Economic Impact Assessment of Climate Change for Key Risks in Nepal

This executive summary details a study requested by the Government of Nepal to estimate the economic costs of climate change across three key sectors: agriculture, hydroelectricity, and water-induced disasters. The study employs an iterative risk-management approach to assess current adaptation deficits and project future costs through the mid-century and beyond, emphasizing the high degree of uncertainty in climate projections.

• Current climate variability and extreme events already impose significant economic costs on Nepal, estimated at 1.5–2% of current GDP annually (approximately US$270–360 million/year in 2013 prices). These costs can rise to 5% or more during extreme years, with flood-related risks serving as the primary driver.
• The agricultural sector, which represents about one-third of GDP and three-quarters of employment, is highly sensitive to rainfall extremes. For instance, droughts in 2006 and 2009 resulted in direct losses of 1.9% and 0.4% of agricultural output, respectively.
• By the 2070s, net agricultural losses in Nepal are estimated at US$140 million per year, or roughly 0.8% of current GDP equivalent. These projections focus on maize, wheat, and rice, noting potentially high impacts in the Terai region, though they do not account for potential mitigation from irrigation or farm-level adaptation.
• Climate change impacts on the hydroelectricity sector are characterized by high uncertainty. One climate model projects a decrease in dry season flows, which would require an additional 2,800 MW of capacity by 2050 and increase investment costs by US$2.6 billion (present value). Conversely, a second model projects increased river flows, which would reduce investment costs by approximately US$170 million through 2050.
• Water-induced disasters are projected to increase in intensity and frequency by 20–100% by mid-century. Events that currently occur once every 10 years are expected to occur once every five years or less. The additional direct annual economic costs are estimated between US$100–200 million (0.6–1.1% of current GDP), with an upper estimate reaching nearly 3%.
• Overall, the study concludes that by mid-century, the combined future economic costs for agriculture, hydroelectricity, and water-induced disasters could add an equivalent of 2–3% of current GDP per year.
• To mainstream adaptation through 2030, the study estimates that a major increase in investment is required across the three assessed sectors, totaling US$2.4 billion (present value).

APA

Climate and Development Knowledge Network (2014). Economic Impact Assessment of Climate Change for Key Risks in Nepal. https://cdkn.org/sites/default/files/files/ids_nepal_brief7.pdf

Chicago

Climate and Development Knowledge Network. Economic Impact Assessment of Climate Change for Key Risks in Nepal. 2014. https://cdkn.org/sites/default/files/files/ids_nepal_brief7.pdf.

Wikipedia

{{cite report |author=Climate and Development Knowledge Network |title=Economic Impact Assessment of Climate Change for Key Risks in Nepal |date=2014 |url=https://cdkn.org/sites/default/files/files/ids_nepal_brief7.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climateanddevelopmentknowledgenetwork2014economic, author = {{Climate and Development Knowledge Network}}, title = {{Economic Impact Assessment of Climate Change for Key Risks in Nepal}}, institution = {Climate and Development Knowledge Network}, year = {2014}, url = {https://cdkn.org/sites/default/files/files/ids_nepal_brief7.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }