Emerging Clean Cooking

Intervention

Social or environmental challenge

The development challenge centers on the lack of efficient and transparent mechanisms to finance and implement climate impact mitigation interventions in developing regions. Market failures contributing to this challenge include the absence of reliable data for measuring and verifying emission reductions, limited access to capital for innovative climate projects, and a lack of incentives for private investment in sustainable development. Traditional financing models often fall short in addressing the unique needs of climate projects, leading to underinvestment and slow progress. The program aims to overcome these barriers by leveraging the ITMOS mechanism under Article 6.2 of the Paris Agreement, utilizing digital measurement, reporting, and verification (dMRV), and outcome-based financing (OBF). Using already available technology, the program seeks to mobilize private capital, ensure high-integrity data, and create a scalable model for climate action.

Description of the intervention

Innovations in the digitization of carbon markets could transform how green technology infrastructure, such as modern energy cookstoves, gets financed and scaled up in Africa. These mechanisms leverage Climate Finance to promote financial inclusion and stimulate sustainable local socio-economic development, by distributing incentives and providing direct digital cash transfers to local implementing agents and beneficiaries using the green technologies. Digital transformation also creates opportunities to mobilize and equip digitally-native youth with skills, tools and incentives, which could provide the workforce and promote entrepreneurship for the green economic transition in Africa. The UNICEF-led Youth Opportunities Marketplace (Yoma) is gearing up to provide the digital coordination and financing platform aiming to create new income opportunities for youth in the transition to a green economy. Internationally Transferred Mitigation Outcomes (ITMOs) are a key driver of this financing innovation. National governments in Africa have begun to introduce regulations that allow mitigation activities to be funded through ITMOs under Article 6.2 of the Paris Agreement. As an example, the government of Zambia has authorized the design of a national modern energy cooking mitigation activity that implements digital Measurement, Reporting and Verification (dMRV) to certify Mitigation Outcomes and Carbon Credits. Government-sanctioned Mitigation Outcome Purchase Agreements (MOPAs) between the Mitigation Activity (MA) implementers and counterparty government Acquiring Parties are expected to raise the bar for the quality, price, and predictability of the supply for Mitigation Outcomes – including for carbon credits in the Voluntary Carbon Markets. This should significantly reduce financing risks for private capital to invest in green energy infrastructure projects. Digital MRV provides real-time visibility of MA project performance, which could reduce project execution risks. Generating digitally certified outcomes could increase capital velocity and liquidity in carbon credit markets. Project finance may now be structured using innovative financing instruments that are linked to the proceeds of MOPAs and to forward contracts for digitally certified ITMOs and Carbon Credits in the private sector. This model of Outcome-based Financing presents a promising approach that could be extended to other areas of sustainable development, such as healthcare and education, potentially transforming funding mechanisms in these sectors and providing opportunities for youth.

Last data update

Data for this pipeline project was last updated in May 2024.