Nepal

Nepal’s current policies are 1.5°C compatible when compared to its fair share contribution. The “1.5°C compatible” rating indicates that Nepal’s climate policies and action are consistent with limiting warming to 1.5°C. Nepal’s climate policies and action do not require other countries to make comparably deeper reductions.

Nepal is off track when compared with modelled domestic pathways and needs to implement more stringent policies, for which it will need additional support. Current policies are also not sufficient to meet the lower end of its Nepal’s conditional target.

Nepal’s emissions excluding LULUCF increased 41.5% between 2010 and 2021 going from about 35 MtCO₂e to 50 MtCO₂e in that period. Under current policies, emissions are expected to increase 67% by 2030, above 2010 levels, reaching 59 MtCO₂e in 2030. To be on a 1.5°C compatible domestic emissions pathway, Nepal would need to halve its emissions - reducing them to 27-37 MtCO₂e/yr by 2030 and 18-23 MtCO₂e/yr by 2050 (Climate Analytics, 2021). As a Least Developed Country, Nepal would need significant international support to achieve this.

Despite the country’s emission growth, the country’s per capita emissions, excluding LULUCF, would go from 1.6 tCO₂e/cap in 2016 to 1.8 tCO₂e/cap by 2030, but will remain well below the world’s current average emissions per capita in 2017 of 4.8 tCO₂e/cap (Ritchie, 2019).

In October 2021, the government published Nepal's Long-term Strategy for Net Zero Emissions (LTS). It provides a timeframe and measures for achieving carbon neutrality by 2045 accounting for a sink in the LULUCF sector (Adhikari, 2022; Government of Nepal, 2021). There are two GHG mitigation scenarios: WEM (With Existing Measures) and WAM (With Additional Measures). The WEM scenario takes into account the plans and policies implemented and adopted up to 2020, as well as potential adoption in 2030 and 2050. The WEM scenario does not target carbon neutrality, while the WAM scenario does. The WAM scenario includes more ambitious and conditional targets, aiming to achieve carbon neutrality by 2045 (Government of Nepal, 2021).

The LTS includes two potential clean energy trade scenarios in combination with its net zero scenarios, which will drive Nepal to be carbon-negative significantly earlier than 2045. The government of Nepal argues that trading its clean energy surplus can offset significant carbon emission of neighboring countries and play a pivotal role in decarbonising Nepal’s economy.

Nepal is one of the leading countries that uses hydro as its main source of electricity generation. Since 2015, Nepal’s electricity generation has been 100% sourced from renewable energy, of which 99.87% comes from hydro (IEA, 2023). The government plans to expand its hydroelectricity as well as all types of renewable energy. In addition, Nepal plans to export clean hydropower to adjacent countries which it explains in the LTS (Havukainen et al., 2022).

Apart from hydro, Nepal is also rich in other renewables potential. In June 2022, the government of Nepal published the Nepal Energy Sector Synopsis Report, which defines Nepal’s renewable energy potential and its development. The potential of solar energy in Nepal is immense. Nepal has almost one million residential solar photovoltaic (PV) systems installed and is growing large utility-scale solar. However, Nepal’s massive potential in biogas and wind energy is underdeveloped. Scaling up renewable energy is crucial for Nepal to achieve its renewable energy target based on the 15th Five Year Plan (FY2020-FY2024) by as much as 12% of total energy consumption (Government of Nepal, 2018b).

In March 2020, the government published the ‘Kathmandu Valley Air Quality Management Action Plan-2020’ to reduce air pollution levels. It includes strategic plans to reduce emissions from transport and industry sectors (Himalayan News Service, 2020). This was also one of the targets listed in the NDC. Air pollution levels are still above the national air quality standards (CEN, 2020). Promoting alternative fuel sources would lead to better air quality and to improved human health (Baral & Thapa, 2021).

Nepal has pushed forward with its EV development policies in 2022. There are several fiscal incentives, i.e. for EV purchase and road tax exemption. In addition, EV imports increased greatly and a considerable number of charging stations have been installed.

The Covid-19 pandemic did not significantly impact Nepal’s emissions: its emissions for 2019 and 2020 were 48 and 49 MtCO₂e respectively. However, Nepal’s lockdown reduced the amount of particulate emissions or pollutants responsible for degrading air quality, due to vehicular movement restriction (Baral & Thapa, 2021).

Nepal had two rounds of lockdown periods and suffered a widespread disruption of economic activity, especially in service industries such as tourism, hospitality and aviation (World Trade Organization, 2020). Nepal’s economic activity has heavily shrunk since the pandemic. Exports and imports have significantly decreased, by 34.6% and 20.7% respectively, during FY2022 until January 2023. In addition, Nepal’s reduction in agricultural production led to a drop in foreign reserves and revenues and a further decline in GDP growth is expected (AIIA, 2023).

