• General
  • RFC: EEIMP Compatible Project Opportunity - StarCB x KlimaDAO

This RFC is in response to the RFC posted by KlimaDAO on September 7th, 2022: Carbon Project Development Initiative

Project Overview

Improved Cookstoves for Rohingya Refugees in Bangladesh

Project context:
The Improved Cookstoves project in Bangladesh is a small yet significant step to address the fact that globally, more than three billion people use inefficient stoves or polluting open flames to cook their meals, which harms their health as well as the climate and the environment, according to the Clean Cooking Alliance a non-profit focused on the issue. In Bangladesh, Rohingya Refugees live in cramped conditions with limited access to income generating activity or to sources of fuel to boil water and cook food.

The energy-efficient, improved smokeless cookstoves known locally as ‘Chula’ are a massive improvement on the current reliance on traditional stoves or open wood fires, which damage respiratory health exacerbated by the confined space of the dwellings made of tarpaulin. The improved smokeless cookstoves burn wood more efficiently, causing less environmental impact from the extensive wood harvesting for cooking fuel in the forest area surrounding the camps.

Project Benefits:
SCB, in partnership with the Bangladesh Bondhu Foundation, commenced the distribution of 100,000 cookstoves in 2022 and will continue in early 2023. Aside from reduced firewood consumption, the project provides employment and supports development of technical skills in the local communities during the production and installation of the cookstoves. With these smokeless stoves in their homes, women and children experience better indoor air quality and fewer incidences of smoke and fire-related injuries.

Project visit
A site visit in November 2022 by a team from SCB senior management will verify the progress of the project, directly engaging with local stakeholders and communities on their needs and how they can be addressed by this and future projects. SCB will provide Klima with the project's multimedia material collected during the site visit so that Klima DAO contributors and community members can follow the project's progress. Depending on mobile coverage SCB team can arrange a live stream session from the project site with Klima DAO team and community.

Project lifetime
2023 to 2033

Project pictures:

Project site and prelimniary phase

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SCB Improved Cookstoves for Rohingya Refugees in Bangladesh_9

SCB on site visit during implementation and distribution period:

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Project Certifications

Certification:
The project will undergo Gold Standard registration which will lead to at least 1 million
metric tonnes of CO2 abatement over a five-year period, generating at least 200,000
carbon credits per annum.

Achievable SDG goals:

SDG 1 No poverty: Clean cooking is part of basic services necessary to lead a healthy and productive life and saves households time and money.
SDG 3 Good health and wellbeing: Reducing smoke emissions from cooking decreases the burden of disease associated with household air pollution and improves well-being, especially for women and children.
SDG 5 Gender equality: Unpaid work, including collecting fuel and cooking, remain a major cause of gender inequality.
SDG 7 Affordable and clean energy: Clean cooking is essential to addressing energy poverty and ensuring sustainable energy security for billions of people.
SDG 8 Decent work and economic growth: Energy access enables enhanced productivity and inclusive economic growth. The clean cooking sector offers many job opportunities.
SDG 11 Sustainable cities and communities: Clean cooking addresses household and ambient air pollution, resource efficiency, and climate vulnerability.
SDG 13 Climate action: Up to 25% of black carbon emissions come from burning solid fuels for household energy needs. Clean cooking solutions address the most basic needs of the poor, while also delivering climate benefits.
SDG 17 Partnerships for the goals: SCB uses innovative financing to strengthen the means of implementation and revitalize partnerships between enterprise, civil society and government for sustainable development.


Project Proponent

SCB, Value Network Ventures & the Bangladesh Bondhu Foundation (BONDHU).

SCB is a world-leading low carbon company with an established portfolio of global carbon project development, requiring technical expertise in project financing, planning and implementation including community-led development; as well as a high degree of scrutiny for monitoring and evaluation. SCB supports projects in Asia on clean water projects and Improved Forestry Management, including the planting of four million trees; as well as in sub-Saharan Africa ranging from solar energy for schools and clean cookstove projects in several countries benefitting communities and the environment.

Value Network Ventures with more than 6M rural household covered and 1 MHA under land use and forestry VNV are on a mission to facilitate climate-resilient programs that empower vulnerable communities to adapt and transform to the changing climatic patterns.

Bangladesh Bondhu Foundation (BONDHU) is a non-profit organization dedicated to the welfare of the people of Bangladesh through energy efficiency, safe water, sustainable agriculture and tree plantation projects.

Pool Specifications - EEIMP

GS Methodologies
-Reduced emissions from cooking and heating – Technologies and Practices to Displace Decentralized Thermal Energy Consumption (TPDDTEC)
-Emission reductions from Safe Drinking Water Supply
Verra Methodologies
-VMR0006 Methodology for Installation of High Efficiency Firewood Cookstoves
-VM0018 Energy Efficiency and Solid Waste Diversion Activities within a Sustainable Community, v1.0
Cutoff vintage: 2016; +1 year on year.

