Key features of the Indoor Air Pollution case study Breathing Space is the Shell Foundation’s programme for tackling Indoor Air Pollution (IAP)
caused by smoke emitted from indoor cooking with biomass. Acute respiratory diseases linked to IAP kill about 1.6 million women and children every year in developing countries while hundreds of millions more suffer debilitating disease.
Historically, aid-funded efforts to tackle this problem have had very little success.
Breathing Space is aiming to identify, test and then diffuse on a very large scale, ‘market-based’
mechanisms for getting killer smoke out of the ‘kitchens’ of poor households.
Supply and demand-side interventions based on business and market principles are being piloted in 8 developing countries. To date 200,000
households have been removed from risk – a figure that will rise to more than a million by the end of the pilot phase.
This is encouraging but trivial compared to the size of the problem. More significantly a number of the interventions tested are robust enough to take ‘to scale.’ So next stage scale-ups underway in India and Guatemala, based on financially viable business models, are targeting three million households.
By 2008, using our own resources as investment capital and smart subsidies, the target is to get 10
million households out of risk. In parallel, exploration is underway into the feasibility of securing strategic partnerships and setting up financially viable intervention mechanisms at the international and national level to reach the additional hundreds of millions of poor households who will otherwise continue to suffer from this ‘killer in the kitchen’.
The common consensus is that at the beginning of the 21st century, more than 2 billion people are still relying on traditional fuels for cooking and heating. This translates into hundreds of millions of very poor households cooking family meals indoors on smoky stoves and open fires using ‘traditional’
fuels such as firewood, crop residues and animal dung. The smoke and fumes emitted (known colloquially as Indoor Air Pollution) contain pollutants and particulates that when inhaled can cause deadly and debilitating diseases such as pneumonia and chronic obstructive lung disease.
In October 2004, the World Health Organization (WHO) and the United Nations Development Programme (UNDP) labelled Indoor Air Pollution (IAP) the ‘Killer in Kitchen’ because it’s responsible for 1.6 million deaths each year – largely woman and young children – and blights the lives of millions more. This makes little-known IAP the fourth largest health threat to these groups after water-borne diseases, malnutrition and HIV/AIDS. IAP is also part of a well-known poverty chain (the poor, not able to afford cleaner, commercial fuels, must spend many hard hours collecting ‘free’ biomass fuel) whose direct and indirect costs are enormous.
The Shell Foundation approach For these reasons and because IAP is the most serious energy and poverty-related health problem, the Shell Foundation has committed $10m to tackle IAP through its Household Energy and Health Programme (HEH) which we have branded Breathing Space. The most important feature of Breathing Space is not the money, however, but our approach to tackling IAP. This is basically to identify, test and then, ideally, cause to be diffused on a very large scale, ‘market-based’
mechanisms for getting killer smoke out of very large numbers of very poor people’s kitchens.
We adopted this approach for three reasons. First, distorting regulations, health and safety concerns and geography have inhibited commercial suppliers of cleaner fuels from entering a market segment it perceived anyway as having no money to spend.
Second, for a variety of largely ‘silo-mentality’
reasons, IAP as an issue, despite its significance, has failed to attract much donor funding compared to other poverty/health/environmental problems.37 Finally and most germane, the interventions that did get donor funding have not made real inroads into the problem on a significant scale. This is partly because of limited funding but largely we believe because the ‘solutions’ offered were basically subsidised, technical fixes (mostly ‘cleaner’ stoves)
that were often designed elsewhere and bore little relation to what the ‘market’ (millions of poor households) wanted and could afford or to what overcoming the IAP problem required.
In our language, very little business thinking appears to have been applied to tackling the IAP problem by either the donor or the project deliverers. In our view, this resulted in most IDC IAP interventions being neither financially viable nor scaleable. Thus they usually made little sustainable headway in eradicating the IAP problem.
A new customer value-proposition The new generation of stoves designed to effectively reduce emissions are significantly more expensive than the lower-cost ‘efficiency stoves’, increasing the barriers to access for poorer customers. In some cases these improved biomass stoves are more expensive than liquid petroleum gas (LPG) stoves. But LPG as a fuel is often not available in rural areas. The combined effect of these product limitations and the low availability of desired alternatives is that there is often a very poor customer-value proposition for IAP reducing stoves and fuels. Consequently, demand is low and marketing costs are high.
Against this backdrop, we reasoned that by successfully demonstrating there might be at least partially market-based approaches to tackling IAP, we might be able to break the vicious cycle of ineffective IDC interventions by better understanding and tackling the market barriers. This in turn might provide the impetus to attract sufficient donor and/or private sector interest to tackle an avoidable poverty problem that has probably caused 40
million unnecessary deaths over the last 20 years.
