https://www.spotlightnepal.com/2026/09/30/deliver-and-demand-strengthening-climate-finance-governance-nepal/
Introduction
While
addressing the 81st United
Nations General Assembly, Nepal’s Prime Minister called on the global
community that the climate finance mechanism remains grossly inadequate and that accessing the fund is a bureaucratic
maze. The United Nations has established financial mechanisms to provide
resources to developing countries for climate change mitigation and adaptation
activities. Loss and Damage, the Global Environment Facility (GEF), and the
Green Climate Fund (GCF) are the major climate-finance mechanisms. According to the United Nations Framework
Convention on Climate Change (UNFCCC), climate finance
supports climate change mitigation and adaptation actions. Based on submitted funding proposals, the governing bodies of climate-finance funds,
such as the GCF Board and GEF Council, approve financing for eligible projects
and programs in developing countries. Understanding climate-finance expenditure patterns
from the global to the national level is essential for effectively managing and
utilizing climate funds. However, Nepal lacks a consolidated analysis of
climate-finance expenditure in relation to global trends. This article
therefore synthesizes evidence on climate-finance expenditure, key enablers and
barriers, and strategies for improving the delivery and mobilization of climate
finance in Nepal..
Climate finance expenditure scenario
Climate finance is
about investments to undertake to transition the world’s economy to a
low-carbon path, to reduce greenhouse gas concentration levels, and to build
resilience of countries to climate change(Hong
et al., 2020). Climate finance
gaps are prevalent at both the global (Wabwile & Ondabu, 2025) and national
level (Dhakal & Pradhan, 2023). Even the available resources through the Green Climate Fund (GCF) and Global
Environment Facility (GEF) have not been effectively mobilized,
allocated, and utilized (Wabwile & Ondabu, 2025). Nepal’s Nationally Determined Contribution
(NDC) 3.0 estimates that approximately US$90
billion will be required for climate change mitigation and adaptation
through 2035 (Government of Nepal, 2025). Analysis of data from the Climate
Funds Update (2026) revealed that, as of February 2026, Nepal had 136 approved
climate-finance projects totaling US$428.62 million. The concerning issue is
that out of the total approved climate budget in Nepal, only 36.5% had been expended. Therefore, annual
investment must increase many times over, and rapidly, to achieve globally
agreed climate goals and initiate a truly systemic transition across global and
national economies (Buchner et al, 2019). Over and above, mechanisms for
effective delivery of climate finance need to be figured out at the
international as well as national level. The following sections have attempted to
identify key enablers, barriers, and recommend strategies for effective
management of climate finance in Nepal.
Enabler and barrier
Nepal has developed
a range of policies, institutional mechanisms, and financial-management
instruments to strengthen climate finance governance. According to the Ministry
of Finance (2026), Nepal is advancing climate-resilient development by
integrating climate finance into its ODA framework. The integration of climate
finance into development planning demonstrates the Government of Nepal’s
commitment to climate action. To enhance transparency and accountability of
climate expenditures, Nepal has prepared several key policy instruments,
including the Climate Change Budget
Code (2012), Climate Change
Financing Framework (2017), Climate
Public Expenditure and Institutional Review (CPEIR), covering FY
2015/16–2024/25, and NDC 3.0.
The Climate Change Budget Code has also been integrated into Nepal’s annual Red Book, providing a mechanism for
identifying and tracking climate-related budget allocations. Moreover, Nepal
has established climate-finance units and multi-stakeholder coordination mechanisms
at the federal and provincial levels, providing a foundation for effective
climate-finance management and utilization.
