Pricing Transparency for Clean Cooking Fuel

The Charcoal Project has been working with Accenture Development Partnerships and the Clean Cooking Alliance on a new project to develop a price index for cooking fuel.  In sub-Saharan Africa, charcoal prices vary greatly, by location, quality and time of year, which puts a strain on low-income households already lacking energy solutions.  The lack of transparency in pricing also makes it difficult for policy makers, academia and clean energy companies to propose policies that would make it easier for consumers to switch healthier or sustainable products.

We spoke with Ronan Ferguson, Manager, Energy Access about the genesis for this project.

1) What prompted you to come up with the idea of a Cooking Fuel Price Index (CFPI) and how was the idea developed?

Market price data is valuable information to clean cooking fuel companies; they can use it to  inform their expansion strategies. It is also useful data for investors when they are assessing and screening potential investment opportunities. Initially I saw charcoal as being the commodity to focus on, but having spoken with multiple stakeholders in the clean cooking sector, it is clear to me that the index should cover kerosene and LPG too, to have a more rounded view of local markets.

2) What do you see as the biggest benefit of this index in terms of impact on the industry?

The ultimate intended impact of the Index is to help customers move towards cleaner fuels. The Cooking Fuel Price Index does this indirectly, by being a stepping stone for more informed decision-making by many actors in the sector.

3) Which stakeholders in the industry do you see realizing the biggest benefit from the CFPI?

Clean fuel enterprises will be better able to screen markets and tell more compelling data-driven narratives to investors. Investors will directly benefit from the Index by being better able to independently assess, and select, funding opportunities. Governments should be able to use the data to make – and refine – data-driven policies. Finally, environmental NGOs will be able to be more data-driven in their interventions and researchers will have a trusted data source to reference or leverage.  Consumers are not a primary immediate beneficiary of the Index, but an ultimate one, depending on the actions taken by the stakeholders I have mentioned.

4) What is the biggest technical challenge you see in implementing the project?

Getting price is one thing, but you also need to capture quantity and quality of the fuel too, in order to make a truly relative price index. Whilst I think the methodology being proposed has the answers to address this challenge, it still needs to be tested in a pilot before we decide if and how to proceed to a global roll-out.

5) What role do you see for sustainable charcoal makers in this project, if any?

I think the pilot needs to be designed to service clean fuel enterprises and that the pilot should capture data where fuels reach the hands of the customer. That said, if the pilot is successful and is scaled globally, I believe that the next ‘module’ to test out is to move the concept further up the value chain; towards the producer-end. In this second pilot, we would be testing how to make sustainably produced charcoal price-competitive with informal charcoal, potentially through subsidy.

6) What type of partnerships will you have to form to make this a successful pilot project?

Coming out of the Forum, we had 18 organisations sign-up to become part of the partnership going forward, which is great; we need to find the right blend of actors that can shape and make a successful pilot project. We will need partnerships to help us create the future of the Index; enterprises, investors, sector advocates and the private sector. We will also need partnerships to help us learn from the past; those that have set up price reporting agencies for other commodity markets, as well as those that have created their own clean cooking fuel indices.

Pricing transparency in the clean cooking sector.

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