ABSTRACT

Nationally Determined Contributions (NDCs) are climate action plans that countries submit to the United Nations Framework Convention on Climate Change (UNFCCC). They are central to the implementation of the Paris Agreement. At the UN climate negotiations in Paris in 2015, countries agreed on a model for NDCs that marks a significant departure from existing policies. NDCs signify ‘contributions’ instead of the harder ‘commitments’ traditionally used in international treaties (Rajamani, 2015). They are near-universal, medium-term targets and ways to implement them are determined nationally. Priorities and ambitions are set in the context of the shared aim of the Paris Agreement of keeping the increase in global temperature to well below 2°C and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels (Article 2.1(a)) and ‘common but differentiated responsibilities and respective capabilities, in the light of different national circumstances’ (Article 4.3) (Rajamani, 2016). Pursuant to the Paris Agreement’s Article 4.3, countries ‘shall’ communicate successive NDCs every five years, representing a progression beyond the current NDC and reflecting its highest possible ambition. This process is crucial to raising ambitions (Rajamani, 2016) and effectiveness (Pauw & Klein, 2020). The Katowice Climate Package (decision 4/CMA.1) guides the NDC formulation, although it neither refers to costs nor finance. However, finance is crucial to NDC implementation, as most developing countries made their NDCs conditional upon climate finance provided by developed countries (Pauw et al., 2020). Sustainable finance receives little attention in NDCs. Of the first 124 new and updated NDCs, only nine mention Article 2.1(c) of the Paris Agreement (Pauw et al., 2022), which is about making finance flows consistent with the agreement’s mitigation and adaptation objectives. However, NDCs by both developed and developing countries do frequently refer to fiscal policy, financial regulation, and policy and public finance (Pauw et al., 2022), all of which are crucial for countries to implement Article 2.1(c) (Whitley et al., 2018). Even without elaboration on NDCs, sustainable finance can nevertheless be important for NDC implementation and for setting ambitions of future NDCs, both of which are nationally determined, if sustainable finance policies help to reduce emissions and/or increase resilience.