Ceramic Stoves, A Hot Investment
By Lisa Frist
Our world is changing quickly, and in ways I never imagined. JP Morgan has just picked $10 ceramic stoves in Ghana as its new hot investment, literally. So, is this just another PR stunt to boost the bank’s image, or has the bank made some exaggerated miscalculations on the market potential of rural cookware? Actually, it turns out it is neither.
What JP Morgan cares about is not the market for the stoves themselves, but their ability to cut carbon emissions. With the introduction of the Kyoto Protocol’s cap and trade agreement, companies are now forced to keep their carbon emissions in check. And they can do this in two ways. One is to simply reduce their carbon output, and the other is to buy what are known as “carbon credits” or “carbon off-sets.”
You’ve probably already seen advertisements for these if you’ve bought an airplane ticket recently. For an extra $11.90, for example, you can off-set your carbon emissions on your flight from New York to London. Your money is then invested in projects to help the environment, like planting trees in Kenya or research on renewable energies. And now your flight, or at least your portion of it, is said to be “carbon-neutral.”
While you have the voluntary choice to off-set your carbon emissions, companies by law must maintain a certain low level of carbon emissions and the carbon off-sets must benefit a developing country. And this brings us back to why JP Morgan has found ceramic stoves in Ghana to be a hidden jewel of an investment. These stoves, which generate jobs and incomes for Ghanaian entrepreneurs, are 40% more efficient than traditional stoves in the region. This means that each stove off-sets approximately 2.3 tons of carbon dioxide emissions a year, translating into some pretty attractive carbon credits that companies are eager (and legally mandated, in many cases) to buy. Who will they buy them from? For now, the answer is JP Morgan and any other organization who has sniffed out this invisible market opportunity.
What’s fascinating to me as both a public policy and business student is how a global policy has suddenly created a market out of nothing. Ceramic stoves have always cut carbon emissions. But no one really cared except for some environmentalists and NGOs who were concerned with poor people spending too much money on charcoal. But now that a ton of carbon dioxide has a price tag on it (or rather a “negative” ton of carbon dioxide has a price tag on it), it’s become as marketable as sliced bread and the private sector is taking notice.
So what is next on the horizon? What other social and environmental solutions can we package up and sell to rich banks? According to a nonprofit called E+Co, which invests in these stoves and sells carbon credits, the new market may be “clean water credits.” These are already sold in a few places in the US and Europe including Pennsylvania. But this is likely to be just the beginning of this unusual marriage between the private and social sectors. The UK, for example, is experimenting with a bond that is indexed to national incarceration rates. In other words, the lower the prison occupancy rate, the higher the return on the bond for the investor. The hope is that these bonds incentivize the investors to support nonprofits that are working to lower crime rates. A little zany? Perhaps, but kudos to the UK for shaking up the dust in government and taking a bold leap into some pretty interesting unexplored territory.
Even if the bonds take some time to garner support, the ceramic stoves have endeared a loyal following. We’ve long struggled to find a solution to both the Tragedy of the Commons and the Tragedy of Poverty. Perhaps we’ve found a new recipe for success where we should have been looking all along….in a simple stove.
Lisa Frist is a dual degree MIT Sloan and Harvard Kennedy School graduate student. She is also the Programs Director of All Nations Education, a nonprofit dedicated to providing college scholarships to students in Ghana, Rwanda, and Peru. She will be traveling with the finnovation team to Cambodia and Indonesia. Prior to graduate school she lived in Mozambique for two years working in community development and disaster relief. She’s also lived in Nicaragua, Brazil, and South Africa. She received her AB in public policy and international affairs from the Woodrow Wilson School at Princeton University.
