Carbon Trade: Rules Obstacle


Initiated by Sustainable Prosperity Initiative Nepal (SPI-Nepal), a meeting of different stake holders agreed to establish an Association of institutions engaged in the voluntary carbon trade

Environment and Forest Rules have thwarted stakeholders’ attempts to enter the market, despite the significant interest they have demonstrated in participating in the voluntary carbon exchange. Except for bio-gas, Nepal has not been able to take advantage of the global carbon market despite having a variety of items to sell there.

The Environment Protection Act, 2019 (2076) and the Environmental Protection Rules 2020 serve as the legal framework for Nepal’s present carbon trading. The majority of the laws’ clauses make it difficult for parties to participate in the voluntary carbon trade.

Similarly, Climate Change Policy sets up Alternative Energy Promotion Center, which has initiated activities relating to Clean Development Mechanism (CDM) by establishing a Climate and Carbon Unit.

A meeting attended by over 12 different stakeholders, including representatives from NGOs, INGOs, the commercial sector, and hydropower companies, agreed to form an association to facilitate interaction with the government and to provide a unified voice.

They also agree to expand non-state actors’ access to Voluntary Carbon Markets. They shared their views on current carbon trade acts and regulations, as well as the formation of an association to increase lobbying on agendas (1) and (2).

Mohan Manandhar of SPI-Nepal moderated the discussion, which underlined the critical need for consistent information on carbon offset projects and market access procedures to the Voluntary Carbon Market. He stated that all stakeholders must take a unified stance on voluntary carbon trading.

Manandhar stated in his introductory remarks that there is a need to begin communication with the government in order to allow voluntary carbon exchange.

The lack of clarity in government policy on the Voluntary Carbon Market and power over carbon offset projects was highlighted during the discussion. The problem of double counting was discovered as a direct result of this uncertainty.

The decision was made to form an organization to further the goals of increasing non-state actors’ access to Voluntary Carbon Markets and assisting the government in modifying legislation and regulations related to carbon project development and carbon trade.

Purushottam Ghimire, SPI Nepal’s Senior Advisor, will handle the contact with the government for a year.

Obtain the services of a consultant/researcher to prepare a note explaining the concerns and interventions required.

UNDP would lend its support to debates and seminars aimed at involving the government at all three levels. Once the note is finalized and the government has agreed on the aim of the association, articles will be published on VCM.

Following the completion of the consultant’s note, a planning meeting to create the framework would be held. Developing recommendations and revising present legislation to define the roles of state and non-state actors. Three months following the planning meeting, the events will take place.

The establishment of an organization to advocate for the inclusion of VCM concepts into Nepal’s laws and acts is a significant step toward increasing non-state actors’ access to the VCM.

In his remark, Purushottam Ghimire of SPI-Nepal stressed the norms and provisions that need to be revised. He also remarked that the regulations should be interpreted consistently.

One of the key outcomes of the COP26 climate summit in Glasgow was the approval of Article 6 – the Paris Agreement’s rulebook governing carbon markets.

Carbon markets incentivize climate action by enabling parties to trade carbon credits generated by the reduction or removal of GHGs from the atmosphere, such as by switching from fossil fuels to renewable energy or enhancing or conserving carbon stocks in ecosystems such as a forest. It is estimated that trading in carbon credits could reduce the cost of implementing countries’ Nationally Determined Contributions (NDCs) by more than half – by as much as $250 billion by 2030. In other words, carbon trading could facilitate the removal of 50% more emissions (about 5 gigatons of carbon dioxide per year by 2030) at no additional cost. Over time, markets are expected to become redundant as every country gets to net zero emissions and the need to trade emissions diminishes.

The participation organizations include, Ridi Power Company, Practical Action, SAHAS Foundation, Ajummery Bikas Foundation , Renewable World, Urja Developers, UNDP, Spotlight, Sustainable Environment Foundation, SPI Nepal and Clean Cooking Alliance.

Despite the engagement of different groups, SPI-Nepal’s proposal has the potential to make voluntary carbon trading a reality