Nepal is located in a highly sensitive region from the perspective of climate change impacts. It is extremely vulnerable, facing major threats to its people, economy, infrastructure, and livelihoods. The most severe shocks include floods, avalanches, glacier melting, changes in the lifecycle of natural ecosystems, and dried-out water resources. As a nation with low contribution to global emissions but high exposure to climate consequences, Nepal has been struggling to address these challenges.
The federal government, along with sub-national governments, is primarily implementing climate initiatives through the Nationally Determined Contribution (NDC) 3.0 and the National Adaptation Plan (NAP). These two key policy documents guide efforts in line with climate-coded budgeting.
Through NDC 3.0, Nepal has committed to tackling climate change by 2035. The government has set targets of reducing emissions by 17.12 percent by 2030 and 26.79 percent by 2035. Federal and sub-national governments are focusing on renewable energy, electric vehicles, agricultural reform, forest and wetland conservation, and waste management. The NAP has been developed to help the country adapt to climate impacts in the short term (up to 2025), medium term (up to 2030), and long term (up to 2050). It aims to ensure informed planning, coordination, and implementation of adaptation actions at all levels of government, while integrating adaptation into policies, programs, and activities across society and ecosystems.
Nepal has planned programs in agriculture, water resources, disaster management, and health, applying principles of gender equality, social inclusion, and equitable transition across provinces and local bodies. The total cost of NDC implementation is estimated at US $73.74 billion, with Nepal contributing US $10.82 billion (14.68 percent) from its own resources and expecting US $62.92 billion (85.32 percent) from international climate finance. The adaptation program requires an additional US $18–20 billion. The NDC supports Nepal’s long-term strategy to achieve net-zero carbon emissions by 2045. International cooperation, technology transfer, and capacity building will be crucial in addressing climate challenges.
The planning and execution of NDC and NAP through budgeting at federal and sub-national levels reflect sensitivity to climate change. However, while local and provincial governments are sensitive in words, their actions remain weaker than expected. Nepal must increase its obligations and responsibilities under international treaties and accords while addressing local climate issues. Currently, all three tiers of government are attempting to mitigate climate change through budgetary and other measures. The fiscal year 2083/84 budget—the largest in Nepal’s history at Rs. 2124.34 billion—claims to prioritize climate change, green economy, and sustainable development.
Federal Government’s Budget
Growing a Green Economy
In FY 2083/84, 6.68 percent and 37.82 percent of the total budget were allocated for direct and indirect climate-related benefits. About Rs. 945 billion of financial resources were allocated under this budget. Compared to FY 2082/83, the share of direct benefit projects rose slightly from 6.54 percent, while indirect programs fell from 40.06 percent. The share of non-climate-coded budget increased from 53.40 percent to 55.50 percent. This indicates that while the overall budget has expanded, the proportion of non-climate-coded allocations is rising.
Provincial Governments’ Budgets
Provincial governments have also adopted climate-coded budgeting. In FY 2083/84, Sudurpashchim Province allocated the highest share of directly beneficial projects at 45.13 percent, while Bagmati Province allocated the lowest at 2.37 percent. Karnali Province allocated 21.69 percent, Madhesh 16.64 percent, Koshi 14.72 percent, Gandaki 12.13 percent, and Lumbini only 4.17 percent.
For indirect benefit programs, Gandaki Province leads with 63.62 percent, while Madhesh has the lowest at 11.78 percent. Sudurpashchim, with the highest direct benefit, allocated 38.39 percent to indirect programs and only 16.49 percent to neutral projects—meaning 83.51 percent of its programs are climate-sensitive.
Bagmati Province, despite suffering significant physical and cultural damage from climate change, shows weak climate sensitivity in its budget, with 79.10 percent of programs failing to address climate issues. It must prioritize infrastructure, cultural heritage, and urban resilience. Gandaki Province, meanwhile, has expanded its climate-sensitive commitments.
Key Focus Areas
Agriculture, Forestry, and Environment
The federal budget has prioritized water conservation, pond construction, erosion control, and sustainable water cycles in highly affected regions. The REDD+ program has been expanded to include carbon mitigation and disaster risk reduction. Policies must also address soil degradation and forest loss, which impact agriculture and livelihoods.
Biodiversity and Human-Wildlife Conflict
Federal and provincial budgets have attempted to address human-wildlife conflicts, particularly in Chitwan, Banke, Bardiya, and high mountain areas. These conflicts often link to agriculture and have caused significant human and material losses. Current programs to protect habitats and food sources remain insufficient.
Green Jobs and Community Engagement
Budgets have adopted strategies to create green jobs through scientific forest management, eco-tourism, non-fossil forest production, and herb cultivation. These initiatives aim to reduce climate impacts, increase community income, and improve living standards. Governments have prioritized forest, environment, water conservation, and climate adaptation. However, challenges remain in implementation, equitable participation, and managing internal climate finance.
Conclusion
Federal and provincial budgets demonstrate political will and policy direction in addressing climate change. Policies focused on energy and the green economy, along with equitable participation, are positive steps. Significant investment in climate adaptation is encouraging, though many programs lean more toward adaptation than mitigation. Mobilizing domestic resources, expanding access to international finance, and engaging the private sector are essential for Nepal’s long-term climate goals. Strong institutional capacity, transparent implementation, equitable community participation, and political commitment will be key to success.
(The author is an economist and expert on public policy and planning. He is a former member of the Lumbini Provincial Planning Commission and co-founder of Initiatives for Equitable Earth. He can be reached via email at skoli@equitable.earth).
