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Energy In Common: New Microfinance Venture Fights Poverty with Clean Energy

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2010-04-19-EIC.jpgRenewable energy and microfinance are among the hottest buzzwords of the past few years. Now, Australian entrepreneur Hugh Whalan and New York energy specialist Scott Tudman are bringing the two together in Energy In Common, a new venture with the ambitious goal of delivering clean energy to 15 million people in five years, all the while fighting poverty by empowering developing world entrepreneurs through microloans. The projects being funded have a clear sustainability focus -- such as solar-powered lighting systems in Ghana -- lowering energy reliance and cost for local small-business owners and ordinary citizens. At the same time, lenders are able to see exactly where their money goes, adding transparency to the carbon offsets they receive for lending.

2010-04-19-EIC.jpg

We sat down with Whalen to ask a few questions about the venture, how it came together and what makes it smarter than other alternatives.

Huffington Post: Carbon offsets have been notoriously criticized as a financial smoke screen and an environmental bandaid. How does EIC bring transparency to the process, offer accountability for where investments are going and show a tangible, real-world effect on the environment?

Hugh Whalan: Carbon offsets are a neat little way of financially incentivizing projects that generate emission reductions. The trouble is, the carbon market rewards sophisticated companies which build enormous projects -- very few notice the tiny projects that make the most difference to the very poor. That's where we think we can make a difference.

At EIC, we have developed a model to accurately measure the emission reductions that occur as a result of each and every loan. Through detailed questionnaires before, during and after the loan, and in-depth field surveys conducted by both us and independent auditing firms, we can calculate the carbon offsets our community helped to create. So our model not only helps to channel valuable funding into energy solutions for those that need it most, but also helps to channel funding into fighting climate change at the same time.

HP: How do you recruit and select entrepreneurs whose projects to invest in?

HW: With our trusted field partners (microfinance institutions), we have established a set of guidelines to help us find and support capable entrepreneurs, and ensure our loans are utilized to not only alleviate poverty, but also reduce emissions. In many instances, we are helping our partner organizations start energy lending programs from scratch.

EIC lenders can then choose to provide funding for a range of solutions such as LED lamps, clean burning stoves and solar home systems. We anticipate moving into solar drip irrigation and biogas digesters in the near future.

HP: Could you explain the whole concept of selling emission reductions as carbon offsets, how you calculate these and what they mean for both entrepreneurs and lenders?

HW: For our community of lenders, carbon offsets are a great way to play an active role in the fight against climate change. As our lenders are able to purchase the emission reductions created by the exact entrepreneurs they have lent to, they can see the human face behind their purchase thus making it far more personal.

100% of the funds from the purchase of these carbon offsets goes straight back into finding and funding even more entrepreneurs in need. In the longer term, the funding of emission reduction projects significantly benefits the poor as the impending effects of climate change will hit the developing world the hardest. Not only that, these same effects are predicted to further hinder efforts to reduce poverty.

HP: How did the EIC team come together?

HW: Most of us know each other from work in the carbon or energy markets. We saw the need for an organization to focus exclusively on very small scale energy projects which alleviate poverty.

We developed EIC as a way to bring attention and resources to the problem of energy and poverty in a way which was scaleable and could reach 15 million people within 5 years.

HP: The correlation between clean energy and poverty isn't necessarily something people think about, but it's there. What's your plan for ending the latter via the former?

HW: For billions of people, gaining access to energy is a time consuming, and expensive process. Families must dedicate hours every day to the collection of firewood. Any other fuels they have access to, such as kerosene, are not only incredibly expensive -- often costing a whopping 30% of a family's income -- but also horribly inefficient.

Green energy significantly reduces the use of expensive energy resources. It is reliable, accessible, safe, and economical. It is a real solution to poverty which makes things like studying after dark, refrigerating medicine and vaccines and pumping clean water to remote community's possibilities, not just dreams.