We Can No Longer Pursue Development Without Integrating Effective Climate Action

Nepal, despite its minimal contribution to global greenhouse gas emissions, ranks as the fourth most vulnerable country to global climate change. Recent studies indicate that the nation could lose 2.2% of its annual GDP due to climate change by 2050. This stark reality underscores the significant risks and challenges that the country faces, as well as the urgent need for effective climate action.

The recent extreme weather events have severely impacted lives, livelihoods, and infrastructure across Nepal. Communities are now at greater risk than ever before, and critical infrastructure designed to support them is being devastated. The immediate focus must be on relief and rehabilitation efforts, prioritizing the saving of lives and restoring connectivity.

Nepal must strengthen its disaster risk management systems to mitigate the impacts of geophysical and extreme weather events. This includes comprehensive risk identification, disaster preparedness with early warning systems, risk transfer, and risk retention strategies. Understanding multi-hazard risks is crucial given the country’s susceptibility to floods, landslides, and glacial lake outburst floods (GLOFs). Implementing robust multi-hazard risk assessments can enhance infrastructure planning, particularly in climate-sensitive sectors like hydropower.

It’s clear that development can’t continue without integrating effective climate action. International organizations, including the Asian Development Bank (ADB), are committed to supporting Nepal in addressing these challenges. This support includes initiatives and programs that enhance resilience and facilitate climate adaptation strategies.

Climate change-related disasters have already significantly affected various projects. The Melamchi Water Supply Project was commissioned in 2021, but severe floods and debris flows damaged its headworks. Conventional design approaches have proven inadequate to mitigate climate-induced risks, highlighting the need for a more holistic approach at project, river basin, and regional levels. This includes better data, research, and knowledge on climate impacts to inform effective planning and decision-making.

ADB supports Nepal through three key initiatives to strengthen climate resilience and sustainable development. First, ADB focuses on better assessing risks at the planning stage. For instance, the ‘Building Adaptation and Resilience in the Hindu Kush Himalayas’ (BARHKH) initiative helps address critical gaps in climate and disaster risk management using scientific data to make informed decisions.

Second, ADB aids policy and legal reforms to facilitate Nepal’s Green, Resilient, and Inclusive Development (GRID) strategy and its Nationally Determined Contributions (NDC). This involves integrating climate change and disaster risk management into national frameworks, ensuring sustainable development that aligns with climate goals.

Third, ADB works on attracting increased financing for climate-related projects through the establishment of the Nepal Green and Resilient Financing Facility (GREFF). This initiative aims to connect Nepal with global and regional funding sources for adaptation and mitigation, ensuring effective resource mobilization to tackle climate risks.

ADB’s implementation of the GRID strategy has faced challenges including institutional capacity limitations and securing adequate financial resources amid budget constraints. Ensuring seamless collaboration among stakeholders and translating national strategies into effective local actions also remains complex. Improvements are needed in monitoring and evaluation systems, currently hindered by limited data and reporting capacity.

Despite progress, Nepal still needs significant improvements in several areas to manage climate risks effectively. One area is disaster risk finance and insurance systems, which currently lack incentives for risk assessment and management. Innovative financing mechanisms like blended finance should be more utilized to attract climate finance. The private sector must play a greater role in resilience and adaptation efforts, supported by incentives such as reduced taxes or risk-sharing mechanisms.

Moreover, better engagement and investment from the private sector are crucial. Private sector actors in Nepal have not been adequately consulted regarding the country’s mitigation targets, representing a missed opportunity for investment in climate adaptation. Enhanced dialogue between the private sector and the government, coupled with a clear investment roadmap, can drive significant progress in climate adaptation, mitigation, and resilience.

ADB is increasing its engagement with the private sector for mobilizing climate finance in Nepal, focusing on projects with both development impact and commercial viability. This includes a technical assistance project to enhance Nepal’s banks’ capacity to mobilize resources for renewable energy and energy efficiency initiatives.

Under the GREFF, ADB aims to establish a financing window for private sector actors for climate adaptation and mitigation projects. This includes providing grants, concessional loans, and guarantees, alongside technical assistance to prepare and implement projects effectively.

Challenges in climate financing for Nepal include limited resources and access to large-scale climate-resilient infrastructure development. However, opportunities lie in leveraging private sector involvement through partnerships and better risk assessment and management. The government’s efforts, in collaboration with development partners, to secure large-scale climate funding need more coherence and complementarity to address these challenges effectively. The GREFF initiative seeks to reform the disintegrated approach towards accessing climate finance, aiming for a more structured and effective resource mobilization strategy.