Guest post by: Eyal Harel, CEO, BlueGreen Water Technologies
The collapse of KOKO Networks in Kenya in early 2026 serves as a stark example of how regulatory uncertainty surrounding carbon markets can threaten the viability of climate projects. At the heart of the issue are government authorization requirements under Article 6 of the Paris Agreement, which can create barriers for projects working to reduce greenhouse gas emissions.
Founded in 2013 by Australian entrepreneur Greg Murray, KOKO had built a network of more than 3,000 bioethanol dispensing machines across Kenya’s urban neighborhoods, serving approximately 1.5 million low-income households with subsidized clean cooking fuel. The company invested over $300 million in Kenya, employed 700 people directly, and based its entire subsidy model on revenue from carbon credit sales into international compliance markets –specifically, CORSIA-approved credits under its Gold Standard-registered project.
In June 2024, the Kenyan government signed an investment framework agreement with KOKO that was explicitly intended to enable such transactions. In March 2025, the World Bank’s Multilateral Investment Guarantee Agency (MIGA) insured KOKO’s Kenyan investment for $179.6 million. This marked the world’s first carbon-linked political risk insurance coverage of its kind, explicitly covering government breach of contract.
However, when KOKO applied for the Letter of Authorization required under Kenya’s new Carbon Markets Regulations, the government declined. The government cited concerns that the volume of credits KOKO sought to sell would have exhausted Kenya’s entire allocation of internationally transferable reductions, leaving no room for other sectors or companies. On January 31, 2026, KOKO ceased all operations, laid off its entire workforce, and filed for insolvency.
KOKO’s failure was not a failure of the underlying project. The stoves were real. The households were real. The fuel displacement from charcoal and kerosene was real. It was a failure of policy architecture, which demonstrated that even a well-capitalized, World Bank-guaranteed climate project cannot survive in a market where the regulatory pathway to revenue is hostage to the sovereign authorization bottleneck.
The consequences of KOKO’s shutdown extend far beyond the company itself, affecting greenhouse gas emissions, public health and livelihoods.
On greenhouse gas emissions alone, the numbers are stark. KOKO was generating approximately 6 million tons of CO2e reductions annually — certified under Gold Standard’s UN-aligned methodology, covering avoided CO2, methane, and black carbon from households switching away from charcoal and kerosene. Those reductions are now gone.
The public health consequences are equally serious, and arguably even less visible to policymakers sitting in distant capitals. Indoor air pollution from burning charcoal, firewood, and kerosene is the eighth leading cause of premature death in Kenya, responsible for an estimated 25,000 deaths annually, more than malaria and HIV combined. Women and children bear the greatest burden: women exposed to high levels of solid-fuel smoke are more than twice as likely to develop chronic obstructive pulmonary disease. The PM2.5 concentrations at charcoal cooking stoves can exceed World Health Organization safety limits by a factor of 100.
The entire KOKO shutdown was communicated via a text message reading “Samahani KOKO customer,” meaning “sorry,” on the morning of January 31, 2026. For hundreds of thousands of families, a decade of clean-cooking progress was erased in a single morning.
For 1.5 million households in Nairobi, Mombasa, Kisumu, and Nakuru − most of which are low-income urban families − the sudden disappearance of bioethanol at half the market price meant a forced return to precisely these conditions. These are not risk projections, but rather the predictable, measurable public health consequences of a regulatory decision.
The socioeconomic damage is equally concrete. KOKO directly employed 700 people and sustained thousands of small-business agents, predominantly women shopkeepers who earned commissions from KOKO points installed in their stores. At the household level, the economic blow is compounded by stranded assets. KOKO customers had invested in proprietary bioethanol stoves at the subsidized price of KSh 1,500, against a true commercial cost of KSh 15,000. Those stoves are now inoperable without bioethanol, and the families who own them cannot afford LPG alternatives. A single six-kilogram refill costs an average of KSh 1,350, roughly fourteen times the cost of an equivalent KOKO top-up.
If the carbon market cannot keep companies like KOKO alive, with a World Bank guarantee, a Gold Standard certification, a signed government agreement, and over $300 million in committed investment, it will not attract the next generation of project developers either. Policy must lead effective and reliable climate action. When it generates only red tape, it does not slow the climate crisis, it only slows the response.
The consequences of this regulatory dysfunction are already visible in one of the most commercially significant segments of the carbon market: aviation. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), administered by the International Civil Aviation Organization (ICAO), enters mandatory Phase 2 from 2027, with the first compliance deadline requiring airlines to retire eligible emissions units by January 31, 2028. Under this obligation, airlines operating international routes must offset emissions above a 2019 baseline, a requirement that will demand the retirement of a very substantial volume of carbon credits in the coming years.
The scale of the supply-demand mismatch is staggering. According to analysis by Sylvera, CORSIA Phase 1 faces potential demand of up to 144 million eligible emissions units by January 2028, against a current available supply of only approximately 15.84 million credits. While over 4,000 projects could theoretically supply eligible credits, only around 1,500 are located in countries with even moderate readiness to issue the Article 6 authorizations required for CORSIA compliance.
The loss of KOKO Networks alone, a project that was generating 6 million tons of CO2e annually and was directly in the CORSIA-eligible pipeline, illustrates how the regulatory bottleneck destroys supply not in the abstract, but one collapsed company at a time.
With MIGA backing, KOKO had planned to expand to reach an additional three million customers by end of 2027. The forward-looking pipeline represented 20 to 25 million tons of annual reductions, a volume that was directly in the pipeline for CORSIA Phase 1 compliance. Its loss is a quantifiable subtraction from the global carbon budget at the precise moment those reductions are most needed.
The result is a classic coordination failure explicitly described as a “chicken-and-egg” challenge by market experts. Airlines cannot sign long-term offtake contracts for credits that may not exist in compliant form; developers cannot finance large-scale projects without offtake certainty; governments have not moved quickly enough to issue the authorizations that would unlock supply. Everyone is waiting for someone else to move first, and the 2028 deadline is fast approaching.
The chilling effect on the broader carbon market is already being felt today, years before the deadline. KOKO Networks, which was itself awaiting CORSIA approval at the time of its collapse, is not an isolated case; it is a preview of what happens when the compliance architecture of a major market mechanism is built on a foundation that almost no project can satisfy.
The cost of this paralysis is no longer theoretical. On October 21, 2026, the UN Environment Programme (UNEP) published its Emissions Gap Report 2026, titled “The Point of Return,” which concluded that the chance of holding global warming to 1.5°C with no or limited overshoot is now gone. UN Secretary-General António Guterres put it bluntly: “The world can no longer avoid overshooting the 1.5 degree limit.” Under current policies, the planet is heading toward 2.8°C of warming by 2100, and even the most ambitious remaining pathway would see temperatures peak at 1.7–1.8°C before they could be brought back down.
This is what climate inaction looks like in practice. It is not only a lack of ambition at international summits, but the accumulation of decisions like the one that shut down KOKO: verified, financed, operating projects halted by red tape, and millions of tons of annual emissions reductions lost for want of a single authorization letter. UNEP’s own prescription for limiting the overshoot is to replicate proven solutions rapidly across every sector and every economy. Governments cannot call for that acceleration while dismantling the very projects already delivering it. If the 1.5-degree goal is to be recovered rather than abandoned, the regulatory architecture of carbon markets must become an enabler of proactive climate action, not the bottleneck that defeats it.
