Nepal’s entry into this initiative marks a significant milestone, not only as the first in Asia but also as the first country to offer correspondingly adjusted carbon credits under the LEAF framework.

In a groundbreaking move for global environmental efforts, Nepal has become the first Asian country to ink a major agreement with the LEAF Coalition, unlocking up to $55 million in climate finance to combat deforestation and bolster forest conservation. The deal recognizes Nepal’s decades-long success in community-led forest management and positions the Himalayan nation as a leader in high-integrity carbon markets.

The Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition is a pioneering public-private partnership aimed at halting tropical deforestation through large-scale financing. Launched in 2021, it brings together governments from Norway, the United Kingdom, the United States, and the Republic of Korea, alongside more than 30 multinational corporations, including tech giants like Amazon, Apple, Google, and Meta. Coordinated by Emergent, a US-based non-profit, the coalition focuses on mobilizing funds for jurisdictional REDD+ (Reducing Emissions from Deforestation and Forest Degradation) programmes, which emphasise verifiable emission reductions at a national or sub-national level.

Nepal’s entry into this initiative marks a significant milestone, not only as the first in Asia but also as the first country to offer correspondingly adjusted carbon credits under the LEAF framework. These credits could potentially be used in international compliance schemes, such as Singapore’s carbon tax or the aviation industry’s CORSIA programme, paving the way for broader adoption of forest-based carbon trading.

Landmark Signing Ceremony in Kathmandu

The agreement was formalized during a high-profile event in Kathmandu, attended by over 100 stakeholders, including government officials, representatives from indigenous communities, local forest user groups, and international partners like the Environmental Defence Fund. Nepal’s ministry of forests and environment led the signing, reaffirming the country’s commitment to its jurisdictional REDD+ program.

Dr. Pem Narayan Kandel, secretary of the ministry of forests and environment, hailed the deal as a “reward for Nepal’s longstanding efforts in protecting and restoring forests.” He emphasized that the funds would support Nepal’s goals of maintaining 45 per cent forest cover by 2030 and achieving net-zero emissions by 2050, as outlined in its nationally determined contributions (NDCs) under the Paris agreement.

The ceremony highlighted Nepal’s unique model of community forestry, which has been instrumental in reversing deforestation trends. Over the past few decades, Nepal has increased its forest cover from around 39 per cent in the 1990s to over 45 per cent today, thanks to the involvement of more than 22,000 community forest user groups managing nearly 2.3 million hectares of land. This grassroots approach has not only conserved biodiversity but also provided livelihoods for millions in rural areas.

Emission Reductions Purchase Agreement

Under the emission reductions purchase agreement (ERPA), Nepal commits to reducing emissions from potential deforestation across three key provinces: Gandaki, Bagmati, and Lumbini. The deal allows for the sale of up to 4 million tonnes of verified emission reductions, valued at an estimated $40 million to $55 million, depending on performance metrics.

The financing structure builds on Nepal’s existing REDD+ framework, with Emergent acting as the intermediary to mobilise funds from corporate buyers. Importantly, the agreement includes safeguards for indigenous peoples and local communities, ensuring equitable benefit-sharing and recognition of their role in forest stewardship.

Experts note that this deal represents one of the largest performance-based forest finance opportunities in Nepal’s history. It also opens doors for compliance market integration, where credits can be used by airlines or governments to meet emission targets, potentially increasing their value beyond voluntary markets.

Boosting Sustainable Development and Biodiversity

The influx of funds is expected to drive sustainable forest management, prevent millions of tonnes of greenhouse gases from entering the atmosphere, and support local economies. Nepal’s forests, which span diverse ecosystems from the Terai lowlands to Himalayan highlands, are home to endangered species like Bengal tigers, one-horned rhinos, and red pandas. Enhanced protection could safeguard these habitats while addressing climate vulnerabilities, such as glacial melt and erratic monsoons that threaten agriculture and water security.

Community leaders have welcomed the initiative, viewing it as validation of their conservation efforts. Bharati Pathak, chairperson of the federation of community forestry users Nepal (FECOFUN), stated: “This agreement honours the hard work of forest-dependent communities and ensures they benefit directly from global climate finance.”

Internationally, the deal has been praised as a model for other forest-rich nations. Norwegian Ambassador to Nepal, Torun Dramdal, highlighted Norway’s role in the coalition, saying, “Nepal’s success demonstrates how collaborative financing can accelerate global deforestation goals.”

Challenges in Implementation and Community Access

Despite the optimism, experts warn of hurdles in ensuring equitable distribution and community access to funds. Past REDD+ pilots in Nepal have faced criticism for bureaucratic delays and inadequate consultation with marginalized groups, including indigenous Tharu and Chepang communities in the targeted provinces.

Abhaya Raj Joshi, a forest policy analyst, noted that while the agreement includes benefit-sharing provisions, “the real test will be in transparent implementation to avoid elite capture and ensure funds reach grassroots levels.” Additionally, verifying emission reductions requires robust monitoring systems, which Nepal is strengthening with support from UN-REDD and RECOFTC.

Environmental groups like Mongabay have pointed out that community access remains challenging, urging the government to prioritize safeguards and inclusive decision-making.