Role of independent power producers in emission reduction

The Indrawati Hydropower Station, Nepal’s first private sector hydropower project that commenced operations in 1993, has conducted a study to assess its impact on carbon emissions reduction. The study revealed an annual reduction of 41,000 tons of CO2, 62 tons of SO2, and 46 tons of NOx, along with the substitution of 1,616,141 tons of charcoal. Despite these significant achievements, the project has not been able to secure compensation from the climate fund. Given the evolving context, it is evident from the statistics that private hydropower projects, such as the Indrawati Hydropower Station, have made substantial contributions to reducing carbon emissions. Projects of this nature should be eligible for facilities from the climate fund.

In recent times, climate change has impacted Nepal's government-private hydropower projects and power plants. Two critical aspects need consideration in this context: evaluating the reduction in carbon emissions by projects promoted by the private sector and assessing the loss and damage caused by climate change. A comprehensive research effort is essential to collect relevant data. The Independent Power Producers Association of Nepal (IPPAN) and hydropower promoters should take needful initiatives in this regard. This is because income generation from hydropower should not only be their focus; attention must also be given to how a sustainable economy can contribute to the national economy, aligning with the United Nations’ call for adopting Sustainable Development Goals within the next decade.

Since 1992, the private sector has invested or is preparing to invest Rs 1,800bn in the hydropower sector. Despite challenges like the lack of transmission lines, hydropower promoters have invested a substantial amount of money in projects with a combined capacity of 42,000 megawatts. Apart from equity investments by the private sector, banks have contributed approximately 60 percent of this fund. This also includes investments by the state-owned power utility and the general public through public offerings. This confirms that energy production, a cornerstone of the green economy, has significantly contributed to reducing carbon emissions. The direct and indirect investment of citizens has increased, making a noteworthy national contribution to the critical issue of hydropower.

Examining global statistics on carbon emissions from excessive fossil fuel use and industry, the world emitted about 37.124bn tons of carbon in 2021, as per Our World in Data. Nepal’s carbon emissions during the same year were only about 0.014bn tons, accounting for 0.038 percent of the total global carbon emissions. Despite this negligible negative contribution, Nepal bears the brunt of global climate change effects. The primary reason for the increasing carbon emissions in Nepal is the growing use of imported fossil energy. To achieve a sustainable economy and reduce emissions, it is crucial to transition to green and clean energy.

While COP28 participants remain divided on the phasing out of fossil fuels, Nepal, with the potential to produce affordable green hydrogen, can leverage its position. The fossil fuel reserves may deplete, but by storing green hydrogen, Nepal can attract global interest and investment in green technology development. Nepal annually imports petrol, diesel, and LP gas worth Rs 500-600bn. Replacing these imports with hydrogen fuel can contribute to self-sufficiency in iron and urea fertilizer production. Additionally, converting hydrogen into ammonia for export could boost Nepal's income and sovereign credit rating.

Nepal's neighboring countries, such as India and China, are significant importers of fossil fuels. India imports fossil fuel worth $160bn annually, and China relies heavily on gray energy. Nepal, despite its minimal contribution to emissions, faces environmental challenges due to industrial pollution in these countries. Nepal should exert pressure on developed nations to attract domestic and foreign investment for green technology and energy