Issuance Outlook

Assuming $250,000 initial investment
**Year Credits Issued
2022 -
2023 15,625
2024 15,000
2025 625

Total 31,250**

Risk mitigation:
SCB mitigates the risk of non-delivery by conducting indepth due diligence on the feasibility and technical parameters of the project. SCB conducts a detailed review of the project developer with whom it is partnering in the project implementation. For this particular project it is VNV, a seasoned project developer with many years of experience. VNV's teams have already completed more than 26 high impact projects which are registered with The Gold Standard, the credits of which have been retired by reputable organizations known for their strict DD standards on the quality of the credits they use, namely PwC, McKinsey or Laudes Foundation etc.
SCB also ensures that the project is aligned with the objectives of the local authorities and that local communities and organizations are an essential part of the project.
**Last but not least, SCB is committed to providing the necessary expertise and monitoring the progress of the project by visiting the site and through local partners. **

Financials

Credit price of $8/tonne

Market Outlook

Data from AirCarbon
HOT trading at $9.45/tonne; +8% increase over the past week.

Data from VCM Partners:
Cookstove projects with a vintage of 2017+ are trading between $11 - $15 per tonne on the market.

Co-Benefits

SCB, for the last 16 years, has driven the leading edge in the low carbon arena, bringing market expertise, project development experience and a culture willing to collaborate on innovative ways to build a low carbon future. SCB was an early adopter of the radical transparency of decentralized technology and is the partner of choice to foster investments in projects benefitting not only the environment, also the health and wellbeing of local communities. Recognizing that the world’s poorest are most affected by climate change, SCB is working to ensure no one is left behind in pursuit of market-led climate solutions in developing countries, harnessing the digital transformation of society for the benefit of all.


Move forward with supporting this cookstoves project to provide initial seed liquidity to C3's Energy Efficiency & Impact pool?

This poll has ended.

I am strongly in favor of KlimaDAO supporting this project and moving forward with a forward carbon deal with the parties outlined by StarCB.

The key ROI for the DAO from such an engagement is putting us in a far stronger strategic position with traditional VCM players, including key registries. As the owner of these credits, we’ll have demonstrated real skin in the game with various interested parties to build a pool specification framework where the credits can be deposited on-chain. Importantly, our involvement here can be used as a powerful case study for other project developers interested in bringing their supply directly on-chain. This latter point is critical as we level up our engagement with key VCM players in the market.

Furthermore, as per KlimaDAO’s strategic plan, this opportunity allows us to catalyze supply-side rails in addition to our work in creating a more accessible market. This places us in a far closer relationship with carbon registries that may be wondering how KlimaDAO can scale up the market beyond post credit-issuance market facilitation.
Note that two of the key execution points from our strategic plan in terms of how KlimaDAO achieves its vision is as follows:
1) “The development of key infrastructure that will unlock growth in key areas of the market, including forward carbon, spot trading, and carbon offsetting.”
2) “The establishment of strategic partnerships that unlock growth and capital across the carbon market’s supply chain.” Effectively, we are providing an initial risk-reduction for other carbon project developers to tokenize their carbon.

From a financial standpoint, and given the general direction of the carbon market over the past two years, a forward carbon deal like the one outlined here is one of the most financially efficient methods for us to control carbon liquidity on-chain (bonding prices are likely to be higher). The EEIMP pool’s launch price is likely to be in the $12-14/tonne range if it’s deployed in Q4 2023 – especially if vintage requirements are increased to 2018+ as has been discussed by some stakeholders.

Additional co-benefits:
-KlimaDAO would have an opportunity to travel to the project site. This gives us an opportunity to tell our story of impact from a completely new and exciting angle – with the community members on the ground by our side.
-This is a direct way for us to ensure increased diversity of on-chain carbon assets in the future.
-Establishes KlimaDAO’s role within the market as the rails to scale the VCM
In summary, this represents an exciting opportunity for KlimaDAO to engage on the supply-side of the market, catalyze the development of a new energy efficiency and social-impact focused carbon pool, and powerfully demonstrate our skin in the game as it pertains to the carbon project and tokenization space.

