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The future for climate finance in Nepal

This report analyses the development effectiveness dimensions of climate finance in Nepal. It offers a forward looking perspective on how climate finance may be administered in the years ahead, focusing on the public financing component of climate finance and the role of international support. It reports that there is considerable complexity associated with different sources, agents and channels for climate finance. At the national level, there are six different channels through which climate finance might flow in Nepal. First, through a national entity specifically for climate finance; second, through traditional official development assistance (ODA) channels; third, through new and additional public finance from industrialised countries; fourth, through the emerging carbon market; fifth, through private sector investment; and finally, through resources made available through the national budget.

It reports that the new climate change policy in Nepal does not provide the detail required to define a climate finance framework. It also argues that direct access to international climate finance should have been established with the appropriate institutional requirements in place to demonstrate the necessary financial integrity, institutional capacity, transparency and self-investigative powers. The report further notes that the primary concern for Nepal should be the ability to demonstrate these attributes in determining the most appropriate institutional arrangements for managing global climate change funds.

The report gives the following recommendations:

  • A national vision for climate finance needs to be drawn up to guide the development of new and additional funding flows that will support climate change actions up to 2020 and beyond.
  • There is a need to move quickly from project delivery to a programmatic approach for public funding of climate change actions from international sources.
  • Government and its development partners should consider drawing up a Joint Financing Arrangement (JFA) for climate finance.
  • A separate arrangement for the provision of technical assistance to climate change programmes should be developed following existing national models.
  • There is much need to strengthen the existing structures in the short term and then to build further institutional capacity as resources permit.
  • There is a need to involve private sector actors in implementation as this will energise public policy engagement with the private sector at scale.
  • There is need for a wider government reforms to ensure efficient use of climate finance, in particular the further strengthening of the country’s public financial management system.
  • A climate finance sub-committee should be established to take forward the climate finance agenda and to act as a national discussion group on climate finance.
  • The possibility of tracking climate change public expenditure within the national budget should be explored with the Ministry of Finance.
  • The Government should create a public website to act as the national information hub on all climate change actions.
  • An early effort should be made to identify and record all international support for climate change actions undertaken within the country by NGOs.