Nepal, a nation highly vulnerable to climate change despite its negligible contribution to global greenhouse gas emissions, is actively seeking international compensation for climate-induced losses while simultaneously relying on borrowed funds for its own climate adaptation and green development projects.
The country, which contributes approximately 0.04 percent to global greenhouse gas emissions, ranks fourth globally in terms of climate change risk and was the ninth most affected country by climate disasters between 1999 and 2018, according to Germanwatch’s Climate Risk Index 2020. This paradox highlights a significant challenge for Nepal on the global stage, as it advocates for grant-based climate justice.
Nepal has formally requested 20 million US dollars in climate compensation from the Loss and Damage Fund, a United Nations climate change fund established to assist developing countries most affected by climate impacts. However, securing these funds has proven difficult.
Rising Costs and Devastating Impacts
The financial burden of climate change on Nepal’s budget has escalated significantly. The climate change budget increased from Rs 85.64 billion in the fiscal year 2074/75 to Rs 688.38 billion in the fiscal year 2079/80. During this period, the federal government contributed an average of 70 percent, with local and provincial governments contributing 22 percent and approximately 8 percent, respectively.
Despite these allocations, expenditure remains low. In the current fiscal year 2081/82, only 13.73 percent of the total budget allocated for climate change adaptation, amounting to Rs 1.34 billion, was spent by the end of Poush (BS).
The devastating impact of climate change was recently underscored by a catastrophic flood in Bhote Koshi, Rasuwa district, which occurred on Bhadra 4, 2083 (BS). This single event caused an estimated Rs 700 billion in physical damage, affected approximately 1.6 million people, and resulted in the deaths of over 1,400 individuals, with more than 5,500 still missing, according to the National Disaster Risk Reduction and Management Authority (NDRRMA).
Policy and International Engagement
Nepal adopted its first National Climate Change Policy in 2067 (2010 AD) and the National Climate Change Policy, 2076 (2019 AD) is currently in effect, aiming to guide risk reduction, resilience building, and green development. A draft of the National Climate Policy, 2083, is currently undergoing consultation with civil society and stakeholders, who are advocating for it to be timely, inclusive, participatory, rights-based, and effective.
The country’s per capita carbon emission rate has seen a six-fold increase, rising from 0.0873 tons in 1994 to 0.5360 tons in 2024. Despite this, Nepal continues to participate actively in international climate forums, including the Conferences of the Parties (COPs), since ratifying the UNFCCC in 1992, the Kyoto Protocol in 1997, and the Paris Agreement in 2015. President Ramchandra Paudel led Nepal’s high-level delegation to COP29 in Baku, Azerbaijan, from November 11 to 22, 2024.
Nepal aims to increase the share of climate-responsive budget in its total allocation to 20 percent by the fiscal year 2085/86 (2028/29 AD), up from the current approximately 6 percent. The 16th Plan, which commenced in Srawan 2081 (BS), will prioritize environmental protection, pollution control, climate resilience, disaster risk reduction, and green economy promotion.
Challenges and Future Outlook
Critics argue that the current draft of the National Climate Policy, 2083, does not adequately prioritize climate justice, confining it mainly to international advocacy. There is also a lack of clear direction on how to mobilize necessary climate finance beyond international loans and grants, including domestic financial systems, green investments, and carbon finance.
Nepal also faces challenges in developing bankable green projects and lacks the institutional capacity to effectively utilize available international finance, hindering its access to and mobilization of global climate funds and investments. Furthermore, the country currently does not track climate budgets and expenditures at the local level, nor does it tag spending on activities with negative climate impacts. An effective system to track international financial flows and private investments in climate-related activities is also missing, impeding transparency and accountability.
Nepal has set a target of achieving net-zero carbon emissions by 2045 and aims to enhance adaptation capacity and resilience by 2050 through its National Adaptation Plan (NAP). The Loss and Damage Fund, expected to be operationalized at COP28, is anticipated to address economic and non-economic losses from climate change in vulnerable developing countries like Nepal.
