Santosh

  • A $179 Million Carbon Market Lesson: KOKO Networks and Its Clean Cooking Play

    Since 2008, I have worked in different roles and geographies on getting clean cooking solutions to poor households. In those early days, the sector got little of the financial creativity flowing toward utility-scale solar and large carbon portfolios. But the emerging carbon credit play under the Clean Development Mechanism gave us real hope: that household air pollution and biomass-driven emissions could be addressed if we used carbon revenues to make clean cooking genuinely affordable.

    Eighteen years on, carbon markets have attracted unprecedented attention from the private sector, development finance institutions, and governments. The rise and fall of KOKO Networks is a milestone in that journey. It demands we acknowledge the market’s potential and take responsibility for building it better.

    A rustic cooking area with a metal grill over a fire pit, surrounded by ash and wood. Two pots and a kettle are positioned nearby, with smoke rising in the background.
    A traditional kitchen in Lao

    A $179 Million Learning Bill for Carbon Finance

    KOKO Networks is a company I have cited many times as an example of what clean cooking success looks like. Founded in Kenya in 2013-14, KOKO built a bioethanol cooking solution and made it accessible at subsidised prices: stoves at KES 1,500 against a market price of over KES 10,000, and ethanol at KES 100 per litre against KES 200.They reached more than 1.5 million households by leveraging carbon credits revenue from compliance carbon buyers. That distinction matters enormously and I will come back to it.

    The model attracted serious capital. Over $100 million from Mirova, Rand Merchant Bank, and the Microsoft Climate Innovation Fund. In 2024, the World Bank’s MIGA arm extended a $179.64 million guarantee to support expansion to 3 million households.

    On January 31, 2026, KOKO filed for liquidation and laid off all 700 staff. The trigger was their failure to secure a Letter of Authorisation from the Kenyan government under its Climate Change (Carbon Markets) Regulations 2024. Disagreements over revenue share and credit volumes proved irresolvable. Without the LoA, KOKO’s credits could not be sold in the compliance market, revenue collapsed, and 1.5 million households now face a return to charcoal.

    The collapse of KOKO Networks triggered a wave of reactions from investors reassessing sovereign risk, to carbon market sceptics citing it as proof of the model’s fragility. I understand those reactions. But these reactions do not factor in that carbon markets and carbon projects have many nuances and they operate under different mechanism with different rule books, different architecture and different outcomes.

    Two Markets, Two Rule Books

    The voluntary carbon market and the compliance carbon market are architecturally distinct, with different purposes and different rule books.

    The voluntary carbon market exists to mobilise additional climate action beyond what regulation requires. When a corporation buys a voluntary carbon credit, it directs private capital toward climate impact the mandatory system often doesn’t reach. Projects certified under Verra or Gold Standard can issue credits to corporate buyers without host country Letters of Authorisation and without triggering corresponding adjustments in national accounts. The voluntary market lane remains open regardless of LoA status.

    What KOKO’s model required was the premium that compliance-grade, Article 6-authorised credits command. At voluntary market pricing, the subsidy engine serving 1.5 million households simply did not work. The LoA was not a regulatory formality. It was the most critical component of the entire compliance carbon market project.

    A Maturing Market, Not a Broken One

    What happened to KOKO is being read by many as evidence of carbon market failure. I read it differently. It is a sign of a maturing market and the disruption that maturation brings for projects built on older assumptions.

    Article 6 of the Paris Agreement is increasingly being operationalised, reflecting serious national intent to meet climate commitments. Under Article 6.2 and 6.4, credits used for compliance purposes now require a corresponding adjustment: the host country formally gives up that emissions reduction from its own national accounting. Kenya cannot count the same reduction toward its NDC and sell it to a compliance buyer abroad.

    Kenya’s insistence on negotiating revenue share before issuing an LoA will soon become a standard part of every government’s playbook. It is a government exercising legitimate discretion over what has become a geopolitical asset. Zimbabwe, Tanzania, and Indonesia have taken similar positions, imposing moratoriums or review frameworks on carbon credit authorisations for the same underlying reason. KOKO’s mistake was overestimating the value of its government MoU and underestimating the discretionary nature of the LoA. A framework agreement is a relationship document. A Letter of Authorisation is a sovereign instrument. KOKO built a $300 million business model in the gap between them.

    Growing Pains, Not Doom

    This case should not be read as a doomsday signal. Ghana, Thailand, Guyana, Suriname, and Vanuatu have all issued LoAs successfully. Singapore has signed bilateral Article 6 agreements with more than 25 countries. As of March 2025, 97 bilateral agreements under Article 6.2 have been signed across 59 countries. The architecture is being built.

