Can Enhanced NDCs Prevent Economic Losses and Boost Global GDP?

April 1, 2025

In a world increasingly aware of the economic consequences of climate change, the question of whether enhanced Nationally Determined Contributions (NDCs) can prevent economic losses and bolster global GDP has become paramount. Accelerating efforts to curb global warming to 1.5°C above pre-industrial levels, in line with the Paris Agreement, could yield significant economic prosperity by mid-century. Research from organizations like the OECD and UNDP suggests that such proactive climate action could result in substantial global GDP gains, with both high-income and low-income countries experiencing remarkable growth. Conversely, a business-as-usual approach could lead to dire economic outcomes, underscoring the urgency of enhancing global climate initiatives.

The Case for Enhanced NDCs

Economic Benefits of Strengthened NDCs

The brief “Investing in Climate for Growth and Development: The Case for Enhanced NDCs” advocates for strengthening NDCs to achieve the Paris Agreement targets. The current emissions trajectories are inadequate, necessitating enhanced commitments to unlock rapid and substantial GDP growth. Enhanced NDCs could provide consistent boosts to the global economy, with projections indicating a potential 3% increase in global GDP by 2050. The benefits could extend further, with a possible 13% rise by 2100, showcasing the long-term economic advantages of aligned climate actions.

Failure to implement aggressive climate policies could delay private investments and reduce GDP by 0.75% as early as 2030. This reduction may seem modest in the short term, but the compounded effects over decades could lead to catastrophic outcomes, including up to a third of global GDP vanishing by the end of the century. This stark contrast between proactive and reactive approaches to climate policies underscores the economic necessity of enhanced NDCs and aligned global behavior toward emissions reduction.

Potential Consequences of Inaction

The risks associated with insufficient climate action are significant and far-reaching. A failure to enhance NDCs and take necessary measures could result in severe economic losses due to climate-induced events. Inaction in this arena isn’t simply an environmental risk; it’s a profound economic concern that could stymie growth and destabilize economies worldwide. Projections indicate that by the turn of the century, the global GDP could be slashed by 33%, illustrating the high stakes involved.

Investments in enhanced NDCs represent an insurance policy against these prospective losses. By adopting stringent climate measures, countries can protect their economies from the ravages of climate change. Such investments ensure not only environmental sustainability but also economic stability and growth, avoiding the dire consequences of inaction. These measures are integral to safeguarding future economic prosperity and combating the intensifying impacts of global warming.

Urgency of Meeting NDC Submissions

Barriers to Timely Submissions

Despite the clear economic benefits, numerous countries have faced delays in submitting their NDCs. As of late February, a significant number of countries had missed the February 10 submission deadline, with only 18 out of 195 NDCs submitted. Factors such as shifting priorities, economic uncertainties, geopolitical tensions, and rising public debts have impeded timely submissions. This delay highlights the challenges and complexities associated with coordinating global climate actions amid various national interests and crises.

These delays, while concerning, also present an opportunity for countries. Those still consulting on their NDCs, including major players like the EU, China, Japan, Australia, Indonesia, and Mexico, have the chance to lead the next decade’s climate initiatives. Leveraging this moment to strengthen their commitments can set a precedent for global climate action, encouraging other nations to follow suit and emphasize the necessity of robust and timely NDC submissions.

Implications for Future Economic Stability

UN climate secretary Simon Stiell has raised concerns regarding the potential economic implications for Europe if strong global climate actions are not undertaken. He warned that failure could result in Europe’s economy shrinking by 2.3% annually by 2050. Such an economic downturn would have severe repercussions, leading to an eventual collapse of the EU economy. This stark warning emphasizes the critical need for proactive climate measures and the urgency of timely NDC submissions.

Enhanced NDCs must be submitted by September to be included in the UN’s next global synthesis report ahead of COP30. This timeline adds pressure on countries to finalize their commitments and underscores the interconnected nature of global economic stability and climate action. The forthcoming OECD/UNDP report, set for release in May, is expected to provide extensive insights into the economic rationale for enhanced NDCs, further reinforcing the imperative for strengthened climate policies.

A Scenario of Global Prosperity

In an era where the economic impacts of climate change are becoming increasingly evident, the question of whether stronger Nationally Determined Contributions (NDCs) can avert economic losses and significantly boost global GDP is crucial. Aligning efforts to limit global warming to 1.5°C above pre-industrial levels, as stipulated by the Paris Agreement, could lead to substantial economic benefits by mid-century. Studies from the OECD and UNDP indicate that proactive climate measures could result in notable global GDP growth, offering considerable advantages for both high-income and low-income nations. On the other hand, maintaining a business-as-usual stance risks severe economic repercussions, emphasizing the critical need for enhancing worldwide climate initiatives. Thus, ramping up climate action is not just an environmental imperative but an economic one as well, with the potential to foster economic resilience and sustainable growth globally.

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