New partners and usual suspects We kicked the whole process off via stakeholder consultation and a typical donor ‘Request for Proposals’ (RFP), asking for proposals for potentially commercialisable and scaleable ways of tackling IAP. The RFP attracted about 140 proposals, primarily from NGOs, of which most addressed the IAP issue but failed to understand what we meant by commercialisable or scalable solutions to IAP.
Nevertheless, we did find some very good NGO partners who could talk, and were willing to walk with us, a route to commercialising solutions to IAP. So we set up pilots in a number of countries40
to explore systematically different market-related IAP ‘solutions’ including the development and sale of cleaner stoves, cleaner fuels, use of consumer finance on a micro-credit model, education via sophisticated marketing strategies, reducing costs through mass production and distribution and so on.
Key actions for the pilot phase Through these, we have sought, with our partners, to:
a. assess whether among our target ‘market’ – rural households suffering from IAP – whether there was an interest, willingness and ability to ‘pay’
for IAP solutions; b. verify the effectiveness of the interventions: do the improved products really reduce IAP exposure; c. assess whether there was some form of business, financing and distribution ‘model’ or value chain that could produce and market appropriate and affordable IAP products to very poor households.
In parallel, we carried out a systematic review of the only two large-scale household energy programmes in the world: the National Improved Chulha Programme in India and the National Improved Stove Programme in China. Lessons from these two programmes have been extremely valuable in developing our own approach. In both cases the programmes were highly subsidised and had mixed results in reducing IAP. The China programme is largely deemed a success and has led to the establishment of a thriving stove market as well as some excellent technical innovation. The Shell Foundation review was the first of the programme since the 1980s and has brought the China experience to the attention of the international community. Neither programme is being continued by the national government in question.
More than money In addition to providing financial resources to the pilots, the Breathing Space programme has three features:
the provision to partners of significant technical and business assistance through intensive handson engagement by Foundation staff, local Shell staff and finance and business consultants; complementary activities (separately funded)
designed to answer key developmental and commercialisation questions thrown up by the pilots and especially by our ‘going-to-scale’
aspirations. These include development of a standardised monitoring methodology to measure the effectiveness of interventions, whether the product offering meets customer needs and if there is a significant reduction in IAP. A set of tools is also being developed for market research, demand assessment, supply chain development and sustainable financing; In parallel, a second set of tools is being developed for market research, demand assessment, supply-chain development and sustainable financing.
Lessons learned Once the pilot phase is completed by the end of 2005 at a total cost of US$7 million, it will have catalysed the market-based diffusion of smokereducing products to poor households and removed over one million at-risk individuals from the perils of IAP. This is the first systematic IAP intervention ever mounted though it is still limited compared with the scale of the problem.
We’ve also learned along the way the value of and how to introduce business DNA into a development project context and how to help NGOs adapt their skills and ways of working. This is essential to meeting the rigorous demands of developing financially viable ways of tackling a classic poverty challenge.
This has not been an easy task because the nonmonetised nature of the biomass fuel market, high distribution costs in rural areas, differences in tastes and diets, and the nature of the product offering means that the most effective business models are often decentralised, bundling together a network of dozens and even hundreds of micro-enterprises.
The most successful pilots have combined centralised component production, quality control and supply-chain management with decentralised installation and assembly of products, linked to a network of social service providers (such as NGOs)
which provide the link to communities, social marketing and awareness raising.
Successful models include both direct cash sales to customers and sales to NGOs or public institutions, which distribute the products through their own social programmes with various combinations of subsidies, micro-credit or in-kind payments. The key factor is maintaining the commercial integrity of the supply chain and keeping it separate from whatever facilitation process is used to get the product to the end customer.
Other advantages of this combined ‘public-private’
model is that the NGOs or public institutions can provide some of the ongoing training on stove maintenance and inspect installed products. Links to micro-finance institutions and other financing mechanisms such as revolving funds that provide both enterprise financing to businesses in the supply chain, and consumer finance to end customers, provide an avenue for market growth and scale up.
Most importantly, the pilots have demonstrated there may be viable business models, supply chains and consumer financing mechanisms that could be brought to bear on the IAP problem on a large scale.
This has given us the confidence to take the next steps in our ‘going-to-scale’ journey. In Guatemala alone, for example, this means all involved moving out of the comfort zone of managing a typical, subsidised, low-risk (to the implementers and funders) poverty project with a target population of 5,000, to planning and implementing a selffinancing market entry and distribution strategy to get IAP interventions sold into a significant percentage of the 600,000 at-risk and very poor households. Meanwhile, in one state in India, the scale-up approach will reach over three million people, from a pilot level of 100,000.
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