On Friday, January 30, 2026, the end of Kenya’s most celebrated climate-tech success story did not come via a press conference, but through a text message sent to 1.5 million households. “Samahani KOKO customer,” the SMS read, “we regret to inform you KOKO is closing operations today.”
By the following morning, KOKO Networks had laid off its entire 700-person workforce and shut down a network of 3,000 high-tech bioethanol fuel ATMs. The collapse of KOKO is not a story of market failure or lack of demand. Instead, it is a stark case study in the volatility of carbon finance and the collision between international climate mechanisms and local regulatory realities.
At the heart of the shutdown is a single regulatory document: a Letter of Authorisation (LOA). When the Kenyan government refused to issue it, they effectively turned off the company’s revenue tap, exposing the state to a potential KES 23.18 billion (US$179.6 million) liability under a World Bank guarantee.
The Mathematics of Subsidies
To understand why KOKO failed, one must understand its aggressive business model. KOKO provided clean bioethanol cooking fuel to low-income urban households, replacing dirty charcoal and kerosene. However, the hardware was impossibly cheap.
KOKO sold high-tech, two-burner cookstoves for KES 1,500 – a product with a market value of KES 15,000. They sold fuel at a 50% discount compared to production costs. This 90% subsidy on hardware and deep discount on fuel was financed entirely by the sale of carbon credits.
KOKO generated approximately 6 million carbon credits annually, certified by Gold Standard. By proving their stoves reduced deforestation and emissions, they sold these credits to compliance markets (like CORSIA for aviation) at roughly $20 per tonne. As one board member noted during the crisis meetings, “Carbon revenue was not an add-on. It was the business.”
The Regulatory Squeeze: Policy vs. Politics
For seven years, KOKO operated with relative freedom, but signs of a targeted squeeze began appearing well before the final shutdown.
The first major blow came in 2023, when the government reportedly refused KOKO’s applications to import bioethanol. This blockade forced the company to pivot to local sourcing, where supply was inconsistent and prices were significantly higher than the global market. The directive bled the company’s operational margins long before the carbon credit crisis hit, weakening its financial resilience.
The situation escalated in June 2024 with the introduction of the Climate Change (Carbon Markets) Regulations, which required an LOA for exports and imposed a 25% revenue share for the state. But sources within the company suggest the friction went beyond policy compliance.
According to employee accounts, the company faced mounting political frustration that bordered on extortion. Allegations have surfaced that key political figures demanded “local share ownership” – a thinly veiled request for free equity in the company. When these demands for shares were not met, the regulatory environment reportedly hardened further.
The final straw was the denial of the LOA in January 2026. While the government may point to global skepticism regarding cookstove credits – highlighted by a 2024 UC Berkeley study suggesting such credits are overstated – the backdrop of import blockades and alleged equity demands suggests a more complex motive: a successful company that refused to pay the political price of doing business.
The $180 Million Political Risk
The irony of the collapse is that it occurred under the umbrella of the World Bank. In March 2025, just nine months prior, the Multilateral Investment Guarantee Agency (MIGA) issued KOKO a $179.6 million political risk guarantee.
This was a landmark policy, the first of its kind covering “breach of contract” regarding Article 6 obligations. The insurance was designed specifically for this scenario: to protect investors if the government reneged on its carbon market commitments.
Now, Kenya faces a diplomatic and financial nightmare. KOKO’s investors are expected to file a claim for the full KES 23.18 billion. If MIGA pays out, they will seek recovery from the Kenyan treasury, straining public finances and potentially damaging Kenya’s reputation as a destination for climate capital.
The Fallout
The immediate losers are the Kenyan public. 1.5 million households are now forced to revert to charcoal and kerosene, accelerating deforestation and increasing indoor air pollution – a reversal of years of environmental progress. The shutdown also devastates a network of thousands of agents, predominantly women shopkeepers, who relied on commissions from KOKO Points.
For the wider African tech ecosystem, the lesson is chilling. KOKO proved that clean energy infrastructure could work at scale in informal settlements. However, it also proved that building a physical infrastructure business on the shifting sands of regulatory-dependent carbon finance is a perilous gamble.