    The KOKO failure was the result of building a financial model on compliance-grade assumptions without compliance-grade regulatory certainty. The lesson is not that carbon markets don’t work. It is that the compliance market requires a fundamentally different approach to sovereign partnership and regulatory sequencing than the voluntary market playbook most of us learned on. The LoA must be secured before capital is deployed, not treated as a problem to resolve once the business is running.

    Carbon markets are growing up and there will be pain in that process. We need to let go of old assumptions and engage with this emerging market in a new light, as its rule book, safeguards, and drivers keep evolving.

    The Collateral Damage

    1.5 million households who had access to cleaner, cheaper fuel are reverting to charcoal. Seven hundred people lost their jobs. The WHO estimates that household air pollution from solid fuel combustion causes approximately 3.2 million premature deaths globally each year, with Sub-Saharan Africa bearing a disproportionate share. When carbon markets succeed, the benefits are diffuse and global. When they fail, the costs are local and immediate, falling on those with the least resilience. The MIGA guarantee protected investors. Unfortunately the households, and the 700 who lost their jobs, had no such protection.

    Suggested Reading

    Here are some key documents that underpin arguments in this article. Recommended for practitioners, investors, and policymakers working in carbon markets and clean cooking finance.

    UNFCCC and Paris Agreement Frameworks

    World Bank

    • World Bank. State and Trends of Carbon Pricing 2025. The most current annual benchmark report on carbon pricing instruments globally, noting growing compliance demand including from clean cooking projects.
    • World Bank. State and Trends of Carbon Pricing 2024. Covers the interaction between voluntary and compliance carbon credit markets, with data on pricing, coverage, and revenue across 75 instruments worldwide.

    WHO

    • WHO. Household Air Pollution and Health. The authoritative fact sheet on health impacts of solid fuel combustion, including the 3.2 million annual premature deaths attributed to household air pollution.

    Carbon Market Integrity

    • ICVCM. Core Carbon Principles. The Integrity Council for the Voluntary Carbon Market’s standard-of-standards framework, establishing minimum quality requirements for voluntary carbon credits.

  • What I Read in 2025

    A stack of books on a wooden table with a person reading in the background, surrounded by a cozy library setting.

    As usual, my last year’s reading was split between deliberate explorations and guilty pleasures. The thrillers, murder mysteries, and crime fiction were my airport reading and guilty pleasures, feeding the inner child who grew up on comics and superhero books. But many others were deliberate choices, and those are worthy of reflection.

    The deliberate selections reflect my acknowledgment of the limited time I have and the many authors and themes I am yet to explore. These selections also reflect a rebellion against reading patterns and comfort zones, pushing me to explore what is less likely to find a place in my reading list.

    Breakneck by Dan Wang was a very deliberate pick and turned out to be one of the best books I have read on China. I have been following Dan Wang and his annual letters (superb expositions of long-form writing that present his layered observations on China) on his blog. This is essential reading for anyone who wants an informed, honest, and insightful commentary on China’s rise as an economic and manufacturing powerhouse.

    Ian McEwan and Italo Calvino are two authors who have been on my reading list, and this year I managed to pick one book from each. Ian McEwan’s Atonement and Amsterdam were the two books waiting for me, but I picked up his latest, What We Can Know. The blurb and reviews drew me in. This literary page-turner takes us to a post-climate apocalyptic world and provides commentary from the lens of future generations. It overpowered my hesitation to pick up dystopian fiction (I have read quite a few recently) and this book became my first Ian McEwan book.

    I am not sure how I ended up picking Invisible Cities out of the three Italo Calvino books on my reading list. It gives a glimpse of what Calvino can produce, though it is not the typical entry point to his work. Considered a masterpiece for its structure and innovative narration, it is his meditation on modern society and cities, but not the most readable Calvino. Still, there is something quietly powerful about spending time in cities that exist only in language and imagination. I need to read another book by him to know his work better.

    I don’t usually read travelogues, but I have read quite a few. What I love about them is how different authors connect with the same places, cultures, and rituals, and how their reflections bring out unique dimensions we often miss. Travelogues often emerge from an immersive interplay between the physical world and an individual’s worldview and experiences. The same roads, buildings, and cities get transformed by the observer’s unique perspective and accumulated experiences. Aatish Taseer’s liminal existence brings that interplay vividly to life in A Return to Self. Gay, born out of wedlock, son of a Hindu journalist and Pakistani politician, anti-establishment (he also authored the controversial Time magazine cover story on our Prime Minister), his liminal positioning entitles him to offer a unique perspective and commentary on Turkey, Spain, Mexico, and obviously India. Interestingly, Invisible Cities can easily be read as a travelogue of cities that don’t exist.

    Mother Mary Comes to Me was an automatic inclusion in my list even before the book was released. I grew up immersed in the extraordinary story of a debut author securing half a million pounds for her first book and becoming a celebrity even for those who never read books and had no idea what the Booker Prize was, all before I got my hands on a borrowed copy of The God of Small Things. I witnessed her fame, notoriety, rebellion, and controversies. Her memoir promised to satisfy my curiosity about how that book came to be and what happened to her afterward and to some extent it did.