In Glasgow, a number of sectoral initiatives were launched to accelerate climate action. At most, these initiatives may close the 2030 emissions gap by around 9% - or 2.2 GtCO₂e, though assessing what is new and what is already covered by existing NDC targets is challenging.

For methane, signatories agreed to cut emissions in all sectors by 30% globally over the next decade. The coal exit initiative seeks to transition away from unabated coal power by the 2030s or 2040s and to cease building new coal plants. Signatories of the 100% EVs declaration agreed that 100% of new car and van sales in 2040 should be electric vehicles, 2035 for leading markets. On forests, leaders agreed “to halt and reverse forest loss and land degradation by 2030”. The Beyond Oil & Gas Alliance (BOGA) seeks to facilitate a managed phase out of oil and gas production.

NDCs should be updated to include these sectoral initiatives, if they're not already covered by existing NDC targets. As with all targets, implementation of the necessary policies and measures is critical to ensuring that these sectoral objectives are actually achieved.

• Methane pledge: Nepal signed the methane pledge at COP26. Agriculture is a key sector in Nepal and one of the highest emissions sources. In 2021, agriculture sector accounted for 54.2% of Nepal’s GHG emissions and methane made up 76.1% of agriculture emissions. Nepal regulates agriculture adaptations through Nepal’s Climate Change Policy 2019 which promotes transition to sustainable, climate-resilient food and agriculture systems. In addition, Nepal’s long-term strategy in waste sector has included promotion of methane recovery from landfills and methane generation from anaerobic digesters in wastewater treatment.
• Coal exit: Nepal agreed to the coal exit at COP26. Coal is not included in the NDC and a coal exit was not included in the LTS. Nepal stated in its second NDC it will adopt low emission technologies in brick and cement industries to reduce coal consumption and air pollution by 2030.
• 100% EVs: Nepal adopted the target to integrate full EVs at COP26. Nepal's 2021/22 budget outlines a plan to replace fossil fuel-based vehicles with EVs by 2031, and it also provides tax incentives for EVs. This plan has resulted in an increase in the import of EVs. Nepal is also developing charging stations for EVs.
• Forestry: Nepal has signed the Leaders' declaration on forest and land use at COP26. Through its LTS (2021), Nepal intends to increase forest cover to 45% by 2030.
• Beyond oil and gas: Nepal did not sign the beyond oil and gas pledge at COP26.

Energy sector emissions contributed about 30% to Nepal’s total emissions excluding LULUCF in 2021 (Gütschow, Günther and Pflüger, 2022). In the same year, about 91% of Nepal’s population had access to electricity. The Nepali electricity mix is dominated by hydropower, which accounts for nearly 90% of installed capacity and 99% of total electricity generation (Government of Nepal, 2014).

The total energy supply, on the other hand, is predominantly based on biofuels and waste, but with a growing share of oil since 2015. This is in conflict with one of Nepal’s NDC sectoral targets that aims to reduce its dependency on fossil fuels. Instead, the consumption of biofuels, waste, oil and coal have continued to increase steadily since 2015 (coal to a lesser extent) (IEA, 2020). On a positive note, Nepal’s second NDC has plans to increase clean energy trading with its adjacent countries.

The Government’s “white paper” on Nepal’s energy sector sets the target of generating 15 GW of electricity (Government of Nepal, 2018a). On top of this, the government marked the years 2018–2028 as the Energy Decade and will focus on the “development and expansion of hydroelectricity and all types of renewable energy to provide clean energy to all Nepali households within the coming three years and to avail electricity to all households per demand within the next five years” (Government of Nepal, 2018a).

In 2022, the cabinet revised how it will divide the share of power generation, where a 40-45% share will come from run-of-the-river projects while 20-25% will come from reservoir type projects. In February 2023, the Nepal Electricity Authority (NEA) signed power purchase agreements (PPAs) for 1.5 GW run-of-the-river hydropower projects. It is expected that the NEA will continue signing PPAs for run-of-the-river projects until they reach a cumulative 6.75 GW (Kathmandu Post, 2023c).

With abundant renewable energy resources, Nepal’s LTS aims to reduce emissions from the energy sector by using renewable energy and hydrogen technologies to power the industrial, commercial, and agricultural sectors. Hydropower plants and solar PV will generate most of electricity in the power generation sector.

