claimed non-carbon benefit, possibly due to the universal evidence of health impacts of direct exposure of women and children to household air pollution (HAP) [43]. However, monitoring and analyzing the state of health is complex and requires accurate measurement techniques, including devices to measure particulate pollutants. This is different from the existing practice of surveying and testing the adoption, usage, and stacking of stoves to quantify equivalent CO₂ emission reductions. Therefore, many projects use simplistic non-epidemiological metrics such as the quantity of smoke in the kitchen during cooking and self-reported declines in specific symptoms, i.e., respiratory illnesses, coughing, headaches, and eye infections. However, these metrics are not viable in terms of their usefulness in measuring the impacts, also because of the wide variations in the cooking environment and the general pollutant levels even for the same technologies and regions, which would require more robust metrics and methods to quantify the health impacts [23,84].

There are also wider health impacts related to different cooking types due to ambient air pollution, such as through nitrogen oxides (NOx) and Sulphur dioxides (SO₂) emissions from fuel combustion, especially upstream in the value chain. More critical, however, are the negative impacts generated by the inhalation of small particulate matter (PM) of 2.5 microns (PM2.5) inside kitchens at the point of fuel usage, which is the dominant contributor according to well-established exposure-response functions for multiple health outcomes [85]. In this, modeling results show that transitions to higher-tier fuels result in the near elimination of PM2.5, depending on fuel stacking, where transitions to LPG and/or electricity could reduce annual emissions of PM2.5 by over 6 Mt (99 percent) by 2040 [72]. The health benefits of limiting PM2.5 emissions would far outweigh the impacts of any additional NOx and SO₂, bringing in substantial near-term health co-benefits and longer-term climate cooling benefits [86].

Challenges and Opportunities to Measure and Monetize Health Co-Benefits

Gold Standard has developed the ‘Methodology to Estimate and Verify Averted Mortality and Disability Adjusted Life Years (ADALYs) from Cleaner Household Air’ which can be used and adapted to quantify the indicators as required by its Sustainable Development Goals (SDG) impact tool. These indicators are (1) the number of households that observed reductions in PM2.5 and carbon monoxide (CO) concentration reductions, (2) the number of Averted ADALYs, and (3) the number of households that visited medical facilities or dispensaries for treatment of respiratory issues such as cough, shortness in breath, pneumonia, among others. The methodology is designed for more sophisticated indicators of (1) and (2). However, add-on surveys can be designed ex-post and ex-ante to measure indicator 3 as well to fit the process of Pollutant Exposure Monitoring (PEM) as required by 1 and 2. The GS methodology is considered the most operationally feasible with respect to scaling up [78]. However, concerns remain over the accuracy and/or the conservativeness of the exposure monitoring as research shows [19] that traditional stove use must drastically decrease to realize wider health benefits among households and communities because of the substantive non-linearity of some of the effects, especially for ALRI (Acute Lower Respiratory Infection), stroke and ischemic heart disease (IHD). Hence, persistent stove stacking decreases the effectiveness of even the most modern and cleanest stove interventions [23].

The methodology has proposed 24 to 48 h (about 2 days) PEM to PM2.5 of the sampled households. However, this may not be sufficient to estimate the real impacts, and the literature suggests longer-term exposure monitoring is required to reduce the uncertainty for inputs into the Household Air Pollution Intervention Tool (HAPIT). Further, the HAPIT model was only designed to provide “good enough” evidence from PEM with several assumptions, e.g., it assumes that all deaths and DALYs are accrued instantaneously upon intervention and only includes ADALYs from PM2.5, excluding other linked conditions. A further inclusion of the suggested recently developed Air Pollution Burden of Disease Explorer (ABODE) model instead of the HAPIT would still lack the use of the most recent statistical techniques used in the latest Global Burden of Disease estimates and uses obsolete values to calculate the ADALYs from 2017 [43] despite some improvements such as the use of more specific inputs [34]. Notwithstanding, going forward, it is recommended to use ABODE as it will be updated with the background burden of disease estimates, exposure-response curves, and other enhancements and maintenance [23]. These changes may increase or decrease the ADALYs per unit reduction in the exposure to PM2.5. However, the issue of the cost-effectiveness of monitoring HAP changes remains, which would require innovative technologies and processes to reduce measurement complexities and costs.

