Clean Energy 101: Nationally Determined Contributions

What are NDCs, how are they determined, and why are they important?

The landmark Paris Climate Agreement is now in its 10^th year. It is also a pivotal year for climate action as it marks the deadline for countries to revise and submit their climate plans under that treaty. These plans are known as nationally determined contributions or NDCs. But what actually are NDCs, how are they defined, and why are they important?

With the UN announcing that the submission deadline has been pushed from February to September, it’s an ideal time to talk through these questions and explain the role of NDCs in the global energy transition as we watch how the next six months unfold.

What are NDCs and why do they matter?

Nationally determined contributions came about with the Paris Agreement, the global climate pact adopted in 2015 by 195 countries. This legally binding international treaty entered into force in 2016 with an overarching goal to stabilize the world’s climate system by limiting global temperature rise to 1.5°C and avoiding the worst impacts of climate change.

To do this, countries around the world need to set emissions reduction targets, and within the Paris Agreement, each country determines their own targets and level of ambition (i.e., how they will contribute to achieving the global goal). That is the “ND” in the NDCs: nationally determined. It’s not a top-down determination imposed on nations, but rather commitments in service of a greater international aim, which countries then translate into their own national law and policies. What is top down are the big goals that the NDCs feed into to: the temperature goal, the adaptation goal, and the financial goal.

The NDCs demonstrate the ambition of each country in the world as contributors to these collective targets.

How do countries determine their NDCs?

Formulating an NDC is both a technical and political exercise. Countries have to collect data, coordinate their ministries, consult stakeholders, and agree on how to translate the global goals into national targets, measures, and policies. They also must determine how much this will cost and how they are going to finance it.

It’s quite a heavy lift for many governments and especially hard for developing countries who might have less resources or support. That’s why some countries may be late in delivering their NDCs, and why NDCs may vary in quality. To clearly define NDCs, a country needs to have good data to inform their goals, and that data can be challenging to access or generate — or might simply not be available.

It’s also difficult to identify how much these measures would cost and where that money will come from. Lacking this information becomes a serious handicap, because global climate funds and multilateral and regional development banks use the NDCs to define their own operational priorities. In other words, NDCs effectively establish an action framework, send a signal to markets, and provide certainty to investors, while indicating how much will be done on countries’ own resources and how much international support is needed.

The more concrete and the more precise a country can be, the better country needs will be understood by all the investors and the financiers.

Which are the NDCs to keep an eye on?

The ones to watch are the members of the G20. Because the G20 are the big emitters currently or have rapidly growing emissions, their advancements in the energy transition will most benefit others, and as such their NDCs will be highly scrutinized. These countries also have made the greatest strides in clean energy adoption and can send strong signals to those markets.

The initial deadline for submitting NDCs was February 10th. Many nations missed that deadline, even those who have the most resources to put into formulating their submissions. With countries struggling to build out their NDCs, the deadline has been moved to September, although the UN expects many will submit in the coming months. (Brazil, who will host this year’s UN climate conference, COP30, has already submitted its NDC.)

For small countries where contributions to emissions are low, what is the primary purpose of an NDC?

For Small Island Developing States (SIDs) and Least Developed Countries, their contributions are more nuanced. Their contribution is, and has been, leading by example. Many SIDs have been committed to renewable energy for years, with a 2022 analysis by IRENA showing 32 out of 39 SIDS committed to or close to 100 percent renewable based energy systems. Their overall contributions to emissions may be minimal, but they demonstrate clearly both what is at stake for most vulnerable countries and what is feasible when it comes to resilient energy systems.

The NDCs play another important role: they are a way for smaller countries to express their need for financing, technology transfer, and capacity building — what’s known as “means of implementation.” They therefore help countries get the resources they need for implementing the projects that will help them survive and thrive on a changing planet.

What does a submitted NDC generally look like?

Initially, the NDCs were focused on mitigation only (i.e., cutting emissions) but many countries, especially from the Global South, now also have a heavy section on adaptation and building resilience and for some on loss and damage.

NDCs in the Global South include two types of financial needs for the implementation — the conditional and the unconditional. Unconditional targets are what the country commits to initiate and implement with their own resources. Then there are conditional aspects of the NDC, which means they are only implementable with additional support. Some countries have entirely conditional NDCs, and for others it’s a mix.

What’s next?

As soon as the NDCs are known, work begins on the ground to translate these broad directions and targets into policies, action plans, and concrete projects. Especially in the Global South, that means a tremendous need for technical assistance. We think of “technical assistance” as supplementing and building country capacity and expertise, so their projects reflect the priorities and needs of the country, and they have the knowledge and skill to implement those projects. It also means supporting countries in the very early stages of developing projects where the risk is highest, to make sure that the projects are technically sound for public and private investors to come in and fund the project.

The NDCs are about long-term choices that will catalyze social progress and economic opportunities. All of that will only be possible if there’s a concerted effort by the international community to make sure that everyone can benefit from the transition, with no one left behind.