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The recent abrupt collapse and closure of KOKO Networks in Kenya for failure to meet new tougher regulatory hurdles sent profound shockwaves through the carbon credit and clean-tech sectors.
The shutdown of KOKO Networks, a popular climate- and venture-backed technology company and bioethanol fuel provider operating in East Africa and India, not only exposed the extreme vulnerability of carbon-financed projects to policy changes but also malpractices by major players in the market.
KOKO Networks closed shop after being in operation for 11 years in Kenya, after it was denied a required Letter of Authorization from the Kenyan government, primarily due to a dispute over the volume of carbon credits the company intended to sell internationally, which the government believed would monopolise the country’s carbon market quota. The refusal to grant this authorisation, needed to trade in high-value compliance markets under Article 6 of the Paris Agreement, led to the company’s collapse and entry into administration.
KOKO Networks is reportedly on the brink of bankruptcy due to the dispute with Kenya and its current financial standing might have far-reaching implications on its other operations, especially in Rwanda and India.
Analysts believe that despite presenting a genuinely inspiring story as one of the most impact-driven technology companies in East Africa, supporting millions of low-income households to transition from charcoal and kerosene to environment-friendly bioethanol at highly subsidised prices before recovering the losses through the sale of carbon credits, KOKO was thriving on inflated carbon credit claims.
Tom Price, a climate and energy policy specialist familiar with KOKO Networks operations, described the collapse of KOKO Networks as a silver lining for carbon market integrity, lauding the Kenyan government for exposing the malpractice that had been going on for close to a decade.
“KOKO was a technical marvel with world-class operators. They built a clean-fuel ATM network that delivered real value to over 1.3 million Kenyan low-income homes. But beneath the branding was a fatal flaw; a business model built on inflated carbon credit claims. So, the Government of Kenya did its job exactly right, ensuring that their carbon credit ‘exports’ will be the same high quality as their tea and coffee,” said Price.
Price further said: “KOKO was a marvel of technology and branding. The operations and team were world-class. The stoves worked, and the fuel was clean. But as they told the Harvard Business Review, they chose to subsidise their fuel by 25-40 per cent, and their stoves by 85 per cent, and banked on selling what turned out to be an inflated number of carbon credits to make up the difference.”
Seemingly, KOKO Networks’ failure wasn’t a warning against clean tech but against misleading investors and regulators in hopes of a big payout.
Moses Kemibaro, a sales and marketing specialist with an interest in energy-related technologies, said KOKO Networks looked like a great model, keen on reducing charcoal use, mitigating against deforestation and lowering household emissions with informal settlements. But he questioned the transparency as well as the integrity of its business model.
“KOKO was not structurally profitable from customers alone. Carbon revenue was not an add-on. It was the business! In simple terms, KOKO could not sell the credits that kept its business model alive. Clean cooking finance needs an honest discussion. Recent academic research has challenged the effectiveness of cookstove and clean-cooking carbon credits, questioning whether the actual emissions reductions match the claims made by project developers,” said Kemibaro, wondering why the carbon credit aspect of KOKO Networks was often on the back burner, with the clean-cooking and highly subsidised bioethanol sale fronted.
Observers say the collapse of KOKO Networks is as a result of the culmination of an almost decade-long climate policy building in Kenya that has resulted in multiple stricter carbon credit regulations that have not only uncovered irregularities in the carbon market but also exposed market loopholes and malpractices.
As a result, many carbon credit projects and companies in the East African country have faced intense scrutiny and legal challenges as well as operational shutdowns in extreme cases like KOKO Networks’ case due to issues regarding community consent, land rights, validity of their alleged carbon removal benefits or the validity of their carbon calculations.
Besides the now popular Climate Change (Carbon Markets) Regulations 2024, the main regulatory framework that governs carbon markets in Kenya, the county has several other significant safeguards such as mandatory benefit-sharing rules in place. The rules, for instance, insist that at least 40 per cent of revenues collected from land-based carbon projects must be channelled to local communities. As for the technology-based projects like the now popular clean cookstoves, 25 per cent of all the revenues collected must support local community initiatives.
Under Free, Prior and Informed Consent (FPIC), carbon credit players must provide proof that the communities in which they intend to set up projects gave informed and legal consent. Also, key carbon credit projects must obtain letters of authorisation from the state before selling credits internationally. This, government officials say, will allow Kenya to easily track how Carbon Credits contribute to climate targets at national level as well as prevent undermining of the State’s emission commitments.