    I also reread Siddhartha after almost two decades. The two decades have changed me, and the context of reading the book has changed. Interestingly, the book itself expands on the changing nature of our experience and the world around us. To paraphrase the saying that you cannot step in the same river twice: you cannot read the same book twice. The book is not the same, and the reader is not the same. The first time I read this book, it was one of the few books with me in the hinterland of a Francophone African nation. Over the years, the book had been reduced to an entry in my reading list. This time it was a deliberate choice, and now I am making a list of books I should reread. We must reread the books that we love (or we hate).

    Non-Fiction

    • The Teaching of Ramana Maharishi in His Own Words
    • The Message by Ta-Nehisi Coates
    • When Things Fall Apart by Prema Chodron
    • A Return to Self by Aatish Taseer
    • Breakneck by Dan Wang
    • Mother Mary Comes to Me by Arundhati Roy
    • How To Think Life Socrates by Donald J Robertson
    • Why the Poor Don’t Kill Us by Manu Joseph
    • Help by Oliver Burkeman
    • Tiny Experiments by Anne Laure Le Cunff
    • Living Democracy by Tim Hollo

    Fiction

    • Invisible Helix by Keigo Higashino
    • Nemesis by Gregg Hurwitz
    • The Final Curtain by Keigo Higashino
    • The Informationist by Taylor Stevens
    • In Too Deep by Lee Child
    • Rock Paper Scissors by Alice Feeney
    • A Spell of Good Things by Ayobami Adebayo
    • The Housemaid by Frieda McFadden
    • The Secret of Secrets by Dan Brown
    • Invisible Cities by Italo Calvino
    • Naukar Ki Kameez by Vinod Kumar Shukla
    • Pratinidhi Kahaniyan of Uday Prakash
    • Siddhartha by Hermen Hesse
    • What We Can Know by Ian McEwan

    Previous Years

    2024,2023, 2022, 2021, 2020, 2019, 2018(2), 2018(1),

     2017(2), 2017(1), 2016, 2015, 2014, 2013, 2012, 2011, 2008,  

    2007,  2006

  • Sankalp Bharat 2025

    Last Friday, I moderated the opening plenary of the Sankalp Bharat 2025 to explore the next phase of transformation of Indian agriculture. We didn’t just discuss problems but mapped the big shifts required for Indian agriculture over the next decade.

    Here are four things we all agreed we must work towards:

    Tech led transformation: Leveraging AI and digital infrastructure is critical to democratising access to finance and markets for smallholder farmers.

    Climate resilience: The shift towards climate-smart farming and decarbonised value chains is not just an environmental necessity but a driver for long term economic stability.

    Access to affordable capital: Indian farmers and farm enterprises need access to affordable capital and insurance products. We need to leverage our regional rural banks, agriculture financing institutions to unlock more capital and risk mitigation instruments.

    Collaborative impact: Real change requires deep synergy between agtech innovators, investors, and policymakers to solve for scale and sustainability.

    A panel discussion at the Sankalp Bharat 2025 event featuring multiple speakers discussing the future of Indian agriculture.

  • RESTORE 2025

    Panel discussion at the 'RESTORE' event focused on accelerating India's restoration economy for a Harit Bharat, featuring four speakers and a colorful backdrop.

    The Economics of Restoration is complicated. And, the context specific nature of interventions make it even more difficult to have commercial capital flow in these interventions for scale. But restoration of our land and food system is critical and cannot be de-prioritized just because our existing frameworks of pricing and financing are unable to do justice to them.

    India’s restoration needs a dedicated institution that owns this agenda and builds the required capabilities and takes responsibility of mobilizing and channelizing capital to this space.

    Above are the key points of my contribution on the panel at RESTORE 2025. Very happy to see that we are having more dedicated conversation and convening on Restoration.

  • Beyond Debt: How the USD 125 Billion Tropical Fund Redefines Climate Finance for Forest Conservation

    Our forests are essential for maintaining Earth’s climate balance, as they absorb around 16 billion metric tonnes of CO₂ annually (gross removals) and store over 860 billion metric tonnes of carbon. They also provide crucial ecosystem services, supporting the water, air, and food systems on which life depends.

    Yet these services are highly undervalued in economic systems. According to recent analysis from the Chinese Academy of Environmental Planning, global ecosystem services, predominantly provided by forests and wetlands—are valued at an average of USD 155 trillion per year (2024 estimate), more than eight times current global GDP. For forests specifically, ecosystem services (excluding timber and carbon) are valued at approximately USD 7.5-8 trillion annually.