Beyond the standardized PEM, other standards and methodologies primarily use surveys to measure the health impacts, such as W+ Standard, created by WOCAN [74,75]. Its method enables project developers to evaluate how clean cooking interventions have improved the overall health of women, which could include associated indicators such as time-saved because of reduced firewood collection and cumulative impacts on health due to reduced PM2.5 exposure as well as reduced firewood collection. This would, however, require robust scientific and statistical methods. The quantitative epidemiological method, including surveys within a single protocol, could also provide opportunities to integrate measurement and estimation of the health and environmental impacts of the other short-lived climate pollutants (SLCPs), like Black Carbon and PM10, by combining existing methodologies on BC and ADALYs measurement and tying up with the ongoing research work on digital MRV for estimative GHG emissions. Such bundling can be cost-effective and accommodate robust quantification either through KPTs or through stove user monitors to monitor stove stacking, more so for larger projects in the interim [23]. However, until now, the Clean Impact Bond (CIB), which will be discussed in the following section, is the only initiative combining the GS health methodology together with the gender guidelines to quantify the SD outcomes.

7. The Clean Development Impact Bond (CIB): Outcomes-Based Funding for Health and Gender Impacts

Carbon credits are expected to offer MEC project developers’ significant opportunities to monetize carbon emission reductions and further support the scaling of clean energy access. Other SDG impacts, including gender and health, which are described in the project narrative as co-benefits, can enhance the attractiveness of these credits—and hence help them to achieve higher prices. Monetizing one or more of the SDG benefits separately has been considered as a means to attract additional funds to a project but is still at the piloting stage. The Clean Impact Bond (CIB) and its piloting project arranged by Cardano Development and their partners was the first initiative globally to evaluate how this might be done in practice [16] and generated key learning lessons, as this section illustrates.

7.1. The Clean Impact Bond (CIB) Structure

The CIB, which has been initiated by Cardano Development, is based on four key roles, as illustrated in Figure 2. These are (1) the clean cooking company, (2) the impact manager responsible for the management of the entire partnership of the CIB, (3) the outcome buyer that pays for the certified health and gender benefits generated by the clean cooking enterprise and (4) the investor that prefinances the clean cooking company based on the offtake agreement between the outcome buyer, clean cooking company and the impact manager. The key roles and transactional processes are illustrated in

Table 1. CIB Stakeholders and their functions (adapted version) [87].

Role	Name	Description	Main Transaction(s)
Clean cooking company	Sistema Bio	Global supplier of biogas products, installation, service, and financing to smallholder farmers in low and middle-income countries with teams in Kenya, India, Colombia, and Mexico.	Borrower of working capital; certified health and gender credits serve as collateral for the loan. Sells gender and health benefits to outcome buyer Osprey Foundations via impact manager Frontier Finance Solutions
Impact manager	Cardano Development	Convener and CIB manager	Initiated the CIB, supplied substantial cash and in-kind funding for its development (also Osprey Foundation) and continues to manage the bond.
Outcome buyer	Osprey Foundation	US-based philanthropic impact investor	Buyer of the health and gender benefits upon results against pre-agreed prices.
Investor	BIX Capital	US$18M debt fund for SMEs in Sub Sahara Africa (SSA) that supply high-impact products such as clean cooking systems or water purifiers to people on lower incomes.	Prefinances Sistema Bio to scale up its operations in Meru and Embu counties in Kenya.
Impact assessor	Berkeley Air Monitoring Group	US-based research group specialized in monitoring and evaluating clean cooking and energy programs in SSA	Designed baseline assessment and gathered and analyzed first health and gender data in the project area.
Certification standard	Gold Standard for the Global Goals (GS)	Swiss-based foundation that has developed a globally accepted set of standards to quantify and certify development impacts	CIB’s health (SDG3) and gender (SDG5) impacts are being certified by GS alongside the environmental impact (SDG13).
Carbon developer	South Pole	Swiss company that develops and implements carbon reduction projects and strategies worldwide.	Owner of the GS-certified carbon project with Sistema Bio and buyer of the carbon credits.
Technical assistance (TA) provider	International Finance Corporation	International financial institutions focused on the private sector in emerging markets. It is part of the World Bank Group.	Technical Assistance provider, including funding, for collecting, analyzing, and reporting the baseline data needed for certification. Investor of BIX Capital.

