Understanding the Carbon Market Evolution

The transition from the Kyoto Protocol to the Paris Agreement marks a significant shift in how countries approach carbon emissions reduction. While the Kyoto Protocol employed a top-down model imposing strict targets on developed nations, the Paris Agreement adopted a bottom-up approach, allowing each country to set its own goals tailored to its unique circumstances. This change empowers nations, especially developing ones, to define their emissions pathways while focusing on achieving a collective target of limiting global warming to no more than two degrees. As a result, disparities have emerged in how countries formulate and implement their Nationally Determined Contributions (NDCs), emphasizing the need for effective financing mechanisms to support these endeavors.