An Environmental and Financial Analysis of Improved Stove Projects in Guatemala

Abstract

Improved stove projects in Guatemala yield potential social benefits and represent sound financial investments for potential investors. Using the AMS IIG methodology provided by the UNFCCC, the implementation of improved stoves, specifically the HELPS ONIL stoves, could yield significant reductions of carbon emissions. With over 2.2 million households in Guatemala, an analysis shows that a 1% adoption rate per year of the ONIL stove could reduce carbon dioxide emissions by 900,000 tCO2e per year in 2019. Following the implementation schedule offered up by the ONIL CDM project, by 2019 up to 1.7 million tCO2e could be reduced per year, which represents just over 10% of Guatemala’s carbon emissions. Within the 10-year framework of the proposed project, emissions could be reduced by up to 1.7 billion tCO2e (cumulative). An NPV (net present value) analysis demonstrates that stove projects also represent cost effective and potentially profitable investment opportunities. Depending on the deal structure agreed upon between project developers and investors, CERs could cost as little as $1 per CER for an entity seeking to invest in CERs to use for compliance. Also, as long as CER contract costs remain below $13 per CER, stove projects could result in positive NPV projects for investors, yielding respectable profits. However, the Clean Development Mechanism along with the European Emissions Trading Scheme is critical in creating a market for carbon credits, thus supporting the widespread implementation of improved stoves. Unfortunately, some social impacts are not easy to quantify. Because of a variety of land-use factors, such as agriculture and logging practices, deforestation impacts are difficult to calculate. It is difficult to quantify the health benefits of improved stoves because of confounding factors such as living conditions and nutrition. While the figures presented are merely estimates of the potential impact on emissions levels, they demonstrate benefits to be gained by implementing improved stove projects, not only in carbon dioxide emissions reductions but also in overall quality of life.