Key Policy Issues on Climate Finance in Nepal and Way Forward

Ek Raj Sigdel

Climate Finance Management – Vision

Climate change financing issue has been evolved as one of the hot topics in Nepalese climate change policy discourse these days. The government of Nepal has shown commitment of bringing upto 80% climate marked budget to local climate vulnerable communities especially poor, women and dalit groups through Climate change policy, 2011 and Nepal Adaptation Program of Action (NAPA), 2010. In the present context when about 1/4^th of the total population are under poverty line add most of them prone to climate induced water hazards. In this context, on the one hand the climate change fund should help addressing livelihood need of the climate change vulnerable communities and on the other should contribute in to maintain sustainable healthy ecosystem. To see the “win-win” situation between poor and environment, it is needed to develop and strengthen climate change vulnerable community and environment linked finance policies, institutions and programs. Moreover, there should be a synergy among funding channeled by different stakeholders through harmonising it under a common umbrella of national and local government.  To ensure the proper use of the climate change budget, the service providers should be more effective and efficient, climate change vulnerable communities should be empowered to voice their demand at local development planning process and there should be well functional accountability and transparency mechanism at the interface of duty bearers and right holders.

Climate Finance Policy Issues

There are some issues that are hindering for effective management of climate finance in Nepal. First, policies related to Climate finance are to be compete with other issue pressing agenda of the government such as poverty reduction, infrastructure development and state restructuring. Even there is no policy distinction between environment and climate change at local level. Second, there is inadequate human and institutional capacity for accessing, consumption and disbursement of climate funds from international to local level. Third, there is a cumbersome decision making process for transferring climate budget from central government to local bodies. Fourth, standard modality of financing at local level yet to explore. Fifth, local government has inadequate capacity to administer and manage 80% climate finance due to lack of clear understanding and skills. Fifth, there is no effective, transparent and accountability mechanism in place to minimize fiduciary risks. Sixth, there is no mechanism of tracking funding, expenditure and reporting on performance of climate finance. Finally, prevailing climate finance knowledge transfer system is very ineffective in Nepal.  

Future Course of Action

To ensure 80% budgets expenditure at local level it is important to carry out the following activities in priority basis:  

1.       Introduce and strengthen result based planning and budgeting system at local level

2.       Include climate financial indicators into Minimum Condition and Performance Measures (MCPM), Local Body Resource Mobilization Guidelines (LBRMG), Procurement Regulations, National Monitoring and Evaluation Guidelines

3.       Introduce and upscale performance based climate resilient grant

4.       Create more demand for climate budget from climate vulnerable communities through better integrating LAPA into local level planning process & link climate expenditure with poverty alleviation

5.       Develop a common coordinating framework for Development Partners, Government and Private sectors 

6.       Prepare and implement fiduciary risk reduction action plan to ensure transparency, accountability, single treasury system and web based reporting

7.       Prepare and implement capacity development strategy –

·         Strengthen environment management special fund (EMSF)

·         Prepare District – CPEIR & expenditure tracking guidelines

·         Introduce climate change budget code at local level

·         Enhance capacity of MoF, Line Ministries, FCGO, DTO

·         Ensure availability of adequate staff in the field

·         Prepare and implement communication strategies to aware stakeholders