[Stoves] No subsidies in TLUD char peoduction

Tue Dec 5 11:09:07 CST 2017

Paul:

I am no longer familiar with CDM rules and don't know how they are going to
change, though it is sure that they will change.

I will limit my reaction to your "Question:   Is it a subsidy if the person
pays in the form of signing away his or her rights to the carbon credits
that will be earned by the use of the stove?    Or is it a form of
"micro-finance" with repayment handled by the dealer in the carbon
credits?   And if the monetary return to the CC dealer is greater than the
initial value of the stove, is that not basically equivalent to the
charging of interest on a micro-finance loan?"

A very good question but from a public finance perspective (which doesn't
apply here), it doesn't matter what you call it. There are all kinds of
methodological jugglery to compute "equivalent subsidies"; that is a whole
another level of discussion. In short, "concessional finance" matters.
There are no hard and fast rules about social venture capital (private).
>From public finance perspective, yes, efficacy, administration cost, likely
leakage, etc. need to be analyzed before committing large amounts of money.

My take on CDM, C-Dev - the "official" entities for public funds - is that
what they are doing is a "barrier removal" activity. Once a product is
validated in some way, and is found usable, external financing for it helps
remove the barriers to commercialization (in this way or  any of other ways
known under GEF projects where this term "barrier removal" originated some
25 years ago).

For a systematic national-level program of "barrier removal", a lot of
technical work is required to characterize the markets, industry structure,
alternatives in technologies and funding mechanisms.

This is precisely what GACC could have done but it went on the track of
IWA/ISO "international standards", leaving aside ground realities. That
faith in EPA approach needs to be subjected to scrutiny, but in parallel,
GACC could build on the consulting reports it got around 2013-14 on
selected countries via its consultants. They could be used as the
springboard for real preparation so as to make entities like yours
"bankable", "marketable".

This still leaves open the question of "pre-design" research. What you did
with your own funds is not a viable model for developing 100 supply chains
in 100 different contexts.

Which amounts to saying "viability and sustainability of the entire supply
chain - from innovation and design to home economics - is at issue, not
just one or 50,000 stoves." That's where public (or private charity funds)
can help. I have written something about it; can discuss it later.

Nikhil

PS: To me, the aid industry academics' interest in viability,
sustainability of enterprises getting subsidies is utterly beside the
point. Someone told me a few years ago, "More than a half of new companies
close within a year". Starting and closing companies, M&A, bankruptcies,
are all part of real business life, which academics (pardon me, you are one
yourself but you don't have theories of subsidies) don't seem to take into
account.

On Tue, Dec 5, 2017 at 11:10 AM, Paul Anderson <psanders at ilstu.edu> wrote:

> Crispins.   see below.              (of interest to some on the Biochar
> Listserv)
>
> Doc  /  Dr TLUD  /  Prof. Paul S. Anderson, PhD
> Email:  psanders at ilstu.edu
> Skype:   paultlud    Phone: +1-309-452-7072 <(309)%20452-7072>
> Website:  www.drtlud.com
>
> On 12/5/2017 1:39 AM, Crispin Pemberton-Pigott wrote:
>
> Dear Paul
>
>
>
> There is nothing controversial or toxic about this question. You have a
> stove project that has a CDM component – apparently the first CDM project
> approved for stoves – someone said (which I found an amazing claim).
>
> "Someone" misinformed you.
>
> I am not all-knowng about carbon credits (CC), so we can work together to
> get full answers.   First, we note that CDM (Clean Development Mechanism)
> is not the same designation as CER (Certified Emission Reduction) and VER
> (Voluntary Emission Reduction).    There are stove projects with CC in the
> form authorized by Gold Standard Foundation (GS) for voluntary credits
> (VERs).  I do not know if there are other stove projects for which the CC
> is registered / verified as CER via the UNFCCC which is the only entity
> that can give the CER designation.  Gold Standard can provide either VER
> and CER forms of CDM.  The TLUD stove project in West Bengal is with GS CER
> status.
>
> So I am sending a copy of this message to Olivier Lefebvre who works in
> this field of stoves and carbon credits.   And maybe my India contacts will
> inform me further.
>
>
>
> Anyway:
>
>
>
> *>*I repeat:  NOT subsidized.
> >…if you are willing to help, including to help test the website
> regarding donations or the purchase GS CER fully certified carbon credits.
> )
>
> It is a donation. There are beneficiaries. *Something* is subsidized. I
> want to know where the CDM money goes. I do not care *where* it goes , I
> just want to see the whole financial picture.
>
> The donations that go through the NFP that I have established are for
> sponsoring a Champion TLUD woodgas stove in West Bengal, so it subsidizes
> those stoves for appropriately low-income families. (We are just getting
> started.  Apart from my own money, there are now two donations that total
> $90 form persons who have been willing to help us test the processing of
> donations.  We will also need to test for the funds to acquire TLUD-based
> GS CER carbon credits.  We only deal with TLUD-generated carbon credits.
> (write to me off line if willing to assist.)  )
>
> The donations do not subsidize the char collection business.
>
> Note:  The major TLUD stove projects in West Bengal are managed by the
> Germany-based entity called   atmosfair   You can see their information
> at   https://www.atmosfair.de/en/home       There you can purchase carbon
> credits to offset airline travel.
>
> The specific info about the TLUD projects in India are at:
>  https://www.atmosfair.de/en/energieeffizienz/indien_holzvergaserofen_cdm
>
> atmosfair uses it funding to get the stoves from the factories (as
> explained in the Deganga report).  So those stoves are subsidized for the
> households.   But the money is recovered via the sales of carbon credits
> during 7 years.
>
> Question:   Is it a subsidy if the person pays in the form of signing away
> his or her rights to the carbon credits that will be earned by the use of
> the stove?    Or is it a form of "micro-finance" with repayment handled by
> the dealer in the carbon credits?   And if the monetary return to the CC
> dealer is greater than the initial value of the stove, is that not
> basically equivalent to the charging of interest on a micro-finance loan?
>
>  This will inform my first question which is: can the [char purchase]
> project continue if this money source [of carbon credit sales] is cut off.
>
> Answer:  Yes.
>
> I was not thinking of your request for $40 per stove, I was thinking of
> the CDM money which according to Sujatha, was necessary to buy the char at
> a viable price and sell it to the foundry.
>
> You either misunderstood Sujatha or she was incorrect.
>
> If the value as a coal replacement is adequate to cover the cost of
> collection and delivery, then it is viable without the CDM money. If it is
> needed, then it is not.
>
> It is viable.
>
> Is this clear? There is external money flowing into the project. I
> expressed no opinion about whether or not it was good or bad. The question
> is whether or not it can continue indefinitely without that money.
>
> There are two separate business operations.   We are discussing the CHAR
> PURCHASE business, not the overall stove project.
>
> If it can, the next assessment of risk is what change might take place and
> how that would affect the viability. If the change wrought indeed made it
> unviable financially, what steps can be take to mitigate the risk?
>
> I addressed that in my previous message.   The risk is a weakness of
> operational management if the CC business stops, and I said there seems to
> be sufficient mid-level management to hold the char purchase business
> together.
>
> This is normal due diligence. We are not allowed to take unconscionable
> risks and risks have to have a mitigation plan. Stove char is a business
> and needs a business plan.
>
> Almost right.   It would be good to have a well layed out business plan.
> But the plan is not as polished as the Western world might like it to be.
> Personally, I am glad that things are functional and participants know
> their roles and do them.  To have a great business plan (formal sense)
> would require talent and money.   Volunteers are welcome to do the business
> plan task.
>
> If it depends on a subsidy, say so, and let us know that it is an
> essential element, and we will prepare for it. We will justify it to
> governments or donors if we can.
>
> Repeat:  The char purchase program has no subsidy whatsoever and employes
> about 100 people in the Deganga area alone.
>
> And I repeat my comment from above:
> *Is it a subsidy if the person pays in the form of signing away his or her
> rights to the carbon credits that will be earned by the use of the
> stove?    Or is it a form of "micro-finance" with repayment handled by the
> dealer in the carbon credits?   And if the monetary return to the CC dealer
> is greater than the initial value of the stove, is that not basically
> equivalent to the charging of interest on a micro-finance loan? *
> Are we discussing something that is a truly different approach to the
> financing of large numbers of cookstoves?   It seems to be working well
> with the TLUD stoves that are earning 4 carbon credits per year of verified
> usage.
>
> All comments and assistance will be gratefully accepted.
>
> Paul
>
>
>
> Regards
>
> Crispin
>
>
>
>
>
>
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