The term ‘Nationally Determined Contributions’ (NDCs) might sound like an abstract policy framework to some, but it is the beating heart of the Paris Agreement, adopted in 2015. This international treaty, ratified by nearly all nations, aims to combat climate change by keeping global temperature rise this century well below 2.0 C above pre-industrial levels, with efforts to limit it to 1.5 C. At the core of this ambitious goal are the NDCs, which are essentially each country’s pledges to reduce greenhouse gas emissions and adapt to the impacts of climate change.
The term ‘Nationally Determined Contributions’ (NDCs) might sound like an abstract policy framework to some, but it is the beating heart of the Paris Agreement, adopted in 2015. This international treaty, ratified by nearly all nations, aims to combat climate change by keeping global temperature rise this century well below 2.0 C above pre-industrial levels, with efforts to limit it to 1.5 C. At the core of this ambitious goal are the NDCs, which are essentially each country’s pledges to reduce greenhouse gas emissions and adapt to the impacts of climate change.
Governed by Article 4 of the Paris Agreement, NDCs are unique in that they are not a one-size-fits-all prescription. Each nation sets its own targets, taking into account its economic capacity, development priorities, and environmental challenges. This flexibility reflects the principle of “common but differentiated responsibilities and respective capabilities” (CBDR-RC), a cornerstone of international climate negotiations. The beauty of this framework lies in its adaptability, allowing countries to craft their contributions based on national contexts while being part of a collective effort to mitigate climate change.
Countries are required to submit updated NDCs every five years, ensuring a progression in ambition, scope and aligning with the latest scientific advancements. This iterative process acts as a ratchet mechanism, intended to push global efforts toward achieving the Paris Agreement’s goals. However, while the framework is robust on paper, its real success hinges on implementation, where the interplay between energy policies, economic structures, and environmental priorities becomes critical.
One of the most complex yet promising aspects of the Paris Agreement is Article 6, which introduces market-based mechanisms to facilitate emissions reductions. Article 6.2, in particular, allows countries to engage in cooperative approaches, including the transfer of Internationally Transferred Mitigation Outcomes (ITMOs). These mechanisms create an opportunity for nations to collaborate in reducing emissions, effectively transforming the climate challenge into an economic opportunity. For example, a country that achieves emission reductions beyond its NDC commitments can sell these surplus reductions to another country struggling to meet its targets. It’s a system akin to trading commodities, but here the currency is carbon reductions.
This cooperative approach not only lowers the global cost of mitigating climate change but also encourages innovation and investment in green technologies. At COP29, a significant decision was made to operationalise Article 6.2 by establishing clear guidelines for transparency, accounting, and the avoidance of double counting in ITMOs. These guidelines are pivotal for building trust in the system, ensuring that every ton of carbon reduced is accounted for accurately and that the environmental integrity of the Paris Agreement is maintained.
For developing countries like Pakistan, this mechanism offers a dual advantage: it can attract foreign investment into green projects and provide a platform to monetise sustainable practices such as decarbonisation, reforestation, and methane capture.
NDCs are not merely about climate commitments; they represent an uncomplicated blueprint for integrating economic growth with environmental sustainability. Pakistan, for instance, faces the dual challenge of energy insecurity and economic constraints. Its heavy reliance on imported fossil fuels not only strains the national economy but also contributes significantly to greenhouse gas emissions.
Transitioning to renewable energy sources such as solar and wind can address these challenges by reducing dependence on imports, lowering emissions, and creating domestic employment opportunities in the green energy sector. Moreover, these actions can position Pakistan as a competitive player in the emerging global green economy.
The operationalisation of Article 6.2 at COP29 is a testament to the evolving nature of international cooperation, where markets and mechanisms incentivise reductions, and countries like Pakistan can monetise their environmental contributions
The evolving global trade system further underscores the importance of aligning economic policies with environmental goals. Mechanisms like the European Union’s Carbon Border Adjustment Mechanism (CBAM) exemplify how trade policies are increasingly being linked to environmental performance. Under CBAM, carbon-intensive imports are subject to tariffs, essentially penalising goods produced with high emissions. For Pakistan, whose exports include emission-intensive products like rice and textile, CBAM presents both a challenge and an opportunity.
To remain competitive in markets like the EU, Pakistani industries must adopt cleaner production methods and invest in energy efficiency, aligning their practices with the country’s NDC targets. Failure to adapt could result in lost market share, while proactive measures could open new avenues for growth and innovation.
The geopolitical landscape of climate governance adds another layer of complexity to this discussion. In 2025, the return of Trump-style policies in the United States leads to a withdrawal from the Paris Agreement, as was seen during his first term. Such a move would signal a retreat from global climate leadership and could undermine collective efforts to address climate change. It might also embolden fossil fuel-producing nations to resist the transition to cleaner energy sources. However, such challenges also present opportunities.
AUS withdrawal could galvanise alternative climate leaders like the European Union, China, and smaller nations committed to ambitious climate action. These nations could fill the leadership vacuum, driving global efforts toward a sustainable future. For Pakistan, this geopolitical shift could serve as a chance to align with emerging climate leaders, attract climate finance, and position itself as a regional advocate for climate-smart policies. By leveraging its vulnerabilities — from water scarcity to extreme weather events — Pakistan can make a compelling case for international support and collaboration.
The Paris Agreement’s reliance on NDCs marks a fundamental shift in global climate governance, moving from top-down mandates to nationally tailored solutions. The operationalisation of Article 6.2 at COP29 is a testament to the evolving nature of international cooperation, where markets and mechanisms incentivise reductions, and countries like Pakistan can monetise their environmental contributions. As the global trade system increasingly incorporates climate considerations, nations must adapt to these changes or risk being left behind in a rapidly transforming global economy. While geopolitical uncertainties like a potential US withdrawal from the Paris Agreement may create short-term disruptions, they also highlight the need for resilient and adaptable leadership.
Ultimately, NDCs matter because they are not just about reducing emissions; they are about reimagining the future of our planet. They represent a collective endeavour to integrate economic growth with environmental sustainability and to build a world that prioritises resilience and equity. For Pakistan, embracing this vision is not merely an environmental imperative but a pathway to economic renewal and global relevance in the 21st century. The stakes have never been higher, and the time to act is now.
To capitalise on this opportunity and make the domain of NDCs more attractive for the private sector, the government must adopt a multi-pronged strategy. First, establishing clear and consistent policies is essential to provide the private sector with the confidence needed to invest in green technologies and practices. Predictability in regulations, coupled with incentives for industrial decarbonisation, can create a conducive environment for private investment. Second, fostering public-private partnerships can unlock innovation and financial resources, enabling the development of large-scale projects like wind farms, solar parks, and green hydrogen production facilities.
Third, the government should prioritise capacity building by providing technical training and support to industries transitioning to cleaner production methods. This could include grants for technology upgrades and access to international best practices. Finally, engaging in international carbon markets through Article 6.2 mechanisms can allow the private sector to benefit financially from emissions reductions, making sustainability not just a moral imperative but an economic opportunity. By aligning national goals with global trends, Pakistan can turn its climate challenges into a driver of growth and resilience, creating a win-win scenario for the environment, the economy, and the private sector.
The writer has a doctorate in energy economics and serves as a research fellow at the Sustainable Development Policy Institute (SDPI). He can be reached at: khalidwaleed@sdpi.org and tweets/posts @Khalidwaleed