    Today, tropical forests contribute approximately 30-35% of global forest carbon sequestration, a drastic decline from the two-thirds contribution recorded three decades ago. This shift reflects accelerating deforestation and degradation rates. Notably, of the world’s three largest tropical rainforests: the Amazon River Basin, the Congo River Basin, and the Southeast Asian rainforests, only the Congo Basin remains a robust net carbon sink. The Amazon approaches a critical tipping point toward net carbon emissions, while Southeast Asia has already transitioned to a net carbon source due to persistent deforestation.

    We are losing tropical forests at an alarming rate. Recent global data indicates deforestation of approximately 10-11 million hectares annually, with nearly 95% occurring in the tropics. However, this is partially offset by natural forest regeneration, resulting in a net loss of approximately 4-5 million hectares per year globally. Critically, 2024 data shows tropical primary rainforests experienced record losses of 6.7 million hectares (nearly double the 2023 rate) driven primarily by fire expansion, at a rate equivalent to 18 football fields per minute.

    This destruction and degradation of our forests is the result of fundamental market failure. Tropical forest countries have no economic incentives for conserving and protecting the forests which are providing trillions of dollars worth ecosystem services to the world. In contrast, these countries can create significant value through forest extraction (logging, agricultural expansion, mining, etc.) and drive their economic growth. The soon-to-be-operational Tropical Forest Fund aims to change this by providing incentives to these countries for forest conservation.

    The Tropical Forest Fund – Catalyzing Market Capital for Climate

    The facility is backed by an expected USD 25 billion commitment from the developed countries. This contribution will be used as first-loss capital and credit guarantees to de-risk this facility and achieve an AAA rating and attract USD 100 billion of commercial capital at a very attractive rate (expected to be at 4.5%) for this permanent endowment fund.

    A fund manager, most likely one of the leading multilateral DFI, will manage this capital and invest in a diversified portfolio of climate investment, sovereign debts and high yield bonds (with average credit profile of BB+) with an average return of 7.5 percent. This return of 7.5 percent creates a percentage point spread between investment returns and borrowing costs, generating approximately USD 4 billion annually for payment for forest conservation.

    Game-changing Innovation in Climate Finance Structure

    If it becomes operational, the facility will set some unprecedented benchmarks for nature financing. For the first time we are mobilizing more than USD 100 billion in market capital for forest conservation in a permanent capital structure. Traditional climate finance mechanisms such as the Green Climate Fund remain unreliable due to dependence on donor fund replenishment and their changing budget priorities. With the permanent capital structure it makes the conservation financing more predictable and does not get marred by changing annual budget allocations (and unmet promises) of the climate finance providers as part of their collective responsibility.

    Beyond the financial structuring innovation and design this is one of the largest result-based financing (RBF) facilities for any kind of climate interventions. This facility redefines standing forests as an asset class. For the first time, maintaining a forest can generate quantifiable financial returns through direct payments for verified conservation outcomes confirmed via satellite monitoring. Moreover, this facility provides a relief from the typical trap of concessional climate finance which eventually results in an additional debt burden for the countries.

    But the most game changing innovation in the design of this facility is the way it is redistributing the risks in climate finance.Traditionally, recipient countries have a double burden: debt servicing obligation and the performance risk of achieving stated climate outcomes. Failure of climate projects means both unmet climate goals and an unserviceable debt obligation. This facility changes this fundamentally by completely transferring the debt servicing risk from the countries to the facility. If the countries are not able to meet the conservation goals, they get reduced payment and there is no debt. But there is still a risk of revenue volatility (uncertainty about how much revenue they will get for their conservation effort) but this is much preferred to the debt servicing risk.

    Critical Implementation Questions: Can Market Capital Enable Forest Conservation at Scale?

    Despite all of its innovations, the facility has some really questionable assumptions and significant implementation challenges. First, the most concerning issue is the proposed payment structure. With proposed USD 4 per hectare per year payment for forest conservation this facility undercompensates the opportunity cost for forest conservation. Recent studies suggest the opportunity cost of forest conservation to local communities ranges from USD 600-3600 per hectare annually depending on the alternative land uses. The additional annual financing of USD 4 billion being made available for forest conservation is surely moving the sector forward but the USD 4 per hectare per year payment sets the wrong precedent.

    The success of the facility depends on how effective the fund manager is in raising the commercial capital and generating investment returns. There is a lot of uncertainty here. If the market does not fare as expected and institutional investors reduce their commitments due to their changing priorities the payout to the countries will reduce substantially.

    The Tropical Forest Fund, with all its innovations—permanent capital structure, result-based payments, innovative risk allocation, and leveraging market capital—establishes many precedents. While our rapidly depleting forests cannot be solved by the financial incentives alone by such innovative facilities, it surely emphasises that we need to value our standing forests and incentivise its conservation and protection. This facility is a great starting point to mainstream these innovations and unlock more financing for protecting our forests.

    Relevant Resources For Further Reading