What’s more, last year Kenya began the implementation of yet another stricter policy that caps and strictly regulates the volume of traded carbon credits, denying private and public entities that deal with offset units a free hand as has been previously. The National Climate Change Council, chaired by President William Ruto will, going forward, determine the volume of tradable credits per the Nationally Determined Contribution cycle to align with climate goals as well as ensure that only excess emissions reductions are traded.
Needless to add, in Kenya, carbon markets are now closely supervised by the National Environment Management Authority (NEMA), which not only approves projects, but monitors environmental safeguards and also conducts audits and other key compliance checks. During the launch of the most recent regulations this February, the Kenya National Carbon Registry, which now serves as a central digital registry to track all carbon credits and projects, Kenya’s Minister/Cabinet Secretary for Environment, Climate Change and Forestry, Deborah Mlongo Barasa, fired a warning shot.
“The introduction of several regulations and safeguards is aimed at controlling carbon credit projects, as well as improve transparency, and ensure local communities fully benefit from resultant climate finance. With this National Carbon Registry, we are happy to have one single, transparent and government-backed platform to not only record but also track and verify all carbon credit transactions in the country,” said Barasa.
The high-profile KOKO Networks’ story is just a tip of the iceberg. Besides KOKO Networks, several other players have either failed or are currently struggling with this stricter scrutiny by the Government of Kenya. Take, Northern Rangelands Trust (NRT) for instance. Its flagship project, ‘Northern Kenya Rangelands Carbon Project’, which is often described as the “world’s largest soil carbon removal project”, was declared illegal and halted two months ago.
Following successful litigation by local communities and environmental activists, the court declared that their key conservancies such as Biliqo Bulesa and others, were established unconstitutionally and without proper community consultation. The project faced multiple accusations of human rights abuses, land grabbing, and failing to obtain FPIC from local indigenous communities. So much so that, Verra, the carbon credit certifier, has suspended the project following these legal challenges and complaints.
In yet another case, Soils for the Future Africa, a company dedicated to developing, managing and implementing soil carbon projects through the restoration of degraded rangelands across East Africa, has been stopped from selling carbon credits through its ‘Kajiado Rangeland Carbon Project’. Residents of Kajiado County demanded a probe into the project in 2025, accusing the company of using exploitative, 40-year lease agreements that lacked proper community consent. Just like NRT, this project faced allegations of coercion, inadequate consultation, and targeting indigenous pastoralist lands for “sham” or low-quality carbon offsets.
Experts warn that the carbon credit market is rife with fraudulent and sneaky behaviours, often driven by the desire for high profits in unregulated markets, especially in the Global South. Some players in the industry, including project developers, sometimes rating agencies, or brokers, use sophisticated tactics to inflate the value of credits that may not represent genuine, permanent emissions reductions.
In explaining how KOKO Networks failed test of stricter scrutiny, Price said KOKO Networks used a significantly high Fraction of Non-Renewable Biomass rate (93 per cent), the metric calculating how much woodfuel comes from deforested sources, when the actual rate in cities like Nairobi is now 38 per cent. He said this single metric over credited them by over 2.4X, meaning that using the accurate number would have cut their claimed carbon credits from US$15 million to less than half that.
“They also used distorted baselines, such as claiming their urban customers used only charcoal previously, more than a ton per household per year, ignoring widespread LPG use and other alternatives. This, again, slashing their likely impact. Also, KOKO ran a high-tech walled garden — you could only fill your stove with their tanks, at their fuel ATMs, and all that data was captured in the cloud,” said Price.
He added: “They knew exactly how many litres of fuel every customer bought, to the decimal point. Yet, for carbon reporting, they ignored their own digital data and used a tiny number of surveys. Their latest, in March 2023, talked to only 159 households out of over a million customers to claim an average of 15+ litres per month, vastly boosting their claimable impact. If the reality demonstrated by fuel sales was higher, they would have used that, but they didn’t. That decision speaks for itself.”
Price closes saying: “The result? Independent carbon credit ratings agency BeZero gave KOKO’s credits a failing overall “B” grade, meaning a low likelihood of actually achieving 1 tonne of CO2 removal — and an even worse “D” sub-grade specifically for carbon accounting.”
