MEC Clean Energy Program- Project Additionality: Overcoming Socio-Economic Barriers

Posted: January 9, 2024

Bolstering the Integrity of Carbon Credits

The concept of additionality is a critical component in bolstering confidence in the integrity of carbon credits. MicroEnergy Credits follows a robust process to ensure that all its carbon projects are strictly additional and have a high social impact.

In the Guide to Carbon Offset Utilization, the concept of "quality or integrity" of an offset revolves around the confidence of the stakeholders in the ability of credit to fulfill the emission reduction requirements. The principle of additionality is crucial for boosting trust in carbon credits and safeguarding their integrity. In the context of crediting mechanisms, "additionality" refers to the notion that emission reductions or removals resulting from a mitigation activity are considered additional only if the activity would not have taken place without the additional incentive provided by carbon credits. Essentially, an additional project signifies that it would only be financially viable with carbon funding from market-based mechanisms. To quality as genuine carbon offsets, the reductions from projects must be "additional" compared to what would happen at business as usual. All projects registered under widely accepted greenhouse gas (GHG) project standardsadhere to the guidelines for evaluating and demonstrating additionality as established by the respective GHG crediting programs.

Socio-Economic Barriers Analysis for Proof of Additionality of MEC’s Clean Energy Program

  1. Barriers faced by low-income households to adopting clean energy technologies in India & Africa

Low-income households in India and Africa face several barriers to adopting clean energy technologies. These barriers are economic, social, and infrastructural. Here are some common challenges:

  • High Initial Costs: Clean energy technologies have high upfront costs, making them unaffordable for low-income households. This includes the cost of solar panels, improved cookstoves, and other renewable energy technologies. Access to affordable financing options that can help spread out the cost over several years can help low-income households gain access to clean energy technologies and make additional savings when compared to the cost of fossil fuels in the long run.
  • Limited Access to Finance: Low-income households have limited access to financial resources and face challenges in obtaining loans or financing for clean energy investments. Lack of credit history and collateral. The above-mentioned issues prevent them from forming formal sources of lending such as banks. However, microfinance institutions can significantly contribute by offering small, affordable loans without collateral to low-income households, and enabling them to access and afford low-carbon technologies.
  • Lack of Awareness: People from low-income households lack awareness and understanding of the benefits of clean energy technologies. Most of these technologies are considered to be of extraterrestrial origin. Limited education and outreach efforts contribute to a lack of awareness regarding available options and potential savings. Besides that, the lack of a market ecosystem for renewable products is also a major constraint for low-income households to get familiar with the technologies. Comprehensive awareness creation exercises can enhance awareness of low-carbon technologies.
  • Dependency on Traditional Fuels: Low-income households rely heavily on traditional and non-renewable energy sources, such as kerosene, wood, or biomass, which are cheaper in the short term but have negative environmental and health impacts. Implementing a robust behavioral change strategy, which includes raising awareness through training sessions, door-to-door campaigns, and facilitating experiential learning processes, can increase and sustain public trust in low-carbon technologies.
  • Cultural and Social Factors: Social norms and cultural practices also influence technology adoption. For instance, a lack of acceptance or understanding of new technologies slows down their adoption in low-income Indian communities. Thorough training and capacity-building exercises can dispel myths associated with the technologies and reshape people's perceptions about the technologies. 
  • Maintenance and Repairs: The lack of access to skilled local technicians or maintenance services also discourages low-income households from investing in clean energy technologies and increases the trust deficit in low-carbon technologies. Concerns about the ongoing costs and reliability of these systems create a significant barrier for low-income households to invest and adopt clean energy technologies.

Addressing these barriers requires a comprehensive approach involving government initiatives, financial institutions, awareness campaigns, and community engagement to make clean energy technologies more accessible and attractive to low-income households in India.

In India, MEC's Carbon Program is closing gaps by designing projects that empower low-income households to select the most suitable and dependable clean technologies, supported by carbon finance.

2. Barriers faced by micro finance institutions to fund low-carbon technologies

Historically, a few microfinance institutions have engaged in providing microfinance for low-carbon technologies, However, challenges such as the high cost of hiring additional staff, costs related to marketing and building awareness, understanding of the products and technologies, absence of a local supply chain, concern about reputational risk, limited onward lending funds and challenge in developing products for consumptive loans have always tied the scope of growth. The MEC has introduced a program aimed at helping microfinance institutions overcome these hurdles.

Use of carbon funding to overcome barriers to clean energy adoption

MEC utilizes carbon finance to overcome the barriers - from investing in awareness programs by training MFI partners to empowering microentrepreneurs by accessing loans for the adoption of products and supporting MFI partners to provide aftersales service to customers. MEC begins by collaborating with microfinance institutions to devise an attractive clean energy product offering for its microfinance client base, addressing obstacles such as lack of education, high pricing, access to financing, and delivery and after-sales services. Subsequently, MEC trains the microfinance institutions for the implementation of the clean energy-lending program. This includes business planning, capacity building, and the execution of marketing, awareness/ education, and supply chain processes. MEC has established a robust and transparent system for monitoring and tracking carbon credits, quantifying, and documenting the amount of emission reductions generated by the clean energy projects. Lastly, the carbon finance is employed to expand and sustain the clean energy program through activities such as:

  • Client education and marketing
  • Internal training and capacity building
  • On-lending funds to local SMEs producing clean energy systems
  • Aftersales service and maintenance
  • Lowering the interest or principal cost to the client.

MEC employs a rigorous methodology to guarantee that its projects exclusively benefit low-income households in rural India, who would otherwise face challenges in accessing clean energy technologies due to economic and financial obstacles. The utilization of carbon funding is instrumental to overcoming these barriers and eventually bridging the viability gap in investment decisions. Consequently, the carbon credits produced by MEC's carbon programs contribute significantly to socio-economic development and the achievement of Sustainable Development Goals (SDGs).

MicroEnergy Credits is the most trusted name in social impact carbon credits.

Our mission is to empower every microfinance community with access to affordable and innovative clean energy solutions, while moving towards a world free of both poverty and climate change.