A project in Mexico to reduce the impact of poverty through distribution of energy efficient light bulbs to 12-million of the poorest homes has secured carbon finance through the signing of a royalty agreement between Cool nrg and the Mexican government.
Cool nrg, a global leader in energy efficiency projects that delivers positive action on climate change, is undertaking the distribution of the bulbs and is generating carbon credits from the resulting energy savings. Standard Bank Group announced the completion of a major funding deal for Cool nrg late last year and has been working in close partnership with them to help to deliver the royalty agreement.
The agreement provides for Cool nrg to pay royalties for the rights to carbon credits, which have been pre-sold to generate revenues. The royalties will help the Mexican government to fund the cost of the light bulbs.
The agreement covers up to 45-million light bulbs and 12-million households, making it the world's single largest energy efficient lighting project
Cool nrg is the only company in the world that has been successful in using the carbon credits generated through mass energy efficient lighting projects to reduce energy poverty.
"The success of the Mexico project is especially gratifying because using energy efficiency projects to generate carbon credits is a complex and highly specialised process," says Geoff Sinclair, head of Standard Bank's Carbon Trading division.
He says the Clean Development Mechanism Executive Board (CDM EB) of the United Nations Framework Convention on Climate Change (UNFCCC), under the Kyoto Protocol, applies extremely stringent criteria to the registration of a project for carbon credits and for the results of a programmatic CDM (one delivered over a number of phases) to be monitored on an annual basis in order to get the credits to flow. Energy efficient light bulbs that vary even slightly from the required specifications, for instance, disqualify a project from carbon credits.
"Also, in order to release the credits over time, the CDM EB needs details such as the number of people actually using the light bulbs and for how many hours a day. That sort of monitoring and reporting across millions of homes over periods of as long as 15 years takes a high order of skill and considerable planning.
"At the same, simply rolling out millions of light bulbs to the correct homes and then getting people to actually use them is enormously difficult.
"Cool nrg is the only company to have undertaken such projects successfully. Which is why, committed as we are to assisting with climate change on the African continent, Standard Bank is helping them set up a business in Africa," says Mr Sinclair.
Nic Frances, CEO of Cool nrg, says that his company's interest in energy efficiency is focused on reducing energy poverty. "For many, the reason for energy efficiency is environmental, in terms of the reduction of carbon emissions and, therefore, the mitigation of climate change.
"For us, however, climate change means the dwarfing of current levels of poverty on the planet. Adding just a few inches to sea levels would see billions of people homeless. So, we're motivated to use energy efficiency to both prevent that sort of scenario and also to reduce energy poverty as it stands now.
"In our experience, energy consumes some 50% of the disposable income of very poor people. If energy is made available to them, they tend to use it first for lighting. If, therefore, you can provide them with energy efficient lighting, you actually put money back in their pockets while you're reducing carbon emissions for the rest of the planet and helping suppliers more easily meet the growing demands for energy," says Mr Frances.
"As social entrepreneurs, we believe in using the market to provide social benefits and the UN's programmatic CDM is an ideal way to do that.
"We are working with Standard Bank to provide fully rounded African initiatives with Standard Bank providing the carbon credit trading and brokering at one end of each project and Cool nrg providing strategy, planning, delivery, monitoring, and reporting at the other end." Cool nrg has begun work on the continent, with an energy efficient lighting roll out for Kenya Power.
"For each project, we put one or two of our own technical people on the ground and then empower local people and organisations to run with the details for the project. As long as the strategy for the project is clear up front, reduction of energy poverty is as much about giving people control over their own environments as it is about wealth generated in sophisticated financial markets," says Mr Frances.
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