Development and environmental economics in Nepal: Forest restoration, carbon mitigation, and livelihoods

Gopal Prasad Tiwari

Nepal currently faces a critical juncture where its economic ambitions and environmental challenges converge.Despite being a small, mountainous country, it is among the world’s most climate-vulnerable nations. Rising temperatures, erratic rainfall, biodiversity loss, and forest degradation threaten ecosystems and livelihoods, particularly in the fragile mid-hills and Himalayan regions. At the same time, poverty, unemployment, migration, and rapid urbanization are reshaping socio-economic dynamics. In this context, integrating development and environmental economics is not just desirable but essential for effective, evidence-based strategies.

Forest restoration has become a cornerstone of Nepal’s climate approach, supported by strong community forestry institutions and increasing engagement with global carbon markets. Across the country, communities, local governments, and private stakeholders are restoring degraded lands, promoting natural regeneration, and strengthening ecosystem services. Nepal is advancing carbon trade initiatives—including REDD+ and voluntary carbon market projects—to link restoration with climate finance and local welfare.

As Sir Partha Dasgupta, Founder of SANDEE, has emphasized, natural capital—forests, rivers, soil, and biodiversity—is the foundation of human well-being, and sustainable development requires managing these resources to meet present needs without compromising the future.

With guidance from institutions like ICIMOD and SANDEE, Nepal is well-positioned to conduct rigorous research, inform policy, and promote ecosystem restoration as a strategy that supports economic prosperity while maintaining environmental balance. Speaking about his affiliation with SANDEE, Prof. Dr. Bishwambher Pyakuryal, President of the Nepal Economic Association, highlighted that SANDEE was initially housed within IUCN, where he played a pivotal role in its establishment. He also contributed significantly to launching the Master’s program in Environmental Economics at Tribhuvan University around 25 years ago.

The ICIMOD/SANDEE international conference brings together SANDEE-affiliated countries—including Afghanistan, Bangladesh, Bhutan, China, India, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka—to share research and knowledge.

A key objective of the conference is to assess the economic foundations of forest restoration as a climate mitigation pathway, including evaluating the costs, benefits, and co-benefits of restoration initiatives and measuring the carbon sequestration potential of natural climate solutions. Understanding these economic dimensions is crucial for ensuring restoration efforts are both financially viable and environmentally effective.

Another focus is evaluating the impacts of Nepal’s restoration programs on forest conditions and household welfare. Nepal’s community forestry system, watershed restoration projects, and private-sector plantation initiatives provide unique opportunities to identify best practices and inform policy decisions. The agenda also includes exploring climate finance, blended finance, and investment streams. REDD+, voluntary carbon markets, IDRC-supported research, and the UN Decade on Ecosystem Restoration offer pathways to secure sustained, equitable financing for restoration and carbon mitigation, which requires strong governance and institutional capacity.

Strengthening the linkage between research, policy, and livelihoods is central. Integrating economic analysis with local needs allows restoration strategies to reduce poverty, enhance climate resilience, and provide long-term incentives for communities to conserve and manage forests. Expected outcomes include generating evidence-based insights for policymakers, scaling effective restoration models, and deepening understanding of carbon mitigation and nature-based solutions. Impact evaluations, remote sensing, and household surveys will support rigorous assessments of ecological and social benefits.

Strengthening national and regional research networks is another critical outcome. SANDEE’s platform enables Nepali researchers to collaborate with regional and global experts, enhancing the quality and relevance of environmental economics research. Increased visibility of Nepal’s environmental challenges and innovative solutions, such as community forestry, landscape restoration, and carbon-credit pilots, can attract investment and policy support. According to Mr. Buddhi Sagar Paudel, Director General of the Department of National Parks and Wildlife Conservation, the government remains committed to restoring ecosystems for improved livelihoods and sustainable resource management.

Enhanced engagement with communities and local institutions is essential. Emphasizing participation, equitable benefit-sharing, and traditional ecological knowledge ensures restoration efforts directly support rural and mountain communities reliant on natural resources.

Nepal must continue aligning restoration programs with national development plans, federalism frameworks, NDC commitments, and long-term low-emission strategies. Decision-making can be further strengthened by leveraging remote sensing, GIS, socio-economic datasets, and quasi-experimental evaluations to monitor and assess restoration outcomes effectively.

SANDEE has played a pivotal role in advancing research and policy on environmental management across the region. Working with ten affiliated countries—Afghanistan, Bangladesh, Bhutan, China, India, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka—SANDEE has supported studies on climate change, forest restoration, biodiversity conservation, and sustainable livelihoods.

Through capacity-building, policy engagement, and cross-country collaboration, SANDEE has enabled these nations to design evidence-based strategies, promote nature-based solutions, and integrate economic analysis into environmental decision-making, thereby strengthening regional efforts toward sustainable development and ecological resilience.

Nepal’s success in forest restoration is rooted in its strong community forestry system. Strengthening benefit-sharing mechanisms—including payments for ecosystem services (PES) and equitable carbon revenue distribution—ensures local ownership and long-term sustainability. Mobilizing climate finance through a strategic mix of public funds, private investment, and international climate mechanisms, while maintaining transparent governance, is critical for scaling efforts.

Enhancing collaboration and policy engagement among universities, think tanks, communities, and government agencies fosters evidence-based policies and innovative restoration practices. Addressing challenges such as gendered impacts, mountain ecosystem vulnerabilities, governance bottlenecks, cost-effectiveness, and long-term carbon permanence is equally important to ensure resilient and inclusive outcomes.

Forest restoration in Nepal sits at the intersection of environmental conservation, climate mitigation, and rural development, driving sustainable development. Supported by rigorous research and inclusive policies, it enhances resilience, strengthens livelihoods, and contributes to global climate goals. SANDEE’s 25-year legacy provides a strong platform to advance research, collaboration, and innovative solutions for Nepal’s sustainable and ecological future.

(Dr Gopal Prasad Tiwari is Secretary General at Nepal Economic Association)