Green economy in Nepal’s prospect: The path ahead

green economy
Photo: Unsplash/ Towfiqu Barbhuiya

Amid structural, economic and social transition, Nepal holds a comparative advantage to orient itself towards a green economy.

Nepal remains alarmingly vulnerable to climate change with limited coping capacities against climate-induced hazards. With the rapid increase in urbanisation, industrial spur and broadening production and consumption base, the shift to a greener economy is not only an inevitable alternative for sustainable use of natural resources and consumption patterns but also achieve the twin goals of economic growth along with environment-friendly development practices.

Though the agenda of the green economy is at the forefront in discussion and debates in the form of dialogues and seminars, no significant intervention has been in place to green the economic structure. Yet, opportunities are imminent.

Targets vs challenges

Nepal aims to graduate to a middle-income country (MIC) from the present status of lower-income country (LDC). To fulfil this objective of gaining the status of MIC by 2026, institutions of the government of Nepal have been focusing on improving human development, reducing poverty, enhancing accessibility to livelihood opportunities along tackling the vulnerability towards exogenous factors such as impacts of climate change and thereby induced disasters.

There is a challenge to combat the impact of the exogenous factor, i.e., climate change. The country despite having minimal emission of carbon at the global level is one of the worst victims of the alteration brought by climate change. To cope with the changing climate and various of its possible consequences, the government has formulated and approved a Climate Change Policy and developed a national framework on Local Adaptation Plans of Action (LAPA) and National Adaptation Plan of Action (NAPA). As means of preventive interventions, a low-carbon development strategy is under development.

Green economy as macroeconomic reform

The green economy as a broad macroeconomic reform agenda may induce various trade-offs in diverse economic parameters. It is often argued that in the course of greening the economic activities, the open unemployment problem may escalate as employment growth falls short of labour force growth. This remains a threat when more than 450,000 semiskilled labour force enters the job market every year along with the poverty rate standing at 25.16% and worsening inequality with a Gini coefficient of 0.49.

There is a deemed need for quantitative macro policy analysis on the impact of green interventions on employment in diverse sectors of the economy. Also, quantitative analysis and estimation of the size of the green economy and jobs are mandatory for further green reform planning.

green economy
Photo: Unsplash/ Visual Stories || Micheile

The nature of the Nepali economy with the predominance of agriculture and more than half the share of the service sector may not allow the replication of greening efforts of other manufacturing-based economies. With the nurturing manufacturing sector, green development strategy may pose a tradeoff between employment generation and increasing productivity. This would be more pronounced during the gradual shift of the workforce from the agricultural to the industrial sector.

This should be carefully analysed, and the tradeoff could be minimised through the choice of sectors in the economy that are employment-intensive and may absorb the mentioned threat. Nevertheless, the choice of patterns and tools of green interventions based on the ground realities of various sectors could direct the green growth.

Climate responsive budgeting and government expenditure

Climate responsive budgeting practice has been proved to be an effective tool to promote a green economy in various countries. Theoretically, Nepal has pursued this strategy. However, with a new decentralised governance system in place along with three tiers of government, an integrated guideline for drafting a climate-responsive budget could be an effective institutional move to green government expenditures at the grassroots.

On one hand, this could decentralise the greening effort and on the other hand, may lead to the incorporation of local indigenous nature-friendly knowledge and practices into action. With the booming entrepreneurship across the country, these local government agencies may play a significant role in promoting green entrepreneurship through related skill development, grants, and subsidies. The issues of transparency and accountability of government officials remain significant in this grassroots initiative.

Circular economy as a pathway to green reform

The popularity and success of the circular economy in various countries including China, Germany and the UK among others is another alternative pathway to green industrial practices. The shift from the linear approach of production-use-disposal to the more sustainable production process and management of residuals and unutilised items at the end of the production process not only minimises the use of non-renewable resources but also significantly reduce industrial emissions.

