Nepal’s Budget: Powering Production, Forgetting Efficiency?

Nepal’s recently announced Fiscal Year 2083/84 budget sends a clear message: the country is ready to invest in growth, infrastructure, energy security, and industrial development. With a national budget of NPR 2.124 trillion and NPR 114.02 billion allocated toward energy, water resources, and irrigation, the government has firmly identified energy as a top national priority. The target to add 1,040 MW of additional electricity generation capacity (670 MW through hydropower and 370 MW through solar installations) underscores Nepal’s long-term ambition to expand renewable energy production.

As someone working in engineering and sustainability, this is welcome progress.

•    Nepal needs reliable energy.
•    Nepal needs industrial growth.
•    Nepal needs infrastructure modernization.

Yet, a critical part of the conversation remains missing. While substantial attention has been given to boosting energy production and expanding infrastructure, comparatively little has been devoted to reducing future demand through efficiency, sustainable design, industrial modernization, and green infrastructure planning. And that matters more than we realize today. Energy Generation Alone Cannot Define Sustainability. Nepal is fortunate to possess immense hydropower potential. Few countries have the opportunity to develop a clean electricity system at such a massive scale.

However, sustainability is not just about producing more electricity. It is equally about reducing unnecessary consumption, improving industrial efficiency, designing smarter buildings, modernizing manufacturing, and creating infrastructure that remains resilient and adaptable for decades to come.

Globally, countries taking long-term sustainability seriously do not just invest in generation. They invest heavily in energy-efficient infrastructure, industrial decarbonization, green building systems, efficient manufacturing technologies, and broader climate resilience planning to ensure their economies remain competitive in a low-carbon future.

This is where Nepal’s policy across key institutions—energy, industry, urban development, and climate sectors—must evolve into a more integrated, long-term approach. Hydropower projects, transmission lines, and renewable energy investments are undoubtedly essential. But every megawatt generated must eventually be consumed by buildings, industries, hospitals, hotels, transportation systems, and urban centers.

If those systems remain inefficient, Nepal will have to continuously expand generation capacity just to compensate for avoidable energy losses. Energy efficiency itself should be viewed as a vital energy resource. The cheapest unit of electricity is the one that never needs to be generated. The Missing Conversation Around Industrial Decarbonization

As part of my ongoing independent research exploring energy efficiency and industrial decarbonization in Nepal’s manufacturing sector under conditions of geopolitical unpredictability, I have seen how energy security, industrial competitiveness, climate resilience, and economic stability are becoming deeply interconnected.

One reality is becoming increasingly clear worldwide :

“Future industrial competitiveness will not depend only on production capacity or labor costs. It will also depend on how efficiently industries use energy and how prepared they are for a lower-carbon global economy.”

The budget showed promise by adopting the Carbon Trading Regulation 2082 and establishing a dedicated carbon authority—representing some of Nepal’s most progressive recent climate-policy developments. By creating a framework for international carbon markets, Nepal has opened the door to climate finance, foreign investment, and carbon revenue.

Yet industrial decarbonization still receives limited mainstream policy attention. There is little meaningful discussion around industrial energy-efficiency targets, the electrification of industrial heating, waste heat recovery, energy management systems, or modernization pathways for energy-intensive sectors like cement, steel, brick manufacturing, food processing, and construction materials. Meanwhile, Nepal is actively encouraging industrial expansion.

That creates both an opportunity and a risk. If efficiency and modernization are integrated early, Nepal can build resilient, competitive, and sustainable industries for the long term. But if efficiency remains a secondary consideration during this growth phase, Nepal will face higher long-term operational costs, rising pressure on electricity demand, and greater difficulty adapting to future international climate regulations and sustainability-linked trade expectations.

Global supply chains are becoming carbon-conscious. Nepal must prepare for that reality.

Green Buildings

One area that stands out in the budget review is the limited attention given to green building policies and energy performance.
This is particularly concerning because Nepal is entering a period of major infrastructure expansion—including hospitals, industrial parks, hydropower-linked developments, tourism infrastructure, urban housing, and transport systems. Many of these structures will remain operational for 40 to 60 years, meaning the design decisions made today will lock in Nepal’s energy consumption patterns for decades.

