While using carbon credit sales to boost a company's revenues has been attempted, the new trend is to ride on the additional revenue generation potential to prune the upfront cost of the product that earns these credits.
After the success of a nationwide rollout of compact fluorescent lights using the same model, Envirofit — an expert in clean cooking stove technology that addresses the hazards of indoor air pollution in poor rural households — has been trying it out along with its partner Shell Foundation.
They first tried it in Africa, where the results were encouraging. The strategy is now being applied to India, where as many as five lakh women and children die prematurely every year due to the smoke caused from cooking on traditional stoves inside homes. The clean stove brings down the emissions substantially.
“In Africa, we found a lot of demand for the clean charcoal burning stove, but affordability was a big question,” says Pradeep Pursnani, Business Director, Breathing Space, Shell Foundation. So, to help bring down its cost, we started a Shell Foundation Envirofit Carbon Fund with a corpus of up to $1 million. The Fund is independent and technology agnostic and will provide tailor-made solutions to stove manufacturers, women's groups and MFIs to make sale and purchase of stoves affordable, he explains.
The fund will now be enhanced to $5 million to cater to India as well. A stove that costs around Rs 1,500 would be available for around Rs 1,000 to rural families. The foundation is on the lookout for investors and entrepreneurs apart from Envirofit to take the concept forward.
So, how does the model work? Stove manufacturers sell the reduced emission stoves at a discounted price, and recover the difference from sale of carbon credits. Though the stoves have the advantage of product quality, manufacturers are likely to see carbon revenues only flow in after 2-3 years. This means the manufacturers are left short of working capital. This is where Shell Foundation will step in. Its carbon fund for stoves will fund the subsidy and later recover it from carbon credits sales that it generates on the same stoves.