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To facilitate the transaction between these four parties, there is an essential role for an independent organization that certifies the health and gender impact. The International Finance Corporation (IFC) and Cardano Development, with support from the Government of Japan and the Osprey Foundation, commissioned the Berkeley Air Monitoring Group to conduct the baseline assessment of the health and gender benefits of biogas digesters in a pilot project with Sistema Bio in Kenya [87].

The structure of the CIB is that of a typical Development Impact Bond [33] where the Investor—in this case, BIX Capital—advances funds to the project company (Sistema Bio) to allow the project to be completed with repayment arising from the outcome payments from the outcome buyer (Osprey Foundation). The Impact Manager (Cardano Development) essentially coordinates and manages the whole process. A certain number of other organizations were instrumental for the pilot in helping to realize the transaction, including the Shell Foundation and Modern Energy Cooking Services (MECS) with financial support and Baker McKenzie providing pro bono legal support.

7.2. CIB Metrics and Financial Terms

In addition to climate impacts (see

Table 2. CIB Key Metrics for Health-, Gender- and Climate Co-benefits [87].

Co-Benefit	Outcomes	Metrics
Health	Averted disability-adjusted life years (ADALYs)	Personal exposure to PM2.5 Population demographics (e.g., household size, number of children under 5, and national background disease rates)
Gender	Increase in “Quality Time”	Time spent actively cooking. Time spent cleaning utensils and the kitchen area. Time spent procuring and preparing fuel for use in the stoves. Proportion of women’s time engaged in income-generating tasks or rest and leisure. Use of any saved time (biogas-using households only).

), the CIB developed metrics to measure the health and gender impacts of switching from cooking with polluting fuels to MEC solutions and negotiated outcome pricing around these.

To measure the impacts on health, the method used relied on field measurement of exposure to fine particulate matter to estimate the Averted Disability Adjusted Life Years (ADALYs) [42], which describes a measure of the number of years that would have been lost due to ill-health, disability, or early death, due to the inhalation of indoor pollution from cooking on open fires. These ADALYs are assigned serial numbers on the Gold Standard Registry. For gender, the DIB used Gold Standard certified SDG 5 Impact Statements that quantify the number of quality hours (QH) added to women’s time—the time spent on productive activities, education, or leisure instead of the time spent gathering wood and tending to open fire. The key metrics for health and gender impacts are presented in

Table 3. CIB Financial Terms [87].

Term	Size	Info	Terms
Outcome payment	Total maximized at US$500,000	Osprey Foundation buys health and gender benefits from Cardano Development	Price health credits: US$1816/ADALY Price gender credits: US$1/added quality hour. 3-year contract Disbursed upon reaching pre-agreed credits.
Loan	US$300,000	BIX loan to Sistema Bio to prefinance working capital	Gender and health benefit revenues are part of the collateral. 3–4 year Market-based interest rate. Disbursement in tranches based on milestones related to distribution and program approval.

. The price setting for these impacts was chosen based on the best available sources and in close consultation with the impact buyer.

Since no project to date has applied GS certification for the gender benefits of clean cooking, the CIB designed its own metric to measure gender impact. The CIB chose to use “Quality Time”, which referred to the number of minutes per day that a woman spends on income generation, the production of goods that otherwise would be bought, education, rest, and/or leisure. The negotiated pricing for outcome payments regarding gender and health is presented in Table 3.

7.3. CIB Pilot Implementation and Findings

Consultations for the implementation of piloting the CIB for health and gender impacts for clean cooking with biogas in Kenya started in 2018, with a start of the project in 2021. The process of certification includes four key stages, which are (1) Project Design, (2) Design Certification, (3) Project Monitoring, and (4) Performance Certification [87].

