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Climate finance intertwined with broader development fortune

Climate impacts are escalating in the Himalayas, threatening ecosystems and livelihoods. Nepal’s proactive policies offer hope but highlight significant challenges in financing and coordination.

Climate catastrophes in the mountains have been escalating in scale, frequency, and intensity. Between 2017 and 2021, Nepal alone lost more than 2% of its Gross Domestic Product (GDP) to climate-induced disasters, and projections warn of a dire future, with Loss and Damage (L&D) surpassing 5% of GDP by 2030 and a staggering 13% by 2100.

Recent disasters in Nepal underscore the urgency of the crisis. On August 16, 2024, a glacial lake outburst flood (GLOF) in the Everest region swept away the village of Thame, displacing 135 people and obliterating infrastructure, including homes, a health post, a hydropower station, and bridges. Shockingly, the glacial lake responsible for this destruction was not even classified as high-risk. Out of 200 potentially dangerous glacial lakes in the region, only 5 are monitored.

Just weeks later, Nepal experienced its heaviest post-monsoon rainfall in 54 years, with 323 mm of rain falling in a single day. The floods and landslides triggered by the rain claimed 250 lives and caused economic losses exceeding $346 million, according to initial estimations by government agencies.

These events are predicted to intensify in the future due to climate change. Studies by the World Weather Attribution (WAA) indicate that such extremes are now 10% more intense and 70% more likely, exacerbated not only by global warming but also by local factors such as poor urban planning.

Alarmingly, even if global warming is contained to the 1.5°C target, the Hindu Kush Himalaya (HKH) region is warming disproportionately, with temperature increases of 0.3°C and 0.7°C projected in the HKH and northwest Himalayas, respectively. This phenomenon is known as elevation-dependent warming.

The stakes could not be higher. The Himalayas store the largest amount of frozen water outside the two poles, feeding ten major river systems that sustain two billion people. As high-altitude regions warm faster than the global average, these vital resources are under threat—not just from climate change, but also from regional pollutants like black carbon. If we fail to act, the cascading effects on ecosystems, economies, and communities will reverberate far beyond these mountains.

Policy and efforts in Nepal

Nepal has taken some positive steps toward translating climate commitments into actionable, ensuring some community-driven solutions. The country’s National Climate Change Policy (2019) pledges to allocate 80% of climate finance directly to the local level. This approach ensures that resources reach the communities most affected by climate change, empowering them to take proactive measures.

Further, Nationally Determined Contribution (NDC) aligns with the 1.5°C global temperature goal, reflecting an ambitious roadmap that includes a dedicated Climate Change budget code, gender-responsive strategies, and a target for net-zero emissions by 2045. Similarly, Nepal’s National Adaptation Plan (NAP) prioritizes 64 programs across 10 critical sectors to address climate vulnerabilities.

A cornerstone of Nepal’s adaptation strategy is the Local Adaptation Plan of Action (LAPA). The plan is being implemented through 753 local governments. This framework emphasizes community-based approaches to climate resilience, leveraging local knowledge and capacities.

One notable success story is Nepal’s Community Forestry (CF) program, which has restored forest cover to 45% of the country. These forests not only act as natural buffers against climate impacts but also sustain local livelihoods, showcasing the symbiotic relationship between environmental conservation and human well-being. At the heart of these initiatives is the recognition of the vital role played by local communities and indigenous peoples.

Obstacle in aligning with global framework

Nepal’s ambitious climate policies face significant obstacles in scaling their impact to align with global frameworks. The major challenge is the country is underfinanced and underprepared.

There is a wide funding gap. An estimated $47 billion is required to implement national and local adaptation plans by 2030, with 97% of this sum reliant on external sources. The global adaptation flow stands at $20 billion in 2021. The UNEP estimates that annual needs could soar to $387 billion. As per ICIMOD study in 2024, the situation could leave Nepal grappling with an 85% funding gap.

Even when funding is available, institutional limitations hinder its effective use. Nepal faces challenges in building institutional capacity, including technical skills, the creation of bankable projects, and overcoming fragmentation among its climate-related frameworks, such as NDCs, NAPs, and sector-specific plans. The absence of integrated, system-wide thinking further weakens the country’s ability to channel resources into impactful, cohesive action.

Additionally, many of Nepal’s climate risks are cross-boundary in nature, such as shared river systems and glacial lakes that affect neighboring nations. Addressing these challenges requires regional cooperation on data sharing, technology transfer, and knowledge exchange. Initiatives to derisk and depoliticize and decarbonization are vital for fostering collaborative solutions to shared vulnerabilities.

Without addressing these challenges and aligning our national efforts with international framework, Nepal’s efforts risk being underfunded and underprepared in the face of accelerating climate impacts.

Mitigation and adaptation

While mitigation and adaptation are fundamental to combating climate change, Loss and Damage (L&D) focuses on the unavoidable consequences of climate impacts. L&D  results from slow-onset events such as glacial melts, sea-level rise, and droughts, as well as rapid-onset disasters such as floods and storms. Many of these impacts are irreversible, underscoring the need for a comprehensive and well-integrated strategy.

Unfortunately, current responses to L&D remain fragmented and incremental, with limited integration into broader development programs. Our current approaches in humanitarian responses are not effective. The ongoing approaches need a paradigm shift. Priorities must be on urgency, agility, and responsiveness.

Long gestation periods frequently delay critical actions, rigid budget cycles inhibit adaptive responses to evolving needs, and resistance to practice of fungibility and process-obsessed transactional intermediaries leads to inflexible, process-driven interventions that prioritize bureaucracy over effectiveness.

Preparing for future climate shocks

It is a fact that climate disasters are growing both in scale and frequency. In such circumstances, an emerging consensus is required on different crucial spheres: coordinated plan of action, nimble decision-making processes, and flexible financing on standby. Pre-agreed, pre-financed, rules-based arrangements have proven effective in mitigating the chaos that often arises in the absence of prior planning. Where these proactive measures are lacking, responses to climate shocks remain disorganized and insufficient.

One critical area to prepare for the future climate shocks is legal undergirding and stronger capabilities of institutions. The measure demands stronger legal frameworks and enhanced institutional capabilities. Integrating climate and environmental agenda into mainstream development planning is essential for a cohesive and systemic response. For instance, institutions like the National Disaster Risk Reduction and Management Authority (NDRRMA), operating under the Prime Minister’s Office with direct disbursement authority to local governments, need to collaborate seamlessly with sectors such as forestry, finance, agriculture, industry, and energy.

Additionally, effective climate action depends on empowering local capacities as communities and local governments are on the front lines of climate impacts, and their ability to respond effectively will determine the success of any national or global climate strategy.

[This article reflects the remarks made by Dr. Swarnim Waglé, Member of the Federal Parliament of Nepal, during panel discussions held on the sidelines of the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC).]