Key Questions:
-I know StarCB has been active in bringing carbon supply on-chain, prior to the tokenization ban, and in offering digital carbon to its clients. Would StarCB bring additional tonnage on-chain fitting the EEIMP pools criteria (or other pools) on its own accord to help boost digital carbon liquidity?
-How can StarCB provide project updates to the wider KlimaDAO community as things progress with the deployment of cookstoves and the impact on local communities over the project’s lifetime?
-What contractual risk-mitigation can StarCB provide KlimaDAO? Given the large expected issuance per year, who is taking on the risk should under delivery occur? Are the credits allocated to KlimaDAO guaranteed under an under delivery scenario? If the project faces considerable under delivery, can StarCB guarantee credits from a similar project (vintage + technology type)?
-Will StarCB share a draft VERPA agreement so that we can perform a legal review?

    This is a very forward-thinking development and one I'm hugely in favor of. Becoming more deeply involved in forward carbon and related project development seems certain to benefit KlimaDAO in terms of securing tokenized carbon for future liquidity. StarCB definitely has the right credentials for a project like this, and looks to be partnering with the right organizations on the ground too.

    Thanks for putting this together @CarbonPapi

    Very exciting opportunity, well aligned with the treasury's goal to scale the voluntary carbon markets and seed liquidity for higher impact methodologies.

    Given the uncertainty about Verra's approach to tokenization pending the results of their public consultation, I'm glad to see this project plans to issue under Gold Standard. These credits will both diversify the registries represented in the on-chain carbon ecosystem, and demonstrate the unique advantages of blockchain technology to Gold Standard and other off-chain VCM players.

    I was reading up on cookstove methodologies and found this Guidebook from Gold Standard very helpful: https://www.goldstandard.org/sites/default/files/documents/ics_methodology_guidebook_v1.pdf

    @CarbonPapi could you clarify which specific Gold Standard methodology this project is implementing? TPDDTEC or GS Simplified?

      It is very important that KlimaDAO shows the world that new projects can be funded also from DAOs and that we can have a serious and important impact IRL

      In my mind, this would be one massive step towards realizing Klima's long-term vision and potential for not just facilitating and growing on-chain carbon markets, but directly having tangible, real-world impacts. Getting to deliberate and direct these investments collectively also provides reinforcing value to Klimates working together as a DAO. I also feel that taking ownership not only positions us favourably with traditional VCM actors as others have said, but also makes Klima that much more readily understandable to a broad audience. Sharing the images and stories from the projects that we fund/own can speak much more directly to audiences that are still trying to wrap their heads around what the VCM is and how tokenization helps.

      I approached Klima some months ago, and I really believe in the project as it is going, and the direction that the DAO took.
      I see this as a great opportunity for KLIMA DAO to grow again as a project especially considering that the market for carbon credits on the blockchain is stagnant.
      This is the direction that the DAO must pursue, but how it is proposed, it’s not good.
      There is no business plan, there is no due diligence or evidence of a due diligence that has been done, there is no resume from this originator, and on their website, they do not speak about the projects and if they develop.
      How can we sure that this is a good deal for the DAO? How can we sure that there is not a margin or a wrong spending in these kind of project? Is there a profit for the DAO, or we only get the credits? is the tribe paid directly?
      for instance a user said:
      **Last but not least, SCB is committed to providing the necessary expertise and monitoring the progress of the project by visiting the site and through local partners. **
      how will this work? is KlimaDAO investing in STARCB, then STARCB will provide information? Is this service paid?
      also "SCB conducts a detailed review of the project developer with whom it is partnering in the project implementation"
      can we have this information?
      I am up for the future projects, but they must be well documented and explained in details with the numbers. I want to vote yes as soon as the documents are shared

      Please bear in mind that these credits will be Gold Standard certified, therefore there is the standard itself that provides enough safety.
      SCB will provide more documents in the support of the project, but don't forget that having them as part of the agreement, and them working closely with the generator give us another layer of safety.
      I think that when the answer that _drw will be answered, there will be enough information to move forward.
      Also, we are working on getting more expert in order to evaluate all the new proposal that will be proposed to Klima DAO in order also to give a neutral aspect to every proposal, and have more data to analyze.
      We can't just stop to onchain carbon, we always need to remember that most of the projects are still happening in the real world, outside the blockchain :-)

      Given slowdown in supply of credits being bridged on-chain, KlimaDAO has to find other ways to push the movement of the VCM onto the blockchain, and this approach makes a lot of sense.

      • KlimaDAO takes a more active role in bringing credits on-chain. Should this go ahead, it would be amazing to see the power of a DAO, not only in being able to act through protocol mechanics like bonding, but also through token holder led governance
      • KlimaDAO makes a statement to the broader VCM. We increased VCM throughput after the launch of the protocol, and we will increase VCM throughput here by deploying capital
      • The KlimaDAO narrative evolves. Not only are we incentivising the VCM to grow through our treasury and bonding, and through Klima Infinity, we are extending our impact at the grassroots project level

      I see other benefits too:

      • KlimaDAO building a closer working relationship with Gold Standard and SCB
      • As a marketing contributor, this is super powerful. Through site visits and close involvement with the execution of a project, we will be able to create unique material that resonates with Klima Infinity customers. We will be able to showcase the power of the VCM
      • On a personal level, I'd love to see the EEIMP pool grow, and become a template for other similar pools. I want to see air pollution levels in Southeast Asia come down, and I want to see the on-chain VCM as being a key driver of this.

