Regulatory dispute results in operational shutdown
KOKO Networks has suspended operations after failing to obtain approval from the Kenyan government to continue selling carbon credits internationally. The government declined to issue the Letter of Authorization (LoA) required for international credit transfers, preventing the company from accessing its intended markets. As a result, KOKO terminated contracts with its entire workforce.
Founded in 2013, KOKO built a business model around the distribution of bioethanol and proprietary clean-cooking stoves at subsidized prices. The company targeted low-income households, positioning bioethanol as an alternative to charcoal and kerosene. Revenues from carbon credit sales were designed to finance these subsidies.
Dependence on carbon credit revenues
Bioethanol was sold at roughly half the market price, and stoves were offered below commercial cost. Product margins alone did not cover operating costs, making carbon credit revenues central to the company’s viability. Without access to those revenues, management determined the business was no longer solvent.
The shutdown affects more than 700 employees and thousands of independent agents within KOKO’s distribution network. Over 3,000 automated fuel dispensing machines were deployed in urban and peri-urban areas. Approximately 1.5 million households relied on KOKO bioethanol as their primary cooking fuel.
The company generated carbon credits based on quantified reductions in carbon dioxide, methane, and black carbon from shifts in household fuel use. Credits were certified under international standards, including Gold Standard, and were primarily positioned for compliance markets. KOKO sought access to the International Civil Aviation Organization’s offsetting mechanism, where pricing has been stronger than in voluntary markets.
International transfer of mitigation outcomes requires host country authorization under Article 6 of the Paris Agreement. Although Kenya signed a framework investment agreement with KOKO in mid-2024, the required LoA was not issued. Without authorization, credits could not be transferred as ITMOs, cutting off the core funding mechanism of the subsidy model. According to sources close to the company, this directly triggered the decision to cease operations.
The closure comes less than a year after the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group provided a political risk guarantee of approximately USD 180 million to support expansion in Kenya. The guarantee covered risks including adverse government actions and contractual breaches. At the time, the company projected expansion to three million additional customers by 2027.
Broader implications for carbon markets in Africa
KOKO raised more than USD 100 million in debt and equity from international investors, including commercial banks, climate-focused funds, and Microsoft’s Climate Innovation Fund. The company was widely cited as a leading clean cooking finance case in East Africa.
The case unfolds amid tighter government oversight of carbon credit authorization and export across several African countries, particularly in relation to Article 6 transactions. Greater control over corresponding adjustments and national accounting has increased regulatory exposure for project developers.
The suspension highlights the vulnerability of business models structurally dependent on carbon credit monetization, particularly where regulatory approval is a precondition for revenue realization. The company has not issued a detailed public statement outlining next steps.
ClearBlue is monitoring these developments and will keep clients informed of any impacts. Contact us to learn more about our carbon market intelligence services.