KOKO Fuel Vendors are staring at losses, empty shelves and huge cost of rebranding their shops and delivery outlets after the Kenya Government declined to authorise Koko Networks, a tech start-up and venture capital firm, to sell carbon credits on the international market. This measure cut off the main revenue stream, making it impossible to continue selling subsidized fuel and cooking stoves.
The KOKO fuel shutdown is said to have impacted some 1.5 million households, mostly middle and low-income families in rural and sub-urban areas, who depend of the cheaper fuel for cooking. These poor households will now be forced to revert to charcoal and kerosene stoves for cooking and lighting.
Koko Network, which had partnered with the World Bank, South Africa’s Rand Merchant Bank, and Vivo Energy, crafted a distribution model that placed 3,000 cloud connected automated filling machines at small shops predominantly owned by female entrepreneurs, providing employment and income to thousands of agents while creating access to clean fuel in low-income neighbourhoods.
The firm’s supply chain included partnerships with Vivo Energy for bioethanol procurement and SAARUS, an Indian firm that manufactured the cook stoves.
Koko Network shutdown reverses the clock on many Kenyan firms that have taken the drive to cleaner production — leaving idle a multi-billion-carbon credit fund. In 2010, the International Finance Corporation(IFC), the lending arm of the World Bank set up Sh18.3 billion kitty to compensate firms that invest in renewable energy and environmental conservation projects like wind power, biogas and afforestation. To date, only a few Kenyan firms have shown interest.
Koko Network was selling sold bioethanol at roughly half the prevailing price and heavily subsidized cooking stoves, absorbing losses that were meant to be recovered through international carbon markets. The government’s refusal to grant a letter of authorization effectively cut off that revenue stream.
The closure follows reports that the company was facing imminent bankruptcy after failing to secure regulatory approval to proceed with carbon credit sales. Staff were informed of the immediate halt to operations and instructed not to return to work.
Koko Network and team in East Africa
Koko’s clean fuel and carbon platform was serving more than 650,000 household subscribers in Kenya, with households across Nairobi, Mombasa, Kisumu and Nakuru benefitting every day from cooking with KOKO Fuel.
Koko Fuel is ultra-low-carbon renewable bioethanol that is available from a dense Network of KOKO Fuel ATMs inside local shops.
Customers can purchase fuel in the small daily quantities that are often preferred in the informal sector.
KOKO had a 1,500-strong team in East Africa and India and had scaled up its operations, including dedicated manufacturing facilities, to meet the very strong consumer demand that exists in Kenya and abroad, in order to tackle the scourge of charcoal-based deforestation at scale.
In July, the firm won the prestigious Keeling Curve Prize an annual award for organizations and companies that have a proven track record of reducing, avoiding, or eliminating greenhouse gasses from the atmosphere.
Carbon markets allow governments and companies to buy and sell carbon credits to offset their carbon emissions. There are compliance markets, where companies are required by law to buy carbon credits to set off their emissions, such as the European Union’s Emissions Trading System (EU ETS) and voluntary carbon markets (VCMs) permitted under Article 6 of the 2016 Paris Climate Agreement.
Reports indicate that KOKO is now preparing to file an insurance claim with the World Bank’s political risk insurer, Multilateral Investment Guarantee Agency, alleging breach of contract by the Kenyan government. On the other hand, the Government of Kenya is questioning the authenticity of the carbon credits that KOKO alleges it has generated.
At stake is an investment worth over US$300 million in building its infrastructure, that is about to go up in smoke.
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