KATHMANDU, Dec 6: Nepal has opened a commercial pathway for carbon-emission reduction projects to generate direct revenue. A cabinet meeting held earlier this week formally approved the Carbon Trading Regulation, 2082 BS, a long-pending document stalled for the past four years, clearing the way for carbon trading in the country.
According to officials, this first-ever legal framework regulating and promoting carbon trading ensures, for the first time, the participation of business entities and the private sector. Until now, Nepal had attracted nearly NPR 5.5 billion (USD 40 million) through carbon-emission reduction projects under the Clean Energy Development Programme and the REDD+ Programme. However, every carbon-related initiative previously required separate cabinet approval, making the process cumbersome and inconsistent.
Under the newly approved provisions, government agencies, state-owned institutions, business organisations and private-sector entities may implement carbon-reduction projects by following a defined process. Project proponents will be able to directly enter agreements with third parties for carbon trading, with the government serving as a facilitator.
Formulated under Section 44 of the Environment Protection Act, 2076, the regulation will come into effect upon publication in the Nepal Gazette.
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At the initial stage, proponents must submit a Project Idea Note (PIN) outlining activities designed to reduce greenhouse gas emissions or enhance carbon absorption in sectors including agriculture, forestry and land use, energy efficiency, clean energy transition, renewable energy, transport, waste management, and climate adaptation and resilience.
Local governments are required to play an integral role in project management. Proponents must also document all processes related to carbon measurement, reporting, monitoring and verification in a detailed Project Design Document (PDD).
Actual emission reductions will be confirmed and validated by an independent third party in accordance with international standards such as VERRA, ART-TREES and the Gold Standard. Once all procedures are completed, proponents must obtain certification and submit it to the Ministry of Forests and Environment (MoFE). As specified in the regulation, project operators must pay NPR 100 per tonne of carbon credit to the Government of Nepal. The MoFE will then issue an authorisation certificate, formally enabling project owners to sell carbon credits on international and voluntary carbon markets.
The regulation also requires the Ministry—or an agency designated by it—to establish a National Carbon Registry to systematically record carbon-trading activities. Until such a registry is created, the Ministry may utilise the international registry available to Nepal under the Paris Agreement or related mechanisms to record carbon credits, sales and transfers.
Apart from mandatory payments to the government treasury—such as per-tonne emission-reduction fees and project charges—project proponents will be able to generate revenue from agreements with third-party buyers. Officials say this will help reduce greenhouse gases, contribute to cleaner environmental conditions, and open a new avenue for national income generation.
In addition to market-based mechanisms, the regulation also allows non-market carbon projects. Government agencies, provincial and local authorities, public institutions, NGOs and private entities may implement such projects for purposes including knowledge transfer, technology development, capacity-building, community benefits and environmental conservation.
For implementation, the Ministry of Forests and Environment will serve as the Designated National Authority (DNA). A Steering Committee chaired by the Ministry Secretary and a Carbon Trading Management Committee led by the Chief of the Climate Change Management Division will also be formed.
“This regulation is a major milestone for carbon trading,” said Joint Secretary Nabraj Pudasaini, chief of the REDD Implementation Centre at the MoFE. He stated that the regulation operationalises Articles 6.2, 6.4 and 6.8 of the Paris Agreement, to which Nepal is a Party, and activates the voluntary carbon market. According to Pudasaini, the regulation creates significant opportunities for private-sector participation, especially among energy-sector companies.
Furthermore, the Tropical Forest Forever Facility (TFFF), endorsed at the recently concluded COP30 in Belém, Brazil, has opened new avenues for mobilising international support for forest conservation. Pudasaini noted that projects under the LEAF Coalition—which aims to reduce emissions through increased investment and finance in the forest sector—could also generate revenue from carbon-credit sales. He added that during COP30, projects such as the 50 MW Middle Marsyangdi Hydropower Project and Bharatpur Metropolitan City’s waste-processing initiative were reported to be advancing efforts to earn income from carbon credits.
Carbon, Carbon Credit and Carbon Trading — Explained
According to the regulation, “carbon” refers to carbon dioxide, methane and nitrous oxide, which contribute to global temperature rise, and includes other greenhouse gases. A carbon credit represents one tonne of reduced carbon dioxide or an equivalent amount of other greenhouse gases. Carbon trading refers to the buying and selling of carbon credits under the mechanisms of the Paris Agreement or within the voluntary carbon market, in accordance with applicable laws and approved regulations.