Key project stakeholders reported that the project timeline was significantly impacted by the COVID-19 pandemic, which also complicated in-person baseline-data collection, a backlog of certification projects at Gold Standard and long processes of third-party data validation, multi-stakeholder approval processes and difficulties in finding an outcome buyer.

As of May 2023, the technical baseline studies had been evaluated and finalized, which concluded key stage three. The studies, which also included a robust monitoring process of indoor air pollution (SDG 3 impact), were conducted from September to November 2021 and from April to June 2022. To measure impacts, 115 households using biomass and the impact group of 126 households using biogas have been surveyed to gather data on the primary metric for gender outcome. Out of these survey participants, 48 participants for cooking with biogas and 45 participants for baseline data were randomly selected to estimate the health outcomes by measuring their personal exposure to PM2.5 [87] by attaching household air monitors to the clothing of participants within the control group. The project partners expect that stage four—which includes verification and performance review—could be concluded within the next few months, and outcome payments can be disbursed by Osprey.

The evaluation of the pilot approach revealed significant health and gender impacts generated by the transition to the MEC technology, which is shown in

Table 4. CIB Health-, Gender- and Climate Co-benefits of Using Biogas for Cooking [87].

	Achieved Per Biogas Stove, Per Year	Certified SDG Contribution with the Clean Impact Bond	Impact Value: Dollars Generated Per Stove Installation 1, Per Year (at US$1816 Per ADALY and US$1 Per Added Quality Hour)
Health	21.2 days (about three weeks) of healthy life added to the household per year 2	SDG 3 (0.058 ADALYs per household, per year). If the CIB supports the sale of 12,000 stoves, this will contribute 696 ADALYs	$105 per household, per year 3
Gender	285 h (about 12 days) of Quality Time 4 added for women and girls in the household	SDG 5: 285 productive hours of Quality Time freed up for the female cook per household per year. If CIB supports the sale of 12,000 stoves, this would result in the addition of 3,420,000 productive hours	$285, per household, per year 5

¹ The amount of money that generates per stove installation based on the CIB. ² The result was generated by multiplying 0.058 ADALYs per household by 365 days. ³ The result was generated by multiplying 0.058 ADALYs per household by the price US$1816 per ADALY set by CIB. ⁴ The result was generated by multiplying 0.78 h of Quality Time per day per household by 365 days. ⁵ The result was generated by multiplying 285 h by the price of US$1 per QH set by CIB.

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With regard to health impacts, the exposure to particulate matter (PM2.5) among households using biogas has decreased substantially and to the extent that would allow predicting an important positive health impact for the population. The individual exposure to PM2.5, especially of female chefs for biogas-using households, was almost 70 percent lower than in the baseline scenario of biomass-using households, which also resulted in substantial projected Healthy Life Gains. The decrease in exposure to particulate matter of approximately 77 μg/m³ was estimated to avert 578 disability-adjusted life years (DALYs) and 16 deaths annually for every 10,000 households using biogas, which means that 21 days of healthy life were added to each household per year [87]. These gains, however, would be realized on average and over the lifetime of the household members, not annually.

Regarding gender impacts and clean cooking, the project applied a novel approach by measuring changes in time-use from cooking related to productive or recreational activities. The idea behind the approach of not including non-paid activities such as household or care activities is that these are unlikely to contribute to increased gender equality and women’s empowerment, whereas the increase of ‘higher value’ activities are more likely to generate positive gender impacts [75]. The pilot project revealed that women in households using biogas spent significantly less time on cooking-related activities, including the collection of firewood, than women in the baseline scenario. At the same time, the assessment of these time-savings alone did not necessarily reveal actual gender impacts. The measurement of quality time for productive or recreational activities as a novel approach revealed an increase of ‘quality time’ of around 12 days per year, as shown in Table 4.

