Under the arrangement, a XacBank customer will purchase an energy efficient stove or home insulation products like a “ger blanket,” which covers a ger, the traditional and ubiquitous Mongolian portable tent-like structures in which more than one quarter of the Ulaanbaatar population lives. Gers are traditionally under-insulated and heated by inefficient coal-burning stoves that contribute to Ulaanbaatar’s especially severe air pollution. Ger blankets greatly increase heat retention, and, like energy efficient stoves, lower the rate of fossil fuel consumption and carbon emissions.

The reductions in household emissions accrued through the use of energy efficient fixtures will be earned by XacBank clients and then assigned to MicroEnergy Credits, which develops carbon finance projects and brings clean energy to low income microfinance households in developing countries. MicroEnergy Credits will then quantify, aggregate, and sell the credits to Citi, who will monetize these credits on the open market through its Environmental Products Trading and Origination team. Portions of the proceeds from Citi’s carbon credit purchase will be distributed by MicroEnergy Credits back to XacBank, allowing the Mongolian lender to expand its clean energy program, build additional marketing and distribution centers, and increase access to affordable clean energy loans.

“Citi and our partners collaborated to design a carbon credit financing chain that connects and values energy saved at the household level with global emission reduction targets and markets,” said Bob Annibale, Global Director of Citi Microfinance and Community Development. “Together, we are creating the capacity for Ulaanbaatar residents, living in gers, to access credit to make home energy efficiency improvements, save money, and limit their harmful environmental impact. It is a great example of using creative microfinancing to address client and community needs, and a model that can be applied in other initiatives and countries.”

“We are very excited to be at the heart of a deal which combines the best of Citi’s environmental products market expertise and our track record in the microfinance sector to deliver tangible positive outcomes for local communities and the environment,” said Stuart Staley, Global Head of Commodities at Citi. “Under this arrangement, we are implementing an innovative market-based strategy to tackle real challenges faced by developing countries.”

“MicroEnergy Credits is proud to partner with Citi in this landmark agreement, which brings microfinance households access to clean energy incentives typically only accessed by large agencies and corporations,” said April Allderdice, CEO, MicroEnergy Credits. “Microfinance institutions like XacBank have the reach to impact the energy-use options of millions of low-income households around the world. MicroEnergy Credits provides the carbon monitoring and aggregating system to be sure these carbon incentives reach the people that can use them. Agreements like this one allow low income families to use microfinance to clean the environment and improve their quality of life.”

“As a triple bottom line bank, dedicated to working for People, Planet, and Profit, XacBank is committed to tackling air pollution in our capital city- now the most polluted city in the world in the winter,” said Bat Ochir Dugersuren, CEO of XacBank. “With access to carbon revenues through our partnership with MicroEnergy Credits and agreement with Citi, XacBank’s Eco Banking Department will expand our services so that all Mongolian families have access to energy efficient products to reduce pollution, improve their health, and save money.”

The first carbon credits are expected to be available for purchase by Citi in March 2013. The program is in the process of being registered and approved through the Clean Development Mechanism run by the United Nations Framework Convention on Climate Change (UNFCCC).

About Citi
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

About MicroEnergy Credits
MicroEnergy Credits is a financial intermediary which links microfinance institutions to the carbon markets when they lend for clean energy. Founded in 2007 and based in Seattle, Washington, MicroEnergy Credits works with Microfinance Institutions and Carbon Emission Reducers around the world. MEC is a for-profit social enterprise financed by impact investors. Today, MEC reaches over 120,000 households with clean energy services in partnership with 20 microfinance institutions.

About XacBank
XacBank (www.xacbank.mn) is one of Mongolia’s largest banks, serving Micro customers, Small and Medium-sized Businesses as well as large corporations with a range of inclusive banking, fair investment and other financial products and services. It operates in all 21 provinces and the capital city, serving more than 500 thousand customers through its 97 retail and business branches, as well as specialized banking outlets including 400 mobile banking agents and 70 Savings and Credit Cooperatives. The Bank aims to create a sustainable value for its customers, shareholders and institutional investors, while promoting a triple-bottom line vision and mission as built around the “Planet, People and Profit.”

For more information about the MEC fellowship and other openings at MEC please view our Careers Page

Today MEC is headed to Mongolia to work with our partner XacBank, a microfinance institution that has started lending for clean energy products like efficient housing and efficient stoves.  We are prepared for cold weather: (-30 degree Fahrenheit), and pollution, that in the winter is the worst in the world. Puffy coats, and pollution masks are in our bags.

Tuesday

Most of the pollution in the city is caused by the burning of coal in gers (yurts) and inefficient buildings in low-income districts of the city. The smell of pollution in noticeably worse as you enter the ger districts. We visited a household that had bought an efficient ger blanket. This is a type of home insulation made of felt that reduces heating requirement by 50%.  This gentleman’s comment was:

“I’ve heard of you but never met you. We are so grateful that you have made these ger blankets available to us. We can have the best intentions to reduce air pollution and protect our health, but unless there is an affordable product to buy, we can’t do anything. The ger blanket is a wonderful product that was offered at an incredible price. Last year my three grandchildren suffered in a house that was too cold. This year we have an efficient ger that stays warm through the night with only half the fuel we used to use. Now my grandchildren can sleep in a warm place.”

