Powering the Micro-Energy Industry With Carbon Markets

>Posted by Jeffrey Riecke
A few weeks ago I wrote a post highlighting microfinance as a tool for achieving environmental sustainability and in it I looked at CFI’s now-completed Energy Links project. During its three years of operations, Energy Links explored, and ultimately demonstrated, how MFIs can help to significantly expand the micro-energy industry. With Energy Links finished, I wondered, what is the microfinance community doing now to support sustainable energy?
Not even a day after writing my Energy Links post a colleague introduced me to MicroEnergy Credits (MEC), an organization that is earning large-scale success in supporting MFI clean energy lending. Since it was founded in 2007, MEC estimates that it has helped provide clean energy to over 100,000 households across several countries.
The work conducted by MEC can be neatly divided into two segments. The first segment probably comes as no surprise. MEC provides the necessary services for MFIs to design and launch clean energy lending programs. It helps institutions establish a clean energy product unit, assess market demand, select a local energy product distributor, and conduct marketing campaigns. Product lines included solar lighting, clean and efficient cookstoves, water purification systems, and efficient housing adaptations.
The second segment of MEC’s work did surprise me. To help cover the cost of these clean energy lending programs, MEC forges a connection between clean energy products and carbon markets. The MEC website describes this scenario as the following:

For the carbon markets, MEC aggregates a previously untapped source of carbon offsets – emissions reductions created by enabling customers of Microfinance Institutions (MFIs) in developing countries to improve their daily lives by purchasing clean energy technologies.

You can find more information on carbon markets and how they relate to MEC’s work on their website.
Tapping into carbon markets using the carbon offsets of small projects, such as microfinance clean energy projects, is typically rare due to the current hurdles imposed by carbon markets. For small projects, the processes of tracking, certifying and purchasing carbon credits are often more expensive and resource-intensive than project-operators are able to justify. MEC combats these conditions by providing software to aggregate many small transactions and serving as an intermediary between MFIs and carbon purchasers. The proceeds from selling the carbon credits on carbon markets are then used to pay for MEC’s services and to provide additional support for scaling up the MFIs’ clean energy programs. MFI partners usually start receiving this funding from carbon markets within a year of starting their clean energy partnership project. MEC calculates the potential market size for microfinance-linked carbon financing for such clean energy products at over $8 billion per year.
If you’d like to support the MicroEnergy Credit network of microentrepreneurs, next time you take a plane trip, consider purchasing carbon offsets online from MEC’s carbon purchasers. Simply purchasing carbon offsets as a means to lower your personal carbon footprint is a good idea in any case.
Image Credit: MicroEnergy Credits
Have you read?
Discovering Microfinance’s Other Green Side
Financial Inclusion According to Yertle the Turtle
Connecting Microfinance to Environmental Sustainability and the Triple Bottom Line