Piloting the novel approach of the CIB for health and gender has generated several key learning lessons for future projects, which are to some extent similar to the experiences of the MMECD pilot, which were revealed through desk research [23,32,87] and stakeholder interviews:

• In terms of costing and timelines, the novelty of the approach caused specific requirements in terms of resources, capital, and time. For the Validation and Verifying Body (VVB), the novelty of the process required the activation of external resources, such as hiring a health expert and investing time to understand the processes to conduct the research. The VVB also experienced a backlog of projects due to the COVID pandemic.
• The level of documentation required for the VVB also presented a learning curve for the project implementers. Document collection from different parties also required some time investment. Consequently, the project duration of three years was significantly longer than anticipated.
• Finding an outcome buyer was an additional source of delay due to the novelty of the approach. It is expected by the key partners that the certification of a similar project could be much quicker, depending on the type of clean cooking company. Stakeholders anticipated that the replication of a similar project might even be achieved within six months.
• Similar to the MMCED pilot, the collection of baseline data and ensuring its highest-possible integrity was a resource-intensive and lengthy process due to its novelty and the limited availability of specific baseline data on HAP. Hence, the complexity of these processes can be a major challenge in nascent markets.
• A third crucial prerequisite for the scaling of the approach is cost. It is expected that the certification process of the pilot project will result in a total upfront cost of roughly US$90,000 in relation to the VVB and project management, which can be a challenge, especially for less established MEC companies in emerging markets. However, a number of project-specific opportunities emerged of how this cost could be reduced in the future, e.g., by optimizing metering to gather baseline data in a less ‘invasive’ approach through air-quality monitors in kitchens or intensified use of local testing facilities. It is also expected that the cost of carbon registration processes will fall significantly due to streamlined processes and higher project volumes.
• Although the interest in investing in outcome funding for SDG 3 and SDG 5 clearly exists in the market, there is yet limited readiness to invest in these specific outcomes, and the approach somewhat ‘competes’ with other climate financing methodologies that are less accurate but easier to apply.
• During the research, stakeholders have expressed the anticipation that the market interest in gender seems to be much more feasible than for health impacts as the impacts are easier to measure and finance.
• ‘Fuel stacking’ is still widely practiced among MEC users for various reasons. Cardano did acknowledge the use of LPG as an additional option to biomass in households. The baseline study focused on households using biomass as their primary cooking fuel, which necessitated an extended screening process in terms of primary/secondary or tertiary use of cooking fuels (fuel-stacking) as Gold Standard did already include obligations for monitoring alternative stove use related to fuel-stacking, as an adjustment factor to account for any sustained use of alternative cooking devices. Consequently, while the collection of relevant benchmarks and baseline data addressing fuel stacking is essential, a balance between the representativeness of the baseline study participants and additional costing must be maintained.

Despite these learning lessons, this pilot project can be considered a key steppingstone for integrating the funding for co-benefits into climate finance. The findings for health and gender impacts generated through the pilot project were aligned with the obligations issued by GS, validating the prospects of selling quantified outcomes to potential buyers within the CIB and gender and health impacts can be an essential component of climate finance [87] acknowledging a more holistic approach towards achieving the SDGs.

8. Discussion: Key Learning Lessons & Future Directions

8.1. Piloting a New Methodology for Impact Funding—Key Learning Lessons

The changes in cooking technologies and related changes in methodologies bring a need for stakeholders across the cooking and outcome finance sectors to adapt in terms of knowledge and skills.

With this regard, piloting the MMECD has revealed important implications for the scaling of this methodology and the development of other metered approaches. For example, while GS issued a spreadsheet-based calculator to demonstrate the intended implementation of the MMECD, alongside the normal guidance on parameters within the methodology itself, MECS has observed misunderstandings by multiple project developers, in particular, how to decide which of the calculation routes to use and how to interpret specific energy consumption values. This highlights the need for a wider range of guidance on developing carbon credit projects around electric cooking.

Secondly, the provision of baseline data and data monitoring are key issues. The starting point for the MMECD is the availability of usage data for cooking devices. While the initial motivation was seeing additional benefits from technology developed primarily for PayGo functionality, there is now rapid innovation taking place in both hardware and software solutions, apparently driven directly by carbon credit opportunities which could also lead to benefits for other impact funding approaches such as the DIB.