Despite this boom, there is little policy emphasis on national green building standards, energy-efficient building systems, high-performance building envelopes, HVAC efficiency standards, or incentives for recognized sustainability certifications like LEED or EDGE. Having worked with high-performance glazing systems and building envelope coordination, I have seen firsthand how technical design directly influences operational efficiency. Small improvements in insulation, glazing, ventilation strategies, thermal management, and daylight optimization drastically reduce long-term energy demand.

Without stronger energy-efficiency planning today, Nepal may unintentionally build future infrastructure that consumes far more energy than necessary.

This is critical in rapidly urbanizing regions like the Kathmandu Valley, where cooling demand is expected to surge due to increasing urban density and climate-driven temperature shifts. If buildings are developed without energy-performance considerations, they will drive up operational costs, spike peak electricity loads, and place avoidable strain on transmission infrastructure.

Climate Commitments

The budget allocates NPR 12.31 billion toward the forest, environment, and climate sectors, which is encouraging. Nepal’s continued emphasis on renewable energy and electric mobility are also important steps.

However, climate action should not remain confined to environmental ministries. It must be deeply integrated into industrial policy, infrastructure planning, manufacturing modernization, urban development, and building design.

Nepal remains among the most vulnerable countries to climate change, despite contributing minimally to global emissions. Economic assessments suggest Nepal could face annual GDP losses of approximately 2.2% by 2050 if resilience measures remain insufficient. This was initially projected by the ADB in 2014 (“Assessing the Costs of Climate Change and Adaptation in South Asia”) and later revalidated in a joint 2021 report by the ADB and the World Bank (“Climate Risk Country Profile: Nepal”).
This is why energy efficiency and industrial modernization are not just environmental issues. They are core strategies for economic resilience. What Could Nepal Begin Doing Today? The encouraging reality is that Nepal does not need to wait until 2030 or 2045 to act. Even gradual policy measures introduced today could yield massive long-term benefits.

Some practical points

Create a National Green Building Framework : Establish energy performance guidelines and sustainability standards for large commercial buildings, hospitals, hotels, schools, and government facilities.

Launch Industrial Energy Efficiency Programs : Support manufacturing sectors with energy audits, process optimization, waste heat recovery, industrial electrification, and energy management systems.

Develop a National Industrial Decarbonization Roadmap : Identify priority sectors and establish phased targets for efficiency improvements and emissions reductions.

Prepare Green Public Procurement Policies : Mandate that major public infrastructure projects evaluate lifecycle energy performance alongside initial construction costs.

Establish Building Energy Benchmarking Systems : Measure and disclose energy performance in large public and commercial buildings to improve accountability and awareness.

Initiate Preparation for Future Carbon Markets and Climate Finance : Operationalize the Carbon Trading Regulation 2082 by preparing Nepal’s industries and infrastructure projects to attract climate-related investments and succeed in the emerging global low-carbon economy.

Looking Beyond Energy Production : Nepal’s current budget demonstrates clear ambition in energy generation and infrastructure expansion—an ambition that deserves recognition. But as the country develops, the next stage of national progress must focus on the intelligent use of that energy.

Hydropower will shape Nepal’s future : However, energy efficiency, sustainable infrastructure, green buildings, and industrial modernization will decide how strong, competitive, and sustainable that future actually is. As engineers, planners, policymakers, and citizens, we need to expand the conversation beyond simply asking: How much energy can Nepal produce?

Now, we must also begin asking: How efficiently and sustainably will Nepal use it?

Mr Upreti is a Mechanical Engineer licensed under the Nepal Engineering Council (NEC), an Engineer-in-Training (EIT) with Engineers and Geoscientists BC (EGBC) Canada, and a LEED Green Associate. His professional interests include energy efficiency, industrial decarbonization, sustainable infrastructure, and climate-resilient development.