The Collapse of Koko Networks: Lessons for Climate Innovation and Regulatory Reform in Africa

The closure of Koko Networks in January 2026 marks a significant setback for climate innovation in Africa. Having served 1.3 million Kenyan households with affordable bioethanol cooking fuel, the company represented a genuine attempt to address the intertwined challenges of deforestation, household air pollution, and energy access. Its failure warrants careful examination—not merely as a corporate casualty, but as a case study in the structural vulnerabilities facing climate-focused enterprises across the continent.

Koko’s business model was predicated on using carbon credit revenues to subsidise clean fuel for low-income households. Stoves were sold at 80% below market price, and fuel at 50% below cost, with the gap financed through credits generated under Gold Standard methodologies. The company secured over US$300 million in investment, including a pioneering political risk insurance policy from the World Bank’s MIGA covering US$179.6 million. However, the regulatory approval required to transfer these credits internationally under Article 6.2 of the Paris Agreement – a Letter of Authorisation from the Kenyan government—was never issued. Without access to carbon markets, the subsidy model became unsustainable, and operations ceased.

This outcome raises fundamental questions about the interplay between sovereign discretion and investment certainty in emerging carbon markets. Koko had obtained a non-binding Letter of No Objection, which enabled its initial capital raise. Yet the subsequent authorisation required under Kenya’s Carbon Markets Regulations (2024) remained discretionary, with no clearly defined criteria or timelines for decision-making. This sequencing gap – between private investment timelines and regulatory processes—created a risk environment that ultimately proved fatal to the enterprise.

For governments across Africa developing carbon market frameworks, the case presents a clear operational challenge. High-level commitments to attract climate finance must be matched by predictable, transparent approval mechanisms. Where authorisation decisions remain discretionary and opaque, investors will reasonably perceive sovereign risk as prohibitive. The involvement of MIGA adds further complexity: with claims now anticipated against Kenya’s breach of contract coverage, the fiscal consequences of regulatory uncertainty become directly tangible.

For climate innovators, the lessons are equally concrete. Regulatory due diligence cannot be secondary to technical development. The policy environment must be treated as a core business risk, assessed continuously from inception through to scale. Revenue models that depend entirely on a single income stream – whether carbon finance or otherwise – carry inherent fragility that diversification can mitigate. And engagement with governments must extend beyond seeking approvals to include sustained dialogue that builds mutual understanding of constraints and priorities.

The emerging field of AI-powered climate solutions will face similar challenges. Innovations in renewable energy optimisation, climate resilience, and agricultural adaptation will require enabling regulatory environments to reach scale. They will need clarity on data governance, approval pathways, and the rules governing cross-border transactions. Without such frameworks, technically sound solutions will remain vulnerable to the same structural uncertainties that undermined Koko.

Koko’s collapse should not be interpreted as an indictment of carbon finance or climate innovation. Rather, it illustrates the gap that can emerge between promising business models and the regulatory systems within which they must operate. Bridging that gap – through clearer rules, predictable processes, and sustained public-private dialogue – is essential if Africa is to realise the potential of climate investment. The alternative is a continued cycle of innovation and failure, with consequences borne by investors, governments (that is taxpayers), and the households that depend on access to clean energy. Read the full policy brief.