Creating a Market

MEC’s local partner XacBank is a microfinance institution that has introduced local product centers to educate people about energy efficient products. At these local marketing outposts in the ger districts energy efficient products are displayed, financial packages offered and clients take delivery.  These product center associates amazed us with their smooth and confident sales pitch. It is no wonder they’ve done more than 3000 products in this district alone.  This product center demonstrated efficient ger blankets and efficient stoves.  For those that can afford it, there is also an efficient house for sale.

 Wednesday: Testing the stoves

 While efficient stoves sound like a good idea, they only work if they can demonstrate a reduction in CO2e emissions. Also, poorly designed stoves may actually leak more smoke and gases into a household than the traditional one. This small stoves lab conducts world class testing on emissions from the efficient stoves. Stoves producers from around Mongolia bring their stoves here to be sure they are achieving the air pollution standards that are required to participate in the program. This lab also enables a research team to innovate development of even cleaner and more efficient stoves.

 MicroEnergy Credits meets the President of Mongolia

Today we met with the President of Mongolia. How did this come about, you may well ask! Well, I don’t think it would be an understatement to say that what started as a program at one microfinance institution has become a national priority. In fact, by reaching only 150,000 households with the clean energy products, the program could remove 50% of the air pollution in the city. President Elbegdorj has prioritized air quality and introduced the first air quality legislation in the country. He learned about the clean energy lending program by viewing MEC’s Yurtcozy website. Then we received an email inviting us to meet with him and present at the Mongolian Economic Forum-our colleague from Climate Care, Ed Hanrahan is pictured here. During our 30 minute conversation with the President,  his question to us: How can my office help this program to scale up?

“…microfinance institutions may lack the funds to identify reliable energy suppliers, educate loan officers about clean-energy technologies and build a support network for energy schemes. One way to solve this problem, being pursued by MicroEnergy Credits, a social enterprise, is to plug microfinance institutions into carbon markets. Projects can then be funded by selling carbon credits when a microfinance customer switches from kerosene to solar lighting, for example.”

So how is this working on a daily basis? I’d like to share some insights from my recent field visit to our partners in Northern India. I learned quite a bit on this visit both with respect to the impact of clean energy on people who’ve never had electric light before, and some signs of a turning point in the market for microfinance and renewable energy in India

Growth in our Indian operations

India is one of the largest global markets for clean energy. It is home to over 400M people without access to the electric grid. On my trip I met with the leadership of two of our rural bank partners, AGB and Prathama Bank, and signed a third partner, Gurgaon Gramin Bank bringing MEC’s bank portfolio up to 4 in India and 15 globally. These existing partners have massive reach: between them they have the capacity to reach over 10 M households with clean energy in the next five years.

The vital funding channeled through the MEC platform is providing resources to the banks and accelerating adoption of a clean energy path for eventually millions of clients. These northern India rural banking giants are now reaching an inflection point in their ability to disseminate solar home lighting systems to their clients and carbon credits are a key part of that growth. The performance that was achieved by the first bank, AGB, is now being replicated by several other banks—each employing their own style to motivate and promote the program within their institution. 

On the ground with our partners

One bank’s General Manager explained, “We need the carbon funding to stage a client education event during our festival season in November.”  Another partner used a small sales incentive for branch managers to achieve competition across branches resulting in record sales.  AGB showed off pictures of their annual facilitator (technician) training held earlier this year. 200 facilitators (jobs!) reviewed basics of solar home system installation, maintenance and carbon monitoring. Their process is so effective that they are now reporting 100% of systems functioning. (Our independent audit last year showed a performance of 96%)   

MEC fellow Jennifer Gong has worked with these northern rural banks for  the past six weeks, providing training in carbon monitoring, and serving as our local contact. While there she helped the rural banks work out carbon monitoring processes implemented by staff at the local solar distributor and the bank branch. She presented MEC’s program to several other regional banks, and she helped ensure that the first year’s data was transmitted in a correct and timely manner.  Our field work has enabled our partners to overcome some initial data monitoring challenges at their 300 branches, and they now have a feasible commitment to send the data necessary to receive a significant payment in October. I was moved that AGB targeted this month as their goal in honor of Gandhi’s birthday. 

MicroEnergy Credits: a critical catalyst                                           

The carbon funding doesn’t cover the full cost of the solar energy system. What it does do is catalyze microfinance banks, that already reach millions of people, to design locally acceptable programs to disseminate clean energy products which are less expensive than the alternatives, and which are loved by households for their benefits to health, education and quality of life.   

With a small investment in MEC, we have an opportunity to bring over $8 Billion per year in carbon funding to microentrepreneurs.  Now at over 45,000 households receiving clean energy, MEC’s carbon platform will breakeven at 330,000 households. MEC is offering accredited investors the opportunity to realize financial returns while providing access to clean energy to microentrepreneurs around the world.  Our current funding round is closing soon, but there is still need for investment to fill the gap.  For information about this investment opportunity please contact me directly. We may also schedule time to meet at the upcoming SOCAP conference or the Opportunity Collaboration.

