World Bank approves $52 million credit for Nepal clean air and prosperity project to tackle industrial pollution

KATHMANDU: The World Bank has approved $52 million in concessional credit to support Nepal’s efforts to reduce industrial air pollution and strengthen national air quality management through the Nepal Clean Air and Prosperity Project, targeting some of the country’s most polluted regions.

The project aims to cut emissions of fine particulate matter (PM2.5)—one of the most dangerous forms of air pollution—by promoting cleaner technologies in industrial and commercial boilers and furnaces. It will focus primarily on pollution hotspots including the Kathmandu Valley, Nepal’s Terai region, and surrounding Himalayan foothill areas.

Air Pollution’s Heavy Economic Cost

According to the World Bank, air pollution has evolved into a major economic and public health challenge for Nepal. The institution estimates that pollution-related health costs and productivity losses currently cost the country more than six percent of its GDP annually.

David Sislen, Division Director for Maldives, Nepal and Sri Lanka at the World Bank, said the project will help protect millions of Nepalis from the harmful impacts of air pollution while also improving industrial competitiveness.

“Air pollution is not only a public health crisis but also a significant economic burden in Nepal,” Sislen said. “This project aims to protect millions of people from harmful pollution by helping Nepali enterprises adopt cleaner and more efficient technologies that also lower operating costs and support sustainable industrial growth.”

Cleaner Technology for Industrial Transition

As Nepal’s economy continues to industrialize, emissions from factories and industrial boilers are expected to become the largest source of air pollution in the coming years. The new project will therefore prioritize cleaner industrial production systems.

Through a combination of long-term financing, investment incentives, and technical assistance, the project plans to support around 400 industrial and commercial enterprises to adopt cleaner technologies such as:

Electric boilers and furnaces

Modern biomass boilers

Advanced emission control systems

These changes are expected to significantly reduce pollution levels while improving energy efficiency in Nepal’s growing manufacturing sector.

Martin Heger, Senior Environmental Economist for the South Asia Region at the World Bank, said the initiative addresses several barriers preventing industries from adopting clean technologies.

“The adoption of clean technology is limited in Nepal due to high upfront investment costs, restricted access to long-term financing, and limited technical capacity among enterprises,” Heger said. “By combining long-tenor financing with capital incentives and hands-on technical support, the project will help industries transition toward cleaner production.”

Government Implementation and Banking Support

The project will be jointly implemented by the Department of Industry under Nepal’s Ministry of Industry, Commerce and Supplies and the Department of Environment under the Ministry of Forests and Environment.

State-owned lender Rastriya Banijya Bank will serve as the handling bank for the clean technology financing facility, channeling financial support to participating enterprises.

Additional International Funding Support

In addition to the World Bank’s $52 million credit, the project will receive a $5 million grant from the World Bank Resilient Asia Program. The program is funded by the UK Foreign, Commonwealth and Development Office and the Swiss Agency for Development and Cooperation.

The initiative also forms part of the broader Regional Air Quality Management Program targeting the Indo‑Gangetic Plains and Himalayan Foothills—one of the world’s most severe air pollution hotspots.

With rapid urbanization and industrial expansion in Nepal, policymakers and development partners increasingly view cleaner industrial technology and improved air quality governance as critical pillars for sustainable economic growth and environmental protection in South Asia.