However, weak
institutional and governance systems constrain the effective and timely
delivery, disbursement, and utilization of climate finance at both
international and national levels. Wabwile and Ondabu (2025) identified bureaucratic delays, complex administrative
procedures, and fragmented governance as key global barriers to the
timely delivery of approved climate finance. At the national level, Dhakal and
Pradhan (2023) identified inefficiencies in Nepal’s institutional mechanisms as
one of the factors contributing to low climate-finance disbursement. Dhakal
& Pradhan, (2023) attribute weak
inter-ministerial coordination, limited technical capacity, and reliance on
international consultants, inadequate dedicated climate-finance staff, frequent
staff transfers, and unclear institutional roles under federalism as key
barriers for financial expenditure in Nepal. In addition, climate-finance
projects have also faced disbursement challenges due to cumbersome project-development procedures and lengthy cabinet approval
processes. Moreover, many
climate-finance projects focus on capacity development through workshops, seminars, studies, and other
“soft” activities. These activities may receive lower priority than
“hardware” infrastructure projects, potentially contributing to lower
disbursement of climate funds.
Recommendations
As
policy, institutional, and financial frameworks are already in place, the
Government of Nepal should focus its forthcoming efforts on translating these
policy instruments into effective action. The Government should reform and
simplify the delivery mechanisms for climate finance based on the importance
and urgency of interventions. In the immediate term, priority should be given
to vulnerable areas and communities in climate-finance allocation;
strengthening inter-ministerial and intergovernmental coordination and
clarifying roles and responsibilities at all levels; breaking institutional
silos through stronger sectoral engagement and cross-sectoral coordination; and
simplifying project approval and disbursement procedures to reduce bureaucratic
delays. In the medium term, Nepal should promote evidence-based decision-making
through improved research, data, and impact assessment; strengthen
institutional governance for timely, transparent, and effective climate-finance
delivery; and improve the transparency and accountability of climate-finance
tracking and reporting systems. In the long term, the Government should build
national technical capacity and ownership while reducing dependence on external
consultants, strengthen policy–implementation linkages through effective
intergovernmental coordination and collaboration, and ensure that climate
finance reaches vulnerable and underserved communities by strengthening their
participation in local development planning and decision-making processes.
Conclusion
Nepal’s
climate-finance challenge is not only a problem of insufficient international
finance; it is also a challenge of converting available and approved finance
into timely, effective, and accountable expenditure. Nepal should adopt a
two-pronged strategy to improve access to international climate finance while
ensuring the effective utilization of the national climate budget. Merely
advocating for increased access to international finance will not produce the
desired outcomes. Therefore, evidence-based advocacy at the global level,
combined with efforts to strengthen participatory, transparent, and accountable
climate-finance governance at the national level, is essential for effective
climate-budget execution. The Government of Nepal should therefore prioritize
implementing existing climate-finance frameworks by simplifying governance and
financial-management systems from the federal to the local level. Ultimately, a
simplified and effective climate-finance expenditure system could provide
useful lessons for other developing countries facing similar challenges.
References
·
Buchner,
B., Clark, A., Falconer, A., Macquarie, R., Meattle, C., Tolentino, R., &
Wetherbee, C. (2019). Global landscape of climate finance 2019.
Climate Policy Initiative.
·
Dhakal,
S., & Pradhan, M. (2023). Identification and prioritization of barriers to
access international climate finance for Nepal. Asia-Pacific Sustainable
Development Journal, 30(1),
·
Climate
Funds Update. (2026). Data dashboard. https://climatefundsupdate.org/data-dashboard
· Government of
Nepal. (2025). Nationally determined contribution (NDC) 3.0. Ministry
of Forests and Environment. UNFCCC
– Nepal NDC 3.0
·
Hong,
H., Karolyi, G. A., & Scheinkman, J. A. (2020). Climate Finance. The
Review of Financial Studies, 33(3), 1011–1023.
https://doi.org/10.1093/rfs/hhz146Ministry
of Finance. (2026). Development cooperation report 2024/25. Government
of Nepal. Development
Cooperation Report 2024/25 (PDF)
·
Wabwile,
W. A. E., & Ondabu, I. T. (2025). Funding climate action: A systematic
review of climate finance efficiency and impact. Journal of Economics,
Finance and Management Studies, 8(4), 2516–2524. https://doi.org/10.47191/JEFMS/V8-I4-49
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