MICROCAPITAL STORY: Carbon Manna Unlimited Seeks Strategic Partners to Implement Carbon Micro Credit System in Kenya

Carbon Manna Unlimited, a San Diego-headquartered company, has put out a call for strategic partnerships with companies and philanthropies interested in implementing its envisioned cell phone based Carbon Micro Credit system in Kenya, and subsequently, other West and Southern African countries. Specifically, the call goes out to manufacturers of cell phone and wireless transmission equipment, wireless carriers doing business in Africa, and companies interested in co-promotional campaigns. Carbon Manna Unlimited, founded by David Palella, aspires to create a system in which impoverished families can profit from the carbon offsets they produce by switching from inefficient cooking methods that burn biomass and contribute to deforestation, to efficient solar cookers or modern charcoal stoves. Mr. Palella estimates that each family that makes the transition could claim approximately three tons of carbon-offset credits per year, worth about USD 20 to USD 35 – about a month’s wage for someone living on USD 1 per day. Furthermore, in transitioning to the new stoves a family would reduce their contribution to deforestation and desertification, and limit their lung exposure to unhealthy smoke.

Carbon Manna’s plan is to sell carbon offsets in bundles on carbon emission trading platforms such as the European Climate Exchange (ECX), and distribute the profits to the families in the developing world through their cell phones via Short Messaging Service (SMS) text messaging technology. MicroCapital has reported frequently on the drive to develop and implement technology that allows mobile financial transactions over cell phones. Please refer to the following four MicroCapital articles: (1) “Rural users yet to take a call on mobile banking”, (2) “Mobile Finance – Indigenous, Ingenious or Both?”, (3) “Gates Grants $12.5m to Mobile Phone Association GSMA for Mobile Banking”, and (4) “Omidyar Network Grants $4.5m to Opportunity International to Scale Technology-Based Microfinance Services in Africa.”

The European Climate Exchange (ECX) is a platform in Europe that aims to reduce global carbon dioxide emission by facilitating trade of carbon emission allowances between emission sources and offset projects. ECX was founded in 2005 as a subsidiary of the Chicago Climate Exchange (CCX), another carbon emission-trading platform that began in 2003. The two are now sister companies owned and operated by Climate Exchange PLC, a publicly traded company on the London Stock Exchange Alternative Investment Market (AIM). More than 90 global businesses have signed up for membership to trade ECX emissions products, including Barclays, British Petroleum, Calyon, Endesa, Fortis, Goldman Sachs, Morgan Stanley and Shell .

According to Carbon Manna’s Founder David Palella, the implementation of such carbon-market regimes have led to a few grossly inequitable projects that benefit wealthy companies. Mr. Palella argues,”The benefits and monetary rewards of global carbon trading should be pushed down to the ‘Bottom of the Pyramid’ as quickly as possible.” Carbon Manna Unlimited is his effort to make it happen.

Carbon Manna’s blog outlines the flow of money involved in its vision for a Carbon Micro Credit system. The monetary values are included for simplicity’s sake and are strictly hypothetical:

(1) An industrial company in Europe will pre-pay for USD 1 million of carbon offsets from the European Climate Exchange (ECX).

(2) ECX will take a commission of 5 percent, or USD 50 thousand.

(3) EcoSecurities (or a similar company) will structure the project and sell the credits on the ECX. It will take a commission of 5 percent, or USD 50 thousand. EcoSecurities is based in Dublin, Ireland, and works with companies in developing countries to create green house gas emission reduction projects. It then purchases the offset credits from its partner companies and sells them to emitters. EcoSecurities portfolio consists of 408 projects in 34 countries. In June 2008, it had USD 125.3 million (p.16) in total assets. From the blog, it is unclear whether Carbon Manna Unlimited has already established a relationship with EcoSecurities.

(4) The remaining USD 900 thousand will be wired to the Project Coordinator in Kenya, which could be an non-governmental organization (NGO), a for-profit company, etc.

(5) The Project Coordinator will use USD 400 thousand to purchase cell phones and matching solar or modern charcoal stoves, and distribute them to participating villagers. Mr. Pallela states that simple cell phones cost less than USD 5 to produce, and solar cookers range in price from USD 10 to 100.

(6) USD 450 thousand will be used to purchase cell phone minutes from a local cell-phone service provider.

(7) The remaining USD 50 thousand will be used by the Project Coordinator to cover its administrative expenses and pay for the project auditing company.

(8) Villagers will dial in and claim their Carbon Micro-Credit (CMC) from the cell phone company on a bi-weekly or monthly basis. At first, the credits will be used to pay off the cell phone and stove.

(9) After, the credits will be distributed in e-dollars or cell phone minutes. Mr. Palella believes that a system could be implemented that will allow the credits to be redeemed for cash. Alternatively, the cell phone minutes could be used as currency to buy goods and services, as Mr. Palella notes is already done in Africa, India, and China.

(10) A carbon project auditor will regularly verify that the carbon offsets are indeed produced and notify the necessary parties.

Little detail is available on Carbon Manna’s plans for an auditing system, which will be a challenge considering the aspired scale and location of operations. It is also unclear what stage Carbon Manna is at in implementing its system, and what partnerships it has already forged with cell phone companies, etc.

To answer David Palella’s call for strategic partnerships, please call him at 858-945-0887 or email him at carbonmanna@gmail.com.

By Ryan Hogarth, Research Assistant

Additional Resources:

Carbon Manna(TM) Xchange Blog: “December 18, 2008: Civil Disobedience and Carbon Market Inequalities”

Carbon Manna(TM) Xchange Blog: “October 26, 2008: Carbon Micro Credits Flow of Funds”

Carbon Manna(TM) Xchange Blog: “September 28, 2008: Carbon Micro Credits (CMCs) — Monetizing carbon offsets at the ‘Bottom of the Pyramid'”

Chicago Climate Exchange (CCX): Home

Climate Change PLC: Home

EcoSecurities: Home

EcoSecurities: “Interim Report 2008”

European Climate Exchange (ECX): Home

MicroCapital article, October 14, 2008: “TECHNOLOGY FOCUS: Rural users yet to take a call on mobile banking”