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 marketâs potential and take responsibility for building it better.
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, 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 sold to international 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 Bankâs 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, KOKOâs 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 modelâs 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 is directing private capital toward climate impact the mandatory system doesnât 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 KOKOâs 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 Articles 6.2 and 6.4, compliance-grade credits 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.2
Kenyaâs insistence on negotiating revenue share before issuing an LoA will soon become a standard part of every governmentâs 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.3 KOKOâs 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.
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 22 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 donât 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.
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.
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
UNFCCC. Article 6 of the Paris Agreement. The primary legal text governing international carbon market cooperation, corresponding adjustments, and the LoA framework.
UNFCCC. Key Outcomes from COP29: Article 6 of the Paris Agreement. The official COP29 document finalising nine years of Article 6 negotiations, establishing the dual-registry system and compliance standards.
UNFCCC. COP26 Glasgow Climate Pact: Article 6 Outcomes. The foundational 2021 rulebook that made corresponding adjustments a requirement for compliance-grade credits.
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. 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.
ICVCM. Core Carbon Principles. The Integrity Council for the Voluntary Carbon Marketâs standard-of-standards framework, establishing minimum quality requirements for voluntary carbon credits.
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