COP28, the new climate deal and catalysing carbon markets


For almost three decades, global governments have convened annually to address the climate emergency under the 1992 UN Framework Convention on Climate Change (UNFCCC). The treaty mandates each country to prevent dangerous climate change and reduce greenhouse gas emissions, on a global scale, in a fair and sustainable manner. Marking its 28th year, The Conference of the Parties (COP) event has seen many triumphs, such as the 2015 Paris Agreement, and numerous setbacks - as seen at the 2009 Copenhagen conference which fell dramatically short of what many of the participating countries had hoped for. 

This year, between 30 November and 12 December, world leaders from around 200 governments and around 100,000 attendees - including senior representatives from Kyoto - met in the UAE for COP28, to discuss how best to mitigate the ever-intensifying threat of climate change and its destructive impact on our planet. 

What made COP28 so important?

Since the adoption of the Paris Agreement subsequent conferences have revolved around implementing its key goal: halt global average temperature rise to well below 2°C and pursue efforts to limit the rise to 1.5°C above pre-industrial levels. If Paris gave us the agreement, Katowice (COP24) and Glasgow (COP26) showed us the plan, Sharm el-Sheikh (COP27) then shifted us to implementation.

The agreement reached at COP28 signalled an important turning point, where countries not only agreed what stronger climate actions will be taken, but showed how to deliver them. Measuring the progress towards achieving the Paris goals on mitigation, adaptation and climate finance and adapting existing plans was a key part of this process and why COP28 was hailed by many as having the most consequential outcome following the 2015 Paris conference.The meeting concluded with a mix of significant achievements and some frustrations.

For Kyoto, as a nascent climate-focused organisation, COP28 was critical to allowing the business to further align its own climate and carbon-focused ambitions with those set out in the formal agreement delivered by UN decision-makers. 

The Paris Agreement, Article 6 and carbon credits

The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris. Its overarching goal is to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. However, to limit global warming to 1.5°C, greenhouse gas emissions must peak before 2025 at the latest and decline by 43% by 2030. 

Article 6 of The Paris Agreement, signed at COP26, set out government-level guidelines for carbon markets, including the exchange of carbon credits. Trading carbon credits through carbon markets is an effective way to accelerate climate action, as credits are gained by removing or reducing greenhouse gases, replacing fossil fuels with renewable energy, or conserving carbon stocks in natural ecosystems. 

What’s in the new climate deal?

The deal marks the first time that COP has actually asked nations to distance themselves from fossil fuels, recognised as the primary catalyst of the climate crisis. The agreement "urges" countries to "contribute” to global endeavours aimed at curbing carbon pollution, outlining a range of actions they can undertake. This includes "shifting away from fossil fuels in energy systems" and intensifying efforts to achieve a net-zero status by 2050.

The draft UN climate deal issued a call on December 13 for a global departure from fossil fuels, representing a final attempt to resolve tensions between nations advocating for the phasing out of oil, gas, and coal and those led by Saudi Arabia opposing such measures. While the final agreement does not specifically mandate a "phase-out" of fossil fuels, a bold proposition supported by over 100 countries, including the United States and the European Union, it faced heavy opposition from fossil fuel-dependent nations such as Saudi Arabia. Additionally, the deal advocates for a threefold increase in renewable energy capacity and a twofold enhancement in energy efficiency by 2030.

Countries are also urged to establish comprehensive adaptation plans by 2025, outlining strategies to address the current and future consequences of the escalating climate crisis. Acknowledging the need for trillions of dollars in funding from more affluent nations to support climate-vulnerable countries in adapting to climate change and transitioning to renewable energy, the agreement lacks binding obligations for wealthy nations to augment their contributions.

Aside from the main climate agreement, the event saw notable achievements in climate finance, as the EU and the UAE spearheaded efforts to secure over $700 million for the Loss and Damage Fund, while the Green Climate Fund received historic pledges of $12.8 billion from 31 countries, and the Adaptation Fund garnered $1.3 billion from 26 countries. 

However, the conference faced scrutiny for insufficient support for climate adaptation, weak language on mitigation efforts, and a lack of attention to food-related emissions and systems. 

Crucially, COP28 also failed to clinch a deal on Article 6 carbon markets. This lack of progress leaves the UN carbon markets in a continued state of flux but avoids the adoption of subpar rules that could hinder climate ambition, enable questionable trading and facilitate greenwashing, the very things that plague the highly fragmented voluntary carbon markets today.

How KYOTO is catalysing carbon markets post-COP28

The initial COP28 proposal for carbon markets featured a minimalist framework, affording countries extensive control over reporting rules, the trading of potentially flawed carbon credits, and unlimited revocation of previously approved credits, risking double-counting. The final draft lacked restrictions on the amount of "confidential" information countries could designate in reports for current and future trades under Article 6.2. COP28 set out to clarify key aspects of Article 6.4, but no progress was made on the authorisation of units, the interconnection between 6.2 and 6.4 registries, and eligibility criteria for emissions avoidance and conservation enhancement.

Fundamentally, the lack of progress on Article 6 means that the voluntary carbon market continues to be the only way to mobilise carbon finance, which in turn enhances the need to demonstrate high levels of integrity when it comes to carbon credits. 

Kyoto is a solution that improves the entire lifecycle and supply chain of carbon credits. Built on the first native layer one blockchain that is carbon negative with unique and scalable financial instruments utilising decentralised finance applications. Kyoto has already made impacts in developing nations, such as Kenya and Tanzania.

Kyoto’s new digital carbon standard improves the financial tools currently accessible to project owners, as well as improving all of the inherent issues currently associated with carbon credits in the voluntary carbon markets. Kyoto brings real-world assets to its blockchain. 

Prior to COP29, Kyoto plans to engage in numerous carbon market working groups and present a technology showcase, leveraging data gathered for broader participation and discussion to help make the supply of high-quality carbon credits more accessible to the market.

For more information on the Kyoto Blockchain, explore our Greenpaper. Get the latest updates on our news page and subscribe to our monthly newsletter.

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