Clean-Cooking Company’s Collapse Touches World Bank and Beyond

The collapse of clean-cooking company Koko Networks Ltd. will reverberate beyond the $300 million investors lost on what used to be one of the industry’s leading businesses.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — The collapse of clean-cooking company Koko Networks Ltd. will reverberate beyond the $300 million investors lost on what used to be one of the industry’s leading businesses.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.The Kenyan firm sold cooking stoves and clean-burning ethanol to about 1.3 million households, operating a network of fuel kiosks in corner stores and keeping prices low by selling carbon credits on the open market. But the company filed for administration over the weekend of Jan. 31 after Kenya’s government demurred for at least eight months over issuing the authorization Koko required to sell its offsets in regulated compliance markets, where they could fetch a higher price. Now, a World Bank unit that insured Koko for almost $180 million may be forced to pay out, while one of Africa’s largest investment banks is trying to recover a loan secured by carbon-credit income that never materialized. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.The bankruptcy damages Kenya’s once-bright prospects as a destination for emissions offsets projects and highlights the challenges of financing the clean-cooking industry, a key tool in the fight against climate change. Many of Koko’s former customers are unable to get the company’s ethanol to cook with and all of the company’s 700 staff have been laid off. “From an environmental standpoint, this is a very big step back for Kenya and for accelerating clean cooking on the continent,” said Ethan Kay, managing director of emerging markets for wood-burning cookstove provider BioLite. “Kenya has become a very challenging place to run a clean-cooking business and that predated the collapse of Koko.”Air PollutionAfrica’s $47 billion cooking fuel market is dominated by charcoal and firewood, smoky fuels that produce planet-warming greenhouse gases and indoor carbon monoxide pollution, which shortens the lives of more than half a million Africans a year. Koko was set up in 2014 to provide an alternative. Backed by Vitol SA and the Microsoft Climate Innovation Fund, it sold ethanol made mostly from sugarcane processing waste. The fuel could be purchased at thousands of what it called fuel ATMs in Kenya’s biggest cities for use in its bespoke stoves. The simplicity of its business model – selling one type of stove and focusing on customers in one country – was key to its success. Supply chains were relatively straightforward and ethanol was cheaper for customers than other fuels such as charcoal or liquefied petroleum gas.Some of Kenya’s poorest people adopted the technology, in part because Koko subsidized costs with income from carbon credits. In order to generate credits, the company attempted to quantify the deforestation avoided by its customers’ shift away from burning wood and charcoal. Each credit represents a ton of avoided carbon dioxide and could be sold to a company looking to offset its own emissions. “Clean cooking specifically is dependent on carbon credits,” said Peter Scott, the founder and chief executive officer of Burn Manufacturing, the world’s biggest clean-cooking company. “There isn’t really another option for funding,” he said, because the consumers generally can’t afford the full price of a stove.Compliance MarketIn June 2024, Kenya’s government signed an agreement to provide Koko with letters of authorization allowing it to sell credits into government-mandated compliance markets. The company would then be able to secure higher prices for its credits and to sell to buyers such as high-emitting countries and to airlines, which have a huge appetite for offsets. Johannesburg-based Rand Merchant Bank had made a substantial loan to Koko earlier that year and pledged more finance in the future, according to people familiar with the matter who did not want to be named discussing private matters.In March 2025, the World Bank’s Multilateral Investment Guarantee Agency insured the company’s investment. Designed to shield the company from breach of contract by the government, it was MIGA’s first insurance policy linked to carbon markets. But Koko never received the necessary letters of authorization to enter the compliance market. The Kenyan government has not issued the documentation to any cookstove company, although other African countries, such as Gambia and Ethiopia, have authorized firms including Burn and DelAgua. The Kenyan government’s top climate official, Festus Ng’eno, declined to comment when asked why the letters hadn’t been issued. Koko, in a brief statement on Feb. 1, thanked its customers, employees and the corner stores it partnered with, but said it would not comment on its contracts with the government and the World Bank for confidentiality reasons. “We are deeply saddened that Kenyans will no longer receive the clean energy subsidies, family health support and environmental benefits that Koko has delivered at scale,” it said. Koko had spent more than $150 million subsidizing its customers, a person familiar with the situation said.Koko is likely to make an insurance claim and may take legal action against the government, according to people familiar with the situation who didn’t want to be named discussing sensitive matters.

Rand Merchant Bank said it was “working through the appropriate processes to support recovery” of its loan. MIGA declined to comment.Capital FM, a radio station in the Kenyan capital of Nairobi, reported that Koko had applied for all the carbon credits the country could issue, potentially locking other companies out of the market. Allowing credits to be traded on the compliance market can make it harder for a national government to meet its emissions-reduction targets, as offsets sold into another country don’t count toward those goals under the UN Paris Agreement.‘Risky Model’Kenya has been trying to boost state income from its carbon industry since President William Ruto took power in September 2022. Ruto hosted Africa’s first heads-of-state level climate summit in 2023 and has put himself forward as a leading voice on climate issues for the continent.The result, according to carbon project developers who spoke with Bloomberg on the condition of anonymity, has been a fight for control among government departments, additional bureaucracy and a slowing of investment into the nation.However, Koko’s collapse has also seen rivals and academics question its carbon-credit methodology. While its calculations were permissible under guidelines issued by the UN and others, the company’s approach has been surpassed by more accurate methods.Koko exaggerated the amount of charcoal and firewood use displaced by its products and relied on a small survey of customers to estimate average ethanol use, wrote Tom Price, a former executive at a Kenyan cookstove company, in a LinkedIn post. “They put a thumb on the scale” in measuring ethanol consumption, Price said in an interview. “They knew to the liter. Why did they use an estimate? They have chipped ATMS.” The methodologies used for carbon-credit calculations in the cookstove industry have been problematic for a decade, said Annelise Gill-Wiehl, a postdoctoral fellow in Environmental Health Sciences at Columbia University and the co-author of a 2024 study that identified pervasive over-crediting. Those methodologies are now starting to tighten up, she said. “The demise of Koko is a product of the sector coalescing around quality,” she said, adding that companies that don’t follow that trend “are going to fail.”Angry CustomersCustomers and vendors saw the signs that Koko was running out of money early on. Owners of grocery stores and phone-repair shops that hosted its kiosks told Bloomberg that fuel supplies had been erratic since October.“I’m back to a charcoal stove and electric coil,” said Rasoa Kakai, a 54-year-old mother of three in Kibera, a sprawling slum on Nairobi’s outskirts. “I am still waiting for Koko, they owe me money. Early December, I paid 200 shillings ($1.55) and went to refill, but was told no fuel.”Videos of customers throwing away Koko stoves are circulating on TikTok.While Koko’s strategy of focusing on the Kenyan market alone brought advantages, it ultimately contributed to the company’s downfall. London-based carbon ratings agency BeZero Carbon gave Koko a “D” for carbon accounting risk, its lowest ranking, but said the company met the requirements of the compliance market nonetheless.Koko became insolvent “because it was unable to sell into the regime that it wanted to,” co-founder and CEO Tommy Ricketts said. “It couldn’t secure the letter of authority.”—With assistance from Yinka Ibukun.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.