      As a next step, I'd call on all Klimates to figure out how we can leverage this opportunity to drive revenues and power up the Klima economic engine – making this the first step of sustained growth.

      I think this seems like a solid use of funds. That being said, I would like to see a stronger governance process to monitor the deployment of capital to these projects. For example, we can do the math here and see that at $13 per credit, we'll have an IRR of 39% with the 250k outlay. How does this compare to other carbon credit generation opportunities?

      And what sort of tracking/reporting will be done to monitor the cash flows from this?

        This is a great initiative and I agree with others here about how this is the right move for KlimaDAO.

        Since KlimaDAO would receive 31,250 carbon credits in total out of 1 million tCO2 over 5 years (200k per annum), could we've more information on who the other investors are who'll be receiving the remaining carbon credits?

        Could we also have more information on how many cookstoves are planned to be purchased and distributed using the $250k investment?

          Can you please clarify, if the Gold Standard approved for this project, will be retired through Klima, or conventionally?
          Does the Klima protocol have any medium or long term benefit from the program other than gratification?

            Smickey I am taking care of arranging a neutral body that can vigilate on this deals.
            More will come soon, as said yestereday in the office hours

            CrazyTurk we can't talk about tokenization, yet. About benefit, if you think about it, it's a IRL carbon credit.

            I strong feel that this is a great move forward for KlimaDAO and I support supporting this project through SCB.

            Drw Thanks for the feedback and the questions:

            -I know StarCB has been active in bringing carbon supply on-chain, prior to the tokenization ban, and in offering digital carbon to its clients. Would StarCB bring additional tonnage on-chain fitting the EEIMP pools criteria (or other pools) on its own accord to help boost digital carbon liquidity?

            Prior to the tokenization restrictions, SCB was indeed deeply involved in the on-chain carbon liquidity lifecycle as well as extensive promotion of tokenized credits to SCB’s large customer base. The rationale behind such an involvement is SCB’s core belief in innovation and its positive impact on the market. Therefore, assuming a positive outcome from the registries regarding tokenization, SCB will boost carbon liquidity as it is in a prime position to do so, given our team's knowledge and expertise of the offchain and onchain world.

            -How can StarCB provide project updates to the wider KlimaDAO community as things progress with the deployment of cookstoves and the impact on local communities over the project’s lifetime?

            The main goal would be to be able to implement a public update schedule. The content of those updates will need to be defined with KlimaDAO to comply with the community but as a first step SCB will deliver photos and videos of the deployment phase of the project that will happen during our visit at the end of November as well as general documentation on the ongoing activities.

            -What contractual risk-mitigation can StarCB provide KlimaDAO? Given the large expected issuance per year, who is taking on the risk should under delivery occur? Are the credits allocated to KlimaDAO guaranteed under an under delivery scenario? If the project faces considerable under delivery, can StarCB guarantee credits from a similar project (vintage + technology type)?

            As mentioned in the draft VERPA, in case of under delivery SCB offers replacement options with credits from a comparable project (vintage, location & project type). Please do refer to the VERPA for the legal terms.

            -Will StarCB share a draft VERPA agreement so that we can perform a legal review?

            Naturally, by this time a VERPA draft has already been sent to your teams for review.

            andybash12 I appreciate the support and thank you for the questions:

            Since KlimaDAO would receive 31,250 carbon credits in total out of 1 million tCO2 over 5 years (200k per annum), could we've more information on who the other investors are who'll be receiving the remaining carbon credits?

            SCB is the sole investor on this project.
            SCB is going to receive the remaining carbon credits.

            Could we also have more information on how many cookstoves are planned to be purchased and distributed using the $250k investment?

            So as to insulate SCB and Klima from potentially lower output we link the contract to issued VERs and not cookstoves.
            As a fun-fact good quality cookstoves are manufactured at $25 each assuming one purchases on industrial scale.

            CrazyTurk

            Can you please clarify, if the Gold Standard approved for this project, will be retired through Klima, or conventionally?

            The project is being reviewed by the GS registry - This is not a spot purchase of credits from an existing project but an investment in a project that is being implemented and going to be on Gold Standard registry.

            Does the Klima protocol have any medium or long term benefit from the program other than gratification?

            This is probably a question for someone from Klima team to answer and give their motivations.

            Isn't $8 ton pretty expensive for a 3 year lock on voluntary carbon credits?