Why the market alone cannot solve the clean cookstove gap

A few months back I sat across a brilliant young social entrepreneur who could not figure out how to justify investing his organization’s “patient capital” in improved cookstove projects.

“We’ve looked at a dozens of projects and the numbers just don’t add up,” he said. “So, until someone can show us a business model that works, we’re putting our money elsewhere,” he declared.

Could it be that the emphasis on finding market-based solutions to energy poverty alleviation and the large-scale deployment of improved cookstoves is just not practical?

“Probably,” say a group of researchers investigating the pressures placed on grass-roots NGOs to adopt market-based approaches to solving household energy and health issues in the developing world.

This is not to say that the market-based approaches cannot be effective under specific conditions, say the researchers, citing positive outcomes in China and Kenya.

Bailis et al 2009 Arresting the Killer in the Kitchen, whose research is based on a case study in Mexico, is an important read for all those trying to apply traditional market principles to the deployment of improved stoves.

In its conclusion, the authors affirm that, through their research, they have demonstrated that extended state and/or donor support has played a vital role in the success of past interventions and question the idea that it be reduced or removed.

Indeed, they add, we caution that the drive for commercialization carries risks for stove producers and their potential beneficiaries that appear to be downplayed by the proponents of commercialization.

It’s probable that the conclusions in the paper are old-hat for some of the more established organization working on stove projects around the world.

Nonetheless, we think this paper is worth reading for those of us lacking the benefit of practical, on-the-ground working experience deploying cookstove for the energy poor.

We’ve excerpted some of the highlights of the paper below:

Background

GIRA is a non-governmental, non-profit organization based in Patzcuaro, Michoacan. Founded in 1985, the organization assists with rural energy needs in the Purhe´pecha region and is also active in thirteen other Mexican states (Masera et al.,2007). Since the mid-1990s, GIRA has worked with the National Autonomous University of Mexico’s Center for Ecosystems Research (CIEco) to promote sustainable energy in rural Mexican households. 3 By the start of 2007, GIRA had disseminated roughly 8,000 Patsari stoves.

Theory & Context

The commercialization of improved stoves attempts to shift stove dissemination from civil society to private, possibly social, enterprise. Terms such as social enterprise, social entrepreneurship, and social marketing are related concepts in which business principles are applied to a variety of social problems. This shift in development practice is an example of a widespread shift toward neo-liberal policies that have gained traction with major donors and international financial institutions (McCarthy & Prudham, 2004).

Adherents promote a minimal role for the state and a rollback of public service provision. Minimally regulated markets are seen as the most efficient means to allocate scarce resources (Peet & Watts, 1993) including services that were traditionally the domain of the state, such as electric power (Greacen & Greacen, 2004; Williams & Dubash, 2004; Williams & Ghanadan, 2006), water and sanitation (Liverman & Vilas, 2006; Shrivastava, 2007; Wilder & Lankao, 2006), and public health (Armada, Muntaner, & Navarro, 2001; Bond & Dor, 2003; Homedes & Ugalde, 2005; Navarro, 2004).

The challenges faced by small business startups in the developing world

Countries in the tropical belt with high levels of dependence of biomass frequently face some of the most difficult environments for small business startups. These include corruption, high start-up costs, problematic and expensive contract enforcement, volatile inflation and interest rates, high taxes, and cumbersome bureaucracies.

Countries where improved stoves are needed also lack institutional support for small businesses. In Mexico it can be difficult to obtain credit and the country’s financial system is ‘‘surprisingly shallow.” Weak lending markets also hurt sales. Lastly, employment regulations in Mexico are among the most rigid in the world, which offers security for workers who find employment, but also creates a barrier for new businesses.

GIRA’s Patsari stove project

This section explains in detail how the project was set up and helps explain the researcher’s conclusions. This section may also hold the key to the project’s shortcomings when it comes to commercialization. That’s because the stove project design incorporates several components that may have proved critical to the success or failure of the project. Among these are the fact that the stove was produced in situ and required a significant amount of technical adjustments and training for end users.

Another important determining factor is that the target population is almost entirely rural and the fuel burnt is wood.

Discussions and Conclusions

To date, successful scale-up has been both limited and contextually distinct, making it difficult to draw generalizable conclusions. We use the cases discussed above to identify five areas in which support by donor or state-funded action can be crucial to the success of stove interventions: research and development (R&D), marketing, financing, monitoring and evaluation (M&E), and quality control.

Closing Thoughts

This paper explores some of the challenges facing organizations that promote improved cookstoves as a means of reducing exposure to harmful emissions from solid fuel combustion among primarily rural consumers. These organizations have historically relied on donor funding and are now under pressure to operate in a more business-like manner. This shift, initiated by the donor community, is supposed to bring greater efficiency and accountability, with the ultimate goal of expanding to a scale equivalent to the magnitude of the problem. However, we have demonstrated that extended state and/ or donor support has played a vital role in the success of past interventions and question the idea that it be reduced or removed.

Without disputing the notion that business-like approaches have the potential to bring creativity and innovation to the development and dissemination of improved stoves, we caution that the drive for commercialization carries risks for stove producers and their potential beneficiaries that appear to be downplayed by the proponents of commercialization. Examples of successful transitions to commercialization show that external support was present for many years in various forms beyond simple direct subsidies to consumers: these include basic R&D, technical advising, entrepreneurial training, and quality assurance. In China, state support persists and in Kenya, where there is no state support for the KCJ, a moderate quality control effort could correct problems that persist 25 years after the stove’s introduction.

(…)

However, in addition to the challenging business environment, other structural factors create hurdles that need to be overcome. The failure of biomass-reliant households to prioritize improved stoves calls for social marketing to convey the message that stoves are a worthwhile investment that carries numerous benefits: one of which is cleaner indoor air. Also, understanding that direct subsidies are not part of the social business model, low purchasing power among the majority of rural biomass users requires financing to spread costs over an acceptable period of time.

At a more fundamental level, strict adherence to the ideology that donors should behave as investors rather than charities when attempting to reduce the health risks faced by the world’s poorest creates a fundamental tension between neoliberal discourse and global health. It is easy to argue that anti-malarial drugs and TB treatments should be subsidized, if not distributed freely to the world’s poor.

However, though the toll on global health resulting from exposure to wood smoke is similar in magnitude to malaria and TB, the dissemination of low-emission stoves is more challenging than disseminating medication or bednets to combat malaria. Improved stoves blur the line between health-improving technology and household consumer goods. They are distinct from other health interventions because of their fundamental link to consumption and food culture. We argue that while there is space for stove developers to commercialize, they should not be expected to do it too quickly. Nor should they do it without substantial effort from either the state or donors to create a conducive commercial environment in which they can survive. Further, the factors that determine a ‘‘correct” pace of commercialization and define what constitutes a ‘‘conducive business environment” must be recognized as contextual and dynamic. Finally, insofar as public finances and donor funding continue to subsidize health care in developing regions, it would be a mistake to completely withdraw subsidies from interventions to fight one of the world’s top killers of children under five.