This concept is in the initial stage in Nepal, sometimes pronounced in the field of solid waste management. However, with effective planning and intervention, this option holds immense opportunity to integrate the various industrial production processes and achieve twin benefits of resource use efficiency and reduced production cost.

However, there remains the issue of practicality in the implementation of this model in Nepal. The starting point for this approach could be piloting integrated manufacturing practice in selected industrial areas and if successful and with the lessons learned, upscaling it to a new model of industrial areas based on a circular model.

Potential sectors for initial intervention

Nepal is predominantly an agricultural country, the agriculture sector contributing to a third of national GDP and almost two-third of employment. This could be the prime sector of green intervention in the sense it remains the potential sector of growth, commercialisation, trade opportunity and prerequisite sector for industrial growth. This sector is already green as traditional agricultural practices are less chemical and equipment-intensive.

However, the major challenge is greening the agricultural practices to enhance productivity to meet the needs of a growing population. The increasing use of chemical fertilisers, genetically modified seeds and fossil fuel-based agricultural equipment pose the threat to green practice. The identification and use of indigenous knowledge and practices, climate-resilient crop varieties and carbon-smart agricultural practices are way forward to green agricultural practices in Nepal.

Although Nepal is rich in water resources with immense potential in the hydroelectricity sector, Nepal’s energy need is mostly fulfilled through imported fossil fuels. Hydroelectricity power plant development remains a prime need towards greening the energy consumption pattern in Nepal. Moreover, Nepal has potential for other sources of renewable energy mainly, solar and wind energy. It is yet to conduct detailed research on the prospect of wind energy across the country and meet at least the local energy needs.

Photo: Unsplash/ Greg Rosenke

As Nepal is prioritising infrastructure development for quite some time and as an area of significant government spending, this sector is very much strategic for green economy reform. Infrastructure is also linked with other sectors of the economy. It is recommended that labour-based option in the infrastructure sector is greener as well as less costly than the equipment-based alternative.

The use of traditional and conventional labour-based approaches in irrigation, soil and water management, erosion control, sewage systems could be more effective to reduce the environmental externalities during infrastructure development.

Nepal has comparative advantages on green tourism with natural landscapes and biodiversity as major attractions. Nepal’s tourism sector is already green in many senses. Tourism is a significant employment-generating sector and with a sizable contribution to the GDP, promoting tourism and expanding tourist destinations is vital to creating green jobs. Nepal is popular for ecotourism with integrated conservation initiatives, thereby acting as a major source of foreign currency earnings which is greener than foreign earnings from other sectors of the economy.

However, haphazard infrastructure development along the tourist trails and the introduction of motor vehicles may do more harm than good. Strict provisions for environmental management, ranging from banning plastics and environment regulatory fees could promote the environmental obligation part of the tourism industry. Further, linking tourism with other associated sectors of the economy (for instance: agriculture, beverage, hotel, or garments) may enhance the gains from tourism as well as foster green practice across these sectors.

Transition to greener technology

An environment-friendly technological landscape is vital to promote green growth. Improvement in the technological landscape can direct the paradigm shift towards green jobs, green products, and minimisation of environmental problems like pollution and greenhouse gas emissions. However, the prime issue for developing countries like Nepal in their journey towards green technology remains the availability of sufficient finance. Meanwhile, this technological shift should also entail the goals of poverty and hunger reduction, food security, capacity building and livelihood support systems.


Nepal entails a better prospect and comparative advantage in its transition towards a green economy to lead the green growth that is sustainable for generations. The sectoral targeted intervention to green their products and services is vital to green the production and consumption practices across the economy. The prime concern is the selection of sectors of the economy for intervention that is in line with employment creation and that creates a broader impact to achieve the twin goals of economic growth and environmental conservation as well as efficient use of resources. The use of green technology and technology transfer across various sectors of the economy could jump-start the green economic reform.

Gelal is a researcher in various domains of development and particularly interested in environmental and inclusion issues along with topics of policy analysis. Upadhyay is an active environmentalist and meteorologist. He has been working as a development researcher and consultant for decades.

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