Other strategic actions are to scale-up distributed energy resources (mini-grid, off-grid isolated wind, solar, micro-hydro, and biogas) and develop policy on regional power sector integration, VRE integration, and grid flexibility (Government of Nepal, 2021). For instance, Gham Power Nepal Private Limited has installed over nine microgrids and 2500 solar projects that cumulatively generate 2.5 MW of electricity (Gham Power, 2023).

The LTS outlines plans to export clean hydropower to adjacent countries (Havukainen et al., 2022), which has begun to be implemented: Nepal began exporting hydropower to India in 2021 (Poudel, 2021). Under the WAM or carbon neutrality scenario, emissions in the energy sector are expected to be 11 MtCO₂e in 2030 and 1.7 MtCO₂e in 2050 [GWP AR5].

The potential of solar energy in Nepal is immense. In 2022, almost one million residential solar PV systems were installed. It is also building large utility-scale solar, with some plants already operating. Around 1.35 MW of solar plants operating are managed by the NEA while around 21 MW is under IPPs. In terms of bioenergy, Nepal’s huge amount of biomass produced by livestock and agriculture activities makes biogas sufficient for large population. However, there have not been many biogas plants installed. The same issue goes for wind energy, which there has been no considerable development despite Nepal’s massive potential of wind energy (Government of Nepal, 2022a).

Currently, Nepal government is trying to attract foreign investment through its FDI (Foreign Direct Investment) policy. The industrial sector in Nepal is small but growing steadily. It plays a key role in job creation, economic growth, living standard improvement, and more. The manufacturing sub-sector accounts for 5.7% of GDP from industry.

Nepal’s emissions from industrial processes and product uses are currently low. Under the LTS’s WAM scenario, emissions in the industry sector are expected to be 2.9 MtCO₂e in 2030 and 1.6 MtCO₂e in 2050 [GWP AR5]. However, Nepal will need to decarbonise the industry sector due to the expected growth forecast. It is crucial for Nepal to increase renewable energy penetration and improve energy efficiency in the industry sector.

Nepal intends to switch to renewable energy and waste-related fuel and exchange raw materials such as limestone for the cement industry (Government of Nepal, 2021). In its FY 2022-2023 budget, the Government of Nepal intends to provide up to a 15% reduction on electricity bills of industries consuming electricity worth above NPR 100 million (ca. USD 820,000) (Nepal Economic Forum, 2022).

As a landlocked country, road transport in Nepal accounts for over 90% of the domestic movement of passengers and freight. Because of rapid urbanisation, rising incomes and increased road access in rural areas, the total number of registered vehicles increased significantly, along with GHG emission levels.

Nepal’s LTS contains strategic actions for the transport sector, including promotion of electric mass passenger transport, switching fuel to clean energy (electricity, fuel cells, synthetic fuels/biofuels in aviation), electrification in freight transport, and installation and expansion of charging stations (Government of Nepal, 2021).

The NDC included the plan to develop an electrical (hydro-powered) rail network (Government of Nepal, 2016). The 945 km Mechi-Mahakali Electric Railway is being developed, although it remains unclear when the railway will come into operation (CEN, 2020) There are some difficulties related to land acquirement and potential conflict with residents near the project area who feel aggrieved by the construction of the railway (Kathmandu Post, 2021b, 2021a, 2022).

There are several tax incentives and fiscal support measures by the government to promote EVs in Nepal. Private EV taxes for buyers are currently around ten times less than private petroleum vehicles due to rebates. EVs are also free of annual road tax for petrol and diesel vehicles (Foreign Policy, 2022). The government also plans to exempt 40% income tax for five years for a new industry of four-wheeler electrical passenger vehicles established for production or assembly (Kathmandu Post, 2023a).

Nepal made considerable progress on EVs in 2022. The Investment Board Nepal (IBN) performed a feasibility study for an electric Bus Rapid Transit (eBRT) on the Ring Road of Kathmandu Valley (My Republica, 2022). In the first seven months of FY2022/FY2023, the import of EVs increased by 61% compared to the same period in the previous FY (Kathmandu Post, 2023a). In addition, the Nepal Electricity Authority (NEA), has launched an effort to install 51 charging stations across the country (Online Khabar, 2022), of which currently NEA has around 50 operational charging stations distributed across Nepal (My Republica, 2023a). NEA plans to install a total of 500 charging stations by the next fiscal year end with collaboration of the private sector (My Republica, 2023b).

In 2020, the government launched a Bus Rapid Transit (BRT) project on the ring road of Kathmandu (Government of Nepal, 2020a). The implementation of a BRT system will reduce daily vehicular emissions, improve air quality and create a more efficient transit system (My Republica, 2021).