There are many different technical and organizational approaches for meeting the requirements for measuring cooking device usage. Some technology developers plan standalone meters attached to stoves, others are building meters in, and others are proposing to represent energy use based on proxies, such as the stove power setting selected by the user. Furthermore, developers are taking different approaches to onboard data storage and to the arrangements for data transmission, which can be via dedicated GSM, by Bluetooth to a user’s smartphone, or via SMS. Different approaches will bring different characteristics to a project in terms of the expected accuracy of individual measurements and the likely coverage across stove users (e.g., as some drop offline from time to time). GS, and other standards organizations who may come into this space, have processes that allow project developers to seek approval for specific aspects of their project. However, making use of such processes adds complexity and delays project development. Given the fast pace of innovation in clean cooking technology and in digital data systems, there is value for all participants in a better understanding of this landscape.

An important challenge to all forms of Results Based Finance is the cost of Monitoring, Reporting, and Verification (MRV) of outputs or outcomes on which payments are based. An opportunity to improve on existing practices is likely to arise from digital technology, which can both reduce costs and improve reporting integrity. One significant development is the use of mobile money. This allows money to be delivered directly to customers without the need to handle cash. Further, having a digital identity creates the opportunity for effective end-user subsidies. Digital identities are relevant for registering people to receive a subsidy and verifying a payment has been made. They can also be used for enrolling people into a subsidy by linking their identity to a welfare program. So digital technology improves targeting, both in identifying those in need and in directing resources to them. A further advantage covers delivery and verification where digital technologies, particularly IoT devices with machine-to-machine (M2M) communication capabilities, allow for the linking of performance to payments [17].

As outlined in this paper, digital technology is playing a key role in innovation for both carbon finance and other forms of RBF. Technical innovations can frequently gain significant penetration through the effects of market forces in reducing prices, improving products, and creating a better enabling environment, including available finance. However, there is typically a gap where affordability is still an issue. This issue is particularly relevant for clean cooking where poorer rural households with more convenient access to biomass may find it harder to transition to clean cooking, especially Modern Energy Cooking solutions. In this context, the ability to deliver targeted subsidies cost-effectively becomes a high priority for donors.

Pay-as-you-go options could expand both implementation and monitoring opportunities. Payment apps could be used to collect data from end users (women). There is an opportunity to engage women in data collection as they will have better access to reach end users (other women).

8.2. Carbon Finance for Clean Cooking—The Way Forward

The current pipeline of clean cooking activities shows potential to leverage more than US$800 million between 2023 to 2030 through carbon finance, which offers a real chance for advancing progress towards modern cooking and energy access [43]. The realization of this potential, however, is only possible if project developers and the sector are able to further alleviate the integrity issues while enhancing cost-effectiveness. Recent studies have highlighted the discrepancies that result in the over-crediting of projects. Gill-Wiehl et al. [24], for instance, found up to 6.3 times over-crediting across clean cooking projects and across the major carbon credit methodologies. Most over-crediting was found to be due to the broad flexibility and poorly designed tools that methodologies offer project developers to determine critical parameters such as the fraction of Non-Renewable Biomass, adoption, usage, stacking rates, and fuel consumption. Surveys and tests used to establish these values, including the standard stove testing measures (e.g., Kitchen Performance Test) [64], are typically infrequent and simplistic, often lacking statistical power [88,89] and prone to social desirability bias (e.g., Hawthorne effect) [24,90] and recall bias. Project developers are free to choose obsolete defaults, concepts, and methods that produce the most credits, such as for the fNRB, which is the fundamental value affecting the calculation of baseline emissions [91]. Despite the evidence that robust fNRB values based on an adaptable model [7] have been published for eight years, most projects have opted to use, and registries to approve, the higher CDM tool-derived or obsolete default values. Some of the literature has also recommended considering the global warming impact of short-lived pollutants, especially of ‘Black Carbon (BC)’, because of its higher cumulative benefits, especially for higher tier MECS [85]. However, its measurement methods and reporting metrics are varied, and there is only one methodology on Black Carbon quantification with limited use so far [92]. Recent studies found that the methodology derived equivalent BC reductions using laboratory emission factors is substantially low compared to applying field-based emission factors from the literature [23]. Whilst issues such as appropriate fNRB assumptions affect all clean cooking methodologies, Gill-Wiehl et al. [24] further identified the metered methodology (MMECD) as by far the most accurate, with relatively low levels of over-crediting. They recommend this methodology as its use of real usage data overcomes many of the key issues; this highlights the opportunities for digital data for carbon and other impacts.

