Nepal Drafts Operational Guidelines to Mobilize Climate Finance

The Government of Nepal is preparing new policy guidelines to streamline and effectively mobilize climate finance from various domestic and international sources. According to the Ministry of Finance, a draft of the "Climate Finance Mobilization Procedure 2025" has been prepared with the aim of enhancing the country’s access to and utilization of climate-related funds.

These funds originate not only from climate-specific financing mechanisms established under global frameworks like the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement, but also from bilateral and multilateral partners, including carbon trading revenues. The guidelines define both priority sectors and implementation areas for climate finance mobilization in Nepal.

Priority Areas for Climate Finance

The draft places top priority on investments aimed at addressing loss and damage resulting from climate change. Other key focus areas include climate adaptation, emission reduction, and carbon trading.

To determine project prioritization, several criteria have been outlined. These include the proportion of grant funding in total project cost, alignment with national systems, project scale and impact, sustainability, visibility of outputs, geographical balance, and project location in climate-affected areas.

The draft also addresses improving Nepal’s access to international climate funds. Accredited or implementing agencies will be required to submit concept notes for priority-listed projects to the Ministry for endorsement before applying to such funds. However, any project proposed for joint implementation across multiple countries will not be eligible for priority status under the current procedure.

Once a request is submitted, the Ministry must provide a decision regarding fund submission or endorsement within seven working days. For projects selected under Nepal’s country allocation, the implementing agency must submit the concept note to the Ministry within three months of selection. In exceptional cases, an extension of up to three months may be granted. Failure to submit within this period may result in reallocation of funds to alternative projects.

Shared Climate Fund and Fragmentation Control

The draft also introduces a provision for establishing a shared climate fund to prevent fragmentation and duplication in climate finance mobilization. This centralized approach aims to ensure coordinated management and use of funds across sectors.

Conditional Grants for Provinces and Local Governments

At the sub-national level, climate finance will be distributed as conditional grants. Allocation will be based on factors such as climate risk exposure, performance in local adaptation planning, and past climate-related interventions. The Ministry will form a task force to recommend fund allocation, which will then be distributed accordingly.

The guidelines also include provisions for facilitating private sector access to climate finance. In such cases, recognized implementing entities must submit private sector project proposals to the Ministry for approval before funds can be mobilized.

Growing Need for External Climate Financing

According to Shyam Prasad Bhandari, spokesperson for the Ministry of Finance, the draft emphasizes loss and damage, climate adaptation, emission reduction, and carbon trading as core priorities. He noted that Nepal's internal resources alone are insufficient to cope with the growing impact of climate change, necessitating increased access to external funds.

Although Nepal contributes little to global emissions, Bhandari highlighted the country’s vulnerability, including drying water sources, increased flooding and landslides in mountainous areas, changing rainfall patterns, and the rapid melting of Himalayan glaciers. The Ministry aims to finalize the draft after incorporating feedback from relevant stakeholders.