Nepal Introduces Carbon Trading Regulation to Enhance Climate Financing Opportunities

Nepal's Carbon Trading Regulation, 2025, marks a significant shift in its climate financing landscape, despite its low greenhouse gas emissions. The new regulation enables market-based finance across sectors like forestry, agriculture, hydropower, and waste management.

Nepal has received $9.4 million from the World Bank for emissions reduction and has earned over $35 million through Clean Development Mechanism projects. The regulation supports bilateral trade agreements under the Paris Agreement, including a recent deal with Sweden and a MoU with ProClime of India for renewable energy certificates.

Carbon credits could generate up to 1% of Nepal's GDP, aiding infrastructure investment without increasing public debt. However, administrative hurdles and the need for robust Monitoring, Reporting and Verification systems remain challenges. Lessons from other countries highlight the importance of clear governance and community benefit-sharing to maximize opportunities in the emerging carbon market.