As one of the developing countries with the most rapid urbanisation, a massive addition of buildings is anticipated in the residential, tourism and hospitality, and commercial sectors for the next decade. In the last few decades, overall operational energy requirement in buildings has increased, mainly for heating and cooling. Nepal’s carbon footprint for the buildings sector is relatively large due to the use of high energy density materials (European Union, 2022).

Nepal launched the National Energy Efficiency Strategy in 2019. It consists of action plans to achieve its main goal of doubling the average improvement rate of energy efficiency in Nepal from 0.84% per year (in 2000 -2015) to 1.68% per year in 2030 (Government of Nepal, 2019). However, Nepal currently still has no standards, guidelines or regulations related to energy efficient building construction nor applications for existing buildings (European Union, 2022).

The majority of emissions in Nepal are non-CO₂ GHG emissions from the agriculture sector. In 2021 methane and nitrous oxide contributed to 70% of total GHG emissions, excluding LULUCF (Gütschow, Günther and Pflüger, 2022). The largest share of these emissions come from rice cultivation, enteric fermentation and agricultural soils (Government of Nepal, 2014). Nepal's fertiliser consumption grew by 17% from 87.3 kg/ha in 2019 to 102 kg/ha in 2020 (Knoema, 2020).

Some studies have been carried out to explore the potential to implement Climate Smart Agriculture (CSA) in Nepal, which would contribute to both mitigating and adapting to the effects of climate change (CIAT; World Bank; CCAFS and LI-BIRD, 2017). In 2020, Gandaki Province in Nepal launched the Chief Minister’s Environment Friendly Model Agriculture Village Programme (CMEFMAVP), which promotes climate resiliency and sustainable farming systems by using CSA (Relief Web, 2020). In 2021, Lumbini Province government in Nepal funded and managed a smart agriculture programme operating in 116 villages (Global Center of Adaptation, 2021).

Nepal’s LTS includes the agriculture sector and livestock in its decarbonisation strategy. Under its WAM scenario, emissions from the agriculture sector are expected to stay at 0.2 MTCO₂e from 2019 until 2050 [GWP AR5] (Government of Nepal, 2021).

In Nepal, land use and forests are a significant emissions sink. In January 2020, The Ministry of Forests and Environment launched the Integrated Landscape Management to secure Nepal’s protected areas and critical corridors (ILaM) with the aim of building national capacity and creating an enabling environment for cross-sectoral coordination to promote forest and landscape conservation (GEF News, 2020).

In 2010-2021, Nepal lost 2.75 kha of tree cover, equivalent to 1.49 MtCO₂ of emissions (Global Forest Watch, n.d.). In 2021, Nepal’s Ministry of Environment and Forestry sealed a USD 45m deal under the Emission Reduction Payment agreement (ERPA) aiming to reduce emission by 9 MtCO₂e in the Terai Arc Landscape (World Bank, 2021). Announced at COP26, the government intended to increase forest cover to 45% by 2030. The LTS highlights LULUCF as an integral part of reaching Nepal's ambition of net negative carbon emissions by 2050.

Nepal’s waste sector emissions contributed 7.5% (or 3.7 MtCO₂e) of its total emissions, excluding LULUCF, in 2021. This is a 17% increase compared to 2010 levels. Emissions mainly come from methane (Gütschow, Günther and Pflüger, 2022).

Nepal’s NDC's target is to reduce emissions by 0.26 MtCO₂e compared to BAU from wastewater treatment and faecal sludge management. Nepal’s LTS also covers waste sector strategic actions: methane recovery from landfills, incineration of waste for heat and power generation, and methane generation from anaerobic digester in wastewater treatment. These efforts are expected to reduce emissions by 0.7 MtCO₂e in 2030 under the WEM scenario and 1.6 MtCO₂e in 2030 under the WAM scenario (LTS).

In 2020, the government launched a waste management baseline survey report, aiming to produce baseline data and information for planning, monitoring and evaluation of the national development plans and programmes related to solid waste management.

Local governments in Nepal hold major responsibility for waste management. The report shows that municipal waste management is a major challenge. Most of the municipalities had resource constraints and demanded funds from the federal and provincial government, so it is crucial for the government to establish effective waste handling procedures and enhance institutional mechanisms (Government of Nepal, 2020c).

In 2020, the ‘Rehabilitation and Expansion Waste Water Treatment Plant‘ next to the Bagmati river, Kathmandu was finished. The system gathers around 3.24 million liters of sewage waste per day and discharges the treated water back to the rivers. This is equivalent to waste from three million people. However, the plant will not change the river status since only about 25% of the total sewage waste gets treated (Online Khabar, 2021).