Located in the climate change hotspot of the Himalayas, Nepal has been one of the leading countries in the global South in recognising climate change-related threats to its economy and reacting upon these threats with relevant actions. Unprecedented variability in rainfall patterns, incidence of frequent floods and droughts, heat waves and the rapid melting of glaciers pose major risks to the country (CGIAR, n.a.), impacting its social and economic development. More recently, the 2017 floods have spotlighted Nepal’s high vulnerability to climate change and weather-related disasters (NPC, 2017). To highlight the relevance of climate change, recent studies have estimated the cost of inaction in sectors such as water and agriculture to be around NRs 35 billons (around USD 308 million, based on the conversion rate: NR 1= USD 0.0088) per year (Mahat et al., 2019). To this end, it becomes imperative to reduce climate risks for key economic sectors by enhancing adaptive capacity.

The Government of Nepal has emphasised climate change as one of the main challenges for the country’s development (CGIAR, n.a.), which points towards the need to integrate it into national development plans and systems. Several policies reflect the government’s commitment to respond to and combat the negative impacts of climate change by integrating relevant actions in national plans and the national budget (ibid.) – including Nepal’s 2011 Climate Change Policy (CCP), which puts the role of climate finance at the center of such responses.

Currently, climate finance is at an early, formative stage in Nepal. The GoN adopted the climate budget code in 2012 to track budget allocation to climate-related plans and programmes of the government. The budgeting is conducted at the programme-level across 11 ministries and a relevance score is assigned, ranging from highly relevant to neutral. To further disaggregate the budgeting from programme level to activity level, the government is currently piloting a new approach to improve the accuracy of the climate budget as well as its relevance in the agriculture sector, which is expected to build further trust in the climate budget tracking process and enhance its focus. This case study examines Nepal’s efforts to track its climate budget flows and thus assess the effectiveness of the same on overall development, with a focus on the agriculture sector.

Nepal´s approach to tracking climate relevant budget constitutes a good practice as it is highly transparent,driven by the government, and has involved an effective dialogue with key stakeholders, including civil society.