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Laws and Policies

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Carbon Trading Regulation

Nepal has launched its Carbon Trading Regulation under the country's Environmental Protection Act, paving the way for participation in international carbon markets.

Institutional structure:
Designated National Authority (DNA): The Ministry of Forest and Environment. Its Secretariat is the Climate Change Management Division.
Steering Committee: The highest policy body, chaired by the Secretary of the Ministry will be responsible to provide policy guidance, coordination, and facilitation regarding carbon trading
Carbon Trading Management Committee: Responsible for project evaluation, prioritization, and providing technical support. Chaired by the Chief of the Climate Change Management Division

Carbon Trading Process:
Key steps for the Proponent (Project Developer):
I. Project approval phase:
Project Idea Note (PIN) Preparation: The Proponent prepares a PIN (using Schedule-2), including the project outline, estimated emission reductions, benefit-sharing mechanism, and buyer information.
II. PIN evaluation and consent:
The Proponent submits the recommended PIN to the Ministry of Forest and Environment (MoFE). The MoFE's Management Committee evaluates it for alignment with the Nationally Determined Contribution (NDC) and Sustainable Development Goals (SDGs) and checks for duplication. The Ministry approves the PIN and issues a letter of consent to prepare the Project Document (PD) within 15 days of receiving the recommendation.
III. Project Document (PD) preparation:
The Proponent prepares the detailed PD (using the Schedule-3 format) within one year of receiving the letter of consent.
IV. PD evaluation and approval: The PD is evaluated by the Management Committee and, if found suitable, is recommended for approval. The Ministry (MoFE) then formally approves the PD.

Corresponding Adjustment:
The DNA shall executre the corresponding adjustment for trades by the Government of Nepal, the provincial government, the local level, or the private sector.

Fees structure:
A one-time fee is required upon PDD approval:
Micro-Project ( 20,000 tons/year): 25,000 NPR
Small/Medium Project (20,000 to 60,000 tons/year): 50,000 NPR
Large Project ( 60,000 tons/year): 100,000 NPR

National Contribution: 5% of the total verified carbon credit must be counted towards Nepal's NDC.

Carbon Credit Sales Fee: The Proponent must pay 100 NPR per ton for the carbon credits remaining after the NDC contribution is deducted.

Valuation:
Pricing is determined by:
- Bilateral agreement with a foreign government
- Bilateral negotiation with other international entities
- Open competitive bidding for public bodies
- Market price negotiated between buyer and seller for the private sector/voluntary market

Benefit Sharing:
The benefit-sharing follows the plan in the Project Document. Additionally, the private sector must allocate 10% of the profits to the Government of Nepal.
The case of national forests are governed by the prevailing federal law on forests.

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