Kenyan clean cooking start-up on the brink after carbon credit clash

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Koko Networks, a prominent clean cooking start-up backed by Vitol and the World Bank, is on the brink of bankruptcy after a dispute with the Kenyan government over the sale of carbon credits.

The company held board meetings on Thursday and Friday to discuss options after failing to receive letters of authorisation from Kenya’s government to sell carbon credits in the compliance markets. Those sales are a cornerstone of Koko’s business model.

The company’s entire staff of about 700 people are expected to lose their jobs if it collapses.

Koko will now file a claim for insurance from the World Bank’s Multilateral Investment Guarantee Agency (Miga), alleging breach of contract by the Kenyan government, according to two people familiar with the company.

Last March, Miga insured Koko’s investment for $179.6mn, in what was the world’s first carbon-linked political insurance coverage. The policy explicitly covers government breach of contract.

The stand-off will deepen concerns about the viability of the cookstove financing model and could damage Kenya’s reputation as a hub for green investment.

Koko has invested $300mn, with half that sum going on building a network to supply bioethanol to 1.3mn low-income urban households. The company sells cooking stoves and fuel at subsidised prices and recoups losses by selling carbon credits.

The airline industry wants to buy millions of carbon credits, such as those supplied by Koko, under a scheme run by the International Civil Aviation Organization. Those credits cost about $20, as much as 10 times the price fetched in the largely discredited voluntary carbon markets.

The credits are generated through calculations about how much deforestation — and therefore carbon emissions — are avoided by low-income households switching from cooking with charcoal to using bioethanol made from sugarcane. The credits are certified by the verification organisation Gold Standard.

However, cookstove credits, which have been used by companies such as Shell, British Airways and easyJet, have been dismissed as largely worthless by researchers at the University of California Berkeley. In a 2024 peer-reviewed study, they concluded that so-called clean cookstoves saved only a fraction of the carbon emissions claimed.

Koko says its methodology is robust and that selling carbon credits to the compliance markets is essential, in the absence of government subsidies, to transition from charcoal cooking. The African Development Bank estimates that 600,000 people, mainly women and children, die prematurely in Africa each year through inhaling charcoal fumes.

In June 2024, Kenya’s government signed an investment framework agreement with Koko that would allow it to sell credits into compliance markets under Article 6 of the UN Paris Agreement.

However, Kenya’s government has not issued the necessary letters of authorisation needed to complete the sale of credits.

“The Kenyans are failing to understand that Koko will go bust,” said a person with knowledge of the company’s operations.

The person said the dispute would harm President William Ruto’s attempt to market Kenya as a safe place to make green investments. “Ruto presented himself as a ‘green president’ and won all those accolades. This will be catastrophic for his reputation,” the person said.

The Kenyan government is divided over the issue. Several senior government officials declined to answer questions as to why the letters of authorisation had not been issued.

One, however, said the company’s stoves had improved the lives and health of many Kenyans.

“They are the only ones with that capacity in Kenya . . . who have set up mechanisms and technical requirements and verification,” said the official, who asked not to be named. “It was a great opportunity to tap into climate financing.” 

Koko said it could not comment due to confidentiality provisions.

Koko’s investors include the Microsoft Innovation Fund, Mirova and Rand Merchant Bank. It has a fuel distribution partnership with London-listed Vivo Energy, which is owned by the Vitol Group.

Miga declined to comment.