The CDM Transition — A Window Nepal Must Not Miss

One of the most time-sensitive issues in the current carbon market is the transition of projects from the Clean Development Mechanism (CDM) — the Kyoto-era carbon market — to the new Article 6.4 mechanism (also called PACM). The CDM transition window closed at the end of December 2025.

Nepal hosted several CDM projects — primarily in hydropower and clean cooking. Projects that successfully transitioned before the deadline are now operating under the new PACM framework, with access to Article 6.4 crediting. Projects that did not transition must re-register under the new mechanism from scratch, applying updated methodologies that are generally more stringent.

Nepal's Position in the Global Market

With the global Article 6 rulebook now finalized, Nepal's Carbon Trade Regulation 2082 enacted, and an existing bilateral agreement with Sweden under Article 6.2, Nepal is better positioned than most developing countries to attract carbon finance. But being well-positioned and being competitive are not the same thing.

Strengths

• Existing Article 6.2 bilateral agreement with Sweden — active and authorized for ITMO transfers
• Named as a potential partner by South Korea for future Article 6 deals
• Prior Consideration Notifications submitted to the UNFCCC for Article 6.4 activities hosted in Nepal
• Carbon Trade Regulation 2082 provides the national legal architecture: DNA, corresponding adjustment, approval timelines, and benefit-sharing rules
• Strong natural capital base: forests, hydropower, and high clean cooking demand create diverse project pipeline
• NDC 3.0 (2025) includes sector-specific carbon market strategies across forestry, energy, and transport

Challenges

• MRV infrastructure and technical capacity remain limited — third-party verifiers operating in Nepal are few
• Foreign exchange and tax rules for carbon revenue repatriation are not fully clarified — a concern for international buyers
• Competition from more established carbon markets (Kenya, Indonesia, Brazil) that have deeper pipelines and more experienced developers
• Local government awareness of the carbon approval process remains low, creating bottlenecks at the recommendation stage
• Upfront development costs are high relative to local access to blended or concessional finance

Nepal's Carbon Opportunity by Sector

Not all carbon projects are equally well-positioned for Nepal's market. The table below maps Nepal's key sectors against the best available trading pathways and most likely buyer groups:

Clean cooking remains the standout opportunity for near-term transaction readiness. It combines immediate measurability, strong co-benefits (health, gender, SDGs), an existing regulatory home under Nepal's new regulation, and active buyer demand from European governments under Article 6.2. For a company like Laxmi Clean Tech, this convergence defines the strategic priority.