On March 18th and 19th, Aryavant Gramin Bank (AGB) and Tata BP Solar, held a training program for over 200 facilitators, who are employees of AGB. These facilitators are responsible for advertising the solar lighting home system (SLHS) program, overseeing installation, as well as answering maintenance requests within 48 hours.

The high integrity of MEC’s carbon credits in the market (and to the carbon purchaser) really depends on the facilitator’s work in the field. For example, to register a household for carbon credits, MEC requires not only information about the system and loan size, but also its gps coordinates to identify its location where addresses can be very difficult to pin down. Furthermore, MEC requires each system to be monitored at least once every quarter. It is the facilitators that will carry these tasks out.

During the training program, I had the pleasure of teaching a few facilitators how to use our gps trackers. When we practiced in one village, I realized how well they knew each and every customer. I was not surprised to later learn that the facilitators were able to collect the longitude and latitude information of over 1000 households in the following two weeks. 27,000 households were able to join the SLHS program on the strength of MEC’s carbon program, and so it is our hope to start producing carbon revenues from all of them in the next coming months.

That’s about 135,000 people with access to clean energy!

Dashdavaa Myangan is a grandmother living with her son, who has lived in the city for the past 24 years. As fuel prices have increased over the last several years, she noticed that her fuel expenses had grown dramatically in the cold Mongolian winters. For this reason, she made the decision to buy an insulated yurt blanket.

Since purchasing the blanket, Dashdavaa has reported that her fuel expenses have greatly decreased, helping her to save her additional income in the winter months. In fact, she has liked the new ger insulation so much that she has recommended it to her friends.

Sosor Zundui is a grandmother that takes care of her two grandsons while they attend the local high school. She is retired and spends the bulk of her time leading the local elder’s Union in her community. She first found out about energy efficient products at a local community event where she decided to purchase an insulated yurt blanket and energy efficient stove for the benefit of the environment and to help her save fuel.

As a community leader she has recommended the eco products to the community elders and local administration to help promote the benefits gained by both the purchaser and environment. In her opinion, one of the easiest ways to decrease air pollution is through the spread of eco products.

Munkhjargal Dari is a mother of two daughters, one in kindergarten and one in elementary school. She had heard much about energy efficient products, and decided to take out a loan for a six-layer energy efficient yurt blanket. She liked the cleanness and warmth of the blanket and the smaller design and savings of the stove. After installing both products, she has experienced real fuel savings. By her calculation, she used to use 1 bag of fuel per day, but is now using two bags of fuel for every 3 days. Both she and her daughters have appreciated the ease at which they have stayed warmer this winter due to the use of their new eco products.

Please go to http://yurtcozy.org to help create more of these success stories! Spread the word: let your friends know how they can help too, and please don’t forget to become a fan of Yurtcozy on Facebook.

Yurtcozy is a brand owned by Microenergy Credits Corporation and licensed to Better World Credits, a 501(c)(3) non-profit organization.

The way it works is quite simple. You or I log into the website and purchase a “carbon credit”-denominated in tons of CO2 emissions avoided. Those funds then enable microentrepreneurs to take a loan for a clean energy investment. The microentrepreneur pays back the loan in small installments—often less than what they previously paid for the dirty energy source. And the clean energy investment reduces pollution, helping to mitigate climate change.

In Mongolia, for example, low income people live in yurts, called gers. By purchasing an insulating “blanket” they can reduce by half the amount of coal they need to burn to stay warm in the winter. This creates a carbon emissions reduction—and it makes their home warmer and more economical. When you buy a carbon credit from a yurt dweller in Mongolia, those funds are used by the microfinance institution –a bank called XacBank–for education campaigns so that more ger owners can learn about the benefits of energy efficient blankets and the financing program that makes them affordable.

The website is called http://yurtcozy.org, and it will be announced at Copenhagen on December 17th.

Yurtcozy helps microentrepreneurs switch to clean energy. As in microfinance they take a loan to improve their quality of life and escape poverty. In this case the cost savings come from reduced expenditures on kerosene, coal, and wood. The products they purchase include solar lighting systems, improved stoves and biogas digesters.

When you purchase a carbon offset on the Yurtcozy site, you know who you are helping. In fact, you can see a map with the GPS location of each microentrepreneur who has purchased a clean energy system.

How does this relate to the cap and trade debate? The mechanism builds on the same principles of the Kyoto Protocol, and leverages partnerships with some of the original architects of the carbon markets including the non-profit, Environmental Defense and the carbon trading firm, EcoSecurities. Yurtcozy is different because it allows people to connect as individuals. Because the clean energy investors are all individual microentrepreneurs, you know exactly who you have helped and how.

Rather than establishing emissions caps, Yurtcozy relies on individuals and teams to set their targets for how much climate change they will reduce.