Besides emerging issues related to the methodologies and quantification, there are other systemic issues that influence the clean cooking sector’s carbon credit integrity. Proving additionality in relation to host country regulations on clean cooking targets and policies, including NDCs; issues related to permanence and leakage with respect to risks of forest fires and allocation of buffers such as by the forestry sector projects; robust third-party validation and verification through VVB performance evaluation; and risk-reward measures are some of the issues. Lastly, going forward, effective governance in relation to Paris Agreement Article 6 implementation will play a pivotal role [93]—with increasing regulation towards net-zero, countries could direct the majority future use of clean cooking carbon credits within the Article 6 domain [38,94]. It is expected that clean cooking credits will be increasingly used and contracted early until 2030, treated as ‘low-hanging fruits’ [95]. In this, incentivizing corresponding adjustments could see an increase in credit price levels while assuring transparency and optimization in meeting the NDCs, such as by establishing conservative baselines to reduce the risk of overselling [96]. Host countries, especially those which are clean cooking heavy, e.g., Nepal and Rwanda, would need support to start establishing a framework and longer-term strategies on the domestic use and sale of carbon credits for clean cooking.

In this, efforts to quantify the benefits efficiently and transparently beyond carbon, including for health (SDG3), gender (SDG5), and deforestation (SDG15), would need additional support since very few clean cooking projects are claiming such obvious contributions. Further, the new methodology that promotes the metered and measured energy cooking devices could be pivotal, such as through quantification of the rebound effects for previously underlying ‘suppressed demand’ [97], indicating positive social benefits which could be due to improved nutrition and livelihoods. This will then reduce the over-crediting due to the methodology. However, the evolving governance structure needs to consider valuing the SD benefits together with the right benefit-sharing regime, which is also recommended by various initiatives both on the demand and supply side [98] (e.g., as part of the Core Carbon Principles of the ICVCM) to enhance not only the overall integrity but also the general willingness to pay, and prices. This will then create a positive feedback loop—where high-quality credits help in scaling up the market and realizing the intended development benefits, such as through integrated electricity and modern cooking planning to address the suppressed demand.

The guiding principle going forward should be enhancing integrity by addressing over-crediting, fair sharing of revenues, and additionality. Over crediting is linked primarily to the generation and use of estimates for critical parameters such as the non-renewable biomass fraction. The generation of these values requires expertise, time, and/or costs, which are oftentimes beyond the remit of the average project developer. In this, the sector partners could identify these critical parameters and the supports required, such as whether the establishment and review of the biomass fraction, the baseline fuel consumption, leakage, or the rate of pollutant exposure should be conducted by a third party for a particular region or country. And if so, how and when—rather than leaving the choices open, which has been shown to result in manipulation.

Another critical issue is the use of revenues where both its giveaway to promote ‘cheap’ credits, as well as complete non-sharing of revenues with the stakeholders, is doing a disservice towards scaling up. Financing experiments to structure revenues together with micro-credit and insurance, tariffs, repair, and maintenance vis a vis plain distribution of revenues across the value chain could feed into policy and legal frameworks at various levels. Lastly, linking additionality more broadly to the NDC’s clean cooking targets and implementation status, together with the nuanced project-level cost benefits, including a review of the technologies’ positive lists, is recommended. This would, while ensuring checks for the cheap credits, allow genuine credits through modern cooking services to materialize efficiently.

