MEC Mongolia Project FAQs

Posted: June 23, 2023

Q: What is the MCC Impact report and is it more accurate than the licensed DOE verification report from 2012
The MCC provided a user subsidy for a portion of the households included in the program. This support enabled the program to scale up more quickly than it otherwise would have. It does not impact the additionality of the program, because MCC support would never have existed if the carbon program had not happened. The carbon program brought together the key project operator (XacBank Microfinance) that had the local the presence and institutional capability, with a projected source of funding which enabled market research, technical assistance, business plan development, investment analysis and a successful pilot demonstration all of which were needed to attract additional partners and support.

The MCC Impact report was a snapshot of a small sample of houses in 2012. The impact report did find that the project had successfully disseminated the products, that households were using them and there was a high degree of customer satisfaction. It also found that there was a high level of improper loading of the stoves. 

These challenges were well known by the project proponents at the time, and there were many interventions implemented to turn them around. The remediation activities included media campaigns and customer awareness campaigns carried out by field agents in the local communities.

The MCC report findings are contradicted by the DOE field visit report which covered a much larger sample. Further the DOE followed standard methods for establishing carbon emission impact. The DOE also was a licensed auditor as opposed to the MCC impact report team. 

Studies from the time showed air pollution in Ulaanbaatar decreased after the project began. This decline is consistent with an effective intervention. Top experts from the World Bank and similar agencies attribute the reduction in air pollution to this project.

The proper way to view the MCC report in context was that it accurately documented a project challenge that came up, and this challenge was addressed by verifiable customer education activities and the subsequent high level of emission reductions are tracked by both the licensed DOE verification field studies and monitored air pollution reports by third party agencies.

Q: Can you provide evidence of the Media campaigns that addressed the 2012 customer issues related to proper loading of the efficient stoves?
Below is a snapshot of the media campaign activities held in 2012 to raise public awareness of the stoves including proper loading techniques.

Click here to view the Awareness Raising initiatives and activities.

Q: How is one household impacted economically when they purchase a clean energy product?
This is an example from the first stoves disseminated by the pilot in 2009. The amounts are given in Tugrik. $114 total cost, $6 monthly payment, $60 monthly fuel spend before, $23/month savings.

Q: What were the first activities of the pilot program?
Here are some slides from our early work in 2009.   These included market research, product identification, business planning, marketing and outreach, agent model development, microfinance loan development, institutional capacity building and carbon funding investment analysis. Looking back, I am overwhelmed because the project has reached over 160,000 households, far beyond our initial targets.

Q: Did the project do an investment analysis which shows additionality of the carbon finance?
Yes. The key project proponent, XacBank Microfinance worked with MEC to develop a business plan which showed the impact of carbon finance. Launching a clean energy program required funding outside of the normal business operations of a microfinance institution.  The following slide from a management presentation in August 2009 gives a historical snapshot into the management discussion at the time. The slide shows that without the carbon contribution, the expenses of the program would have been greater than the revenues (from loan interest) the MFI would have earned if it had tried to do the project on its own making the project economically unviable.

Q: What is the income level of the participants in the MEC Mongolia project?
The program focused exclusively on low-income households living in the ger districts. The ger districts are a peri-urban area. All ger district inhabitants use coal as their source of fuel. The ger district is not connected to district heating which middle class houses benefit from, so they burn coal for heating. The project did not cover any rural areas that used wood for fuel. Ger district dwellers are often pensioners on a fixed income. In some cases, winter fuel expenditure to stay warm consumed 90% of their income using baseline furnace technologies. Ger district inhabitants usually live in Gers (yurts) or small houses. The ger district has access to very limited utilities, for example electric lines with low maximum current allowance. All participants in the program belong to these low socio-economic strata, because the efficient coal furnace that was disseminated is not useful to anyone in a middle class living situation because those households access district heating for heat.

Q:  Was there a gap in carbon funding and does that prove that the carbon funding is not needed for this project?
Yes, there was a 3-year gap between project inception and the first carbon issuance and a subsequent three-year gap in carbon cash flow due to the crash of the carbon markets in 2013.  These gaps were managed by financing to provide a continuous level of activity to support the clean energy program.  The project has continuously relied on carbon funding to carry out key project activities. It has used a combination of carbon investment, CDM project revenues and Voluntary Gold Standard project revenues.

The project initially used advance investment that was raised by MEC based on projected revenues from a carbon offtake agreement with EcoSecurities. This covered many early-stage activities between 2009-2012.  Once the clean energy products had been disseminated and operational the projects issued carbon credits and received carbon revenue as projected in the initial business case. The first sale of credits from the project was in 2011. The project issued significantly in 2012. The project initially received funding from EcoSecurities offtake between 2010-2012. Then the project was certified by the Gold Standard and issued in 2012 receiving carbon funding from Microsoft. However, after 2012 the voluntary market collapsed. There was a gap in revenue from 2013-2015. This gap was covered by financing. In 2014 the project won an RFP by the Swedish Energy Agency and issued credits under the CDM, receiving revenue from 2016 to 2021. Due to the non-completion of Article 6, SEA could no longer buy carbon credits. Therefore in 2022 the project started working again in the voluntary markets and has received revenue in 2023.

The project has also been able to attract cofinancing in the form of grants or in kind support. These have always been from agencies that required meticulously tracking to avoid redundant activities. This cofinancing has also helped cover gaps in carbon funding which were caused by market dynamics.

Q:  What was the role of carbon funding in the project? 
The project has spanned over 15 years and has attracted cofinancing from leading development agencies and government sponsors. The cofinancing greatly amplified the impact of the carbon funding. This cofinancing does not reduce the projects additionality, because none of these agencies would have been able to do the project without the participation carbon funding. XacBank is the local microfinance institution who has a long term relationship with the ger district households and who engaged all of the field agents, deployed the distribution centers, provided loans and provided monitoring and aftersales service.  XacBank became interested in doing a project to help its members after hearing about MEC, a newly formed social enterprise focused on helping microfinance institutions connect to the carbon markets which they lend for clean energy.

Below is an overview of the activities that the project conducted, and the role of carbon funding and cofinancing. 

Q: How did carbon finance overcome the barriers to clean energy?

Click here to view the Product BrochureClick here to view the Training Photos

Q: What financing was raised to cover gaps in carbon funding?
MEC has raised investment over the years to support its programs when there were gaps in carbon revenue.

2008: MEC won the Global Social Venture Business Plan Competition

2009: $150K PRI facility from Deutsche Bank Foundation

2010: $300K Angel Investment

2012: $600K Series A

2014: $1.3 M Series B

2016: $500K Debt facility from MCE

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