These issues could be addressed collectively with a nuanced comparative analysis of the methodologies, guidelines and supporting tools, and their project reports. This could also then allow the designing and aligning of processes and requirements across methodologies in other sectors, e.g., health, to create synergies, together with efforts to bring in more entities (e.g., American Carbon Registry) to handle the anticipated influx of clean cooking projects efficiently.

9. Conclusions and Outlook

The paper illustrates that access to clean cooking is a key element of SDG 7, but to date, four billion people are still without access to modern energy cooking (MEC) services. Substantial funding is required to address this challenge. It is estimated, however, that of the annually required US$10 bn of funding to achieve the transition to MEC and, thereby, SDG 7, only two percent are currently met [43].

This paper highlights how technological innovation and the development of new methodologies to measure the impact of MEC has generated substantial opportunities for further market advancements as they have the potential to unlock climate finance and impact funding with regard to health- and gender co-benefits.

With increasing efforts of global decarbonization, the demand for carbon credits is expected to continue to rise. It is estimated that annual global demand for carbon credits could reach up to 1.5 to 2.0 gigatons of carbon dioxide equivalent (GtCO₂e) by 2030 and up to 7 to 13 GtCO₂e by 2050 [99]. Depending on different price scenarios and their underlying drivers, carbon prices are estimated to reach between US$25 to US$50 by 2030, which could potentially generate between US$450 to US$800 million of future carbon income between 2023 and 2030 [43].

Clean cooking access is not only a key element of SDGs 7 (Energy), 13 (Climate), 3 (Health), and 5 (Gender). It is also vital for the achievement of further multiple targets, including SDGs 1 and 8 (Livelihoods), 15 (Ecosystems), and 4 (Education), which are all closely interconnected. Consequently, future outcome investment should acknowledge this interconnection to a greater extent and ensure that impacts are properly quantified and monetized where appropriate.

The evaluation of the clean cooking landscape suggests that there is a huge, yet largely untapped potential, of connecting climate and other outcome finance with those SDGs that are yet less in the investment focus as sustainable development can only be facilitated through the holistic achievement of the SDGs.

To date, improved efficiency projects (ICS) account for around three-quarters of the cooking project pipeline, but the market for MEC solutions is evolving [43]. Potential ‘over-crediting’ and inaccuracies within climate financing approaches that do not rely on metered devices or other rigorous forms of continuous usage monitoring can potentially threaten the further advancements of MEC solutions and the achievement of SDG 7. In theory, the market would support the improvement and higher accuracy of crediting methodologies as this would achieve higher market prices for carbon credits. However, there is a risk that outcome buyers may opt for readily available credits for ICS or other technologies that are based on less accurate methodologies. These have been described earlier as ‘low hanging’ fruit and can not only generate undesirable results for carbon emission reductions and climate change prevention. They can also distort local clean cooking markets by flooding them with subsidized ICS, of which usage is not metered, and the positive impact on health through the reduction of household air pollution is questionable.

The continuation and even increase of financial investment and interest from Voluntary Carbon Markets rely significantly on the capacity to maintain confidence among investors and buyers. Hence, there is a significant opportunity for more accurate methodologies to be developed and applied, but carbon market developments in this regard are still somewhat uncertain. MECS stakeholders have repeatedly expressed these substantial concerns and joined leading experts [24] in a call for creating a universal framework that applies improved standards to increase the accuracy in quantifying carbon emission reductions based on actual usage across the currently available methodologies and clean as well as improved cooking technologies.

The review of the MMECD and the CIB pilot has revealed the challenges of adapting and implementing new methodologies for MEC outcome finance but has contributed significantly to paving the way for wider adoption across a range of MEC technologies and geographies. The MMECD has proven the importance of usage metering to achieve higher accuracy in calculating carbon reduction, which can create greater confidence in the market. The CIB achieved some significant results which can provide guidance for future transactions. The CIB demonstrated the viability of promoting outcome payments alongside carbon credits-essentially ‘piggybacking’ off these well-established certification procedures and platforms. However, it appears that the costs of the transaction were substantial in relation to the funds disbursed. Although it will be much easier and less expensive to replicate the transaction following the work achieved in the pilot, it may also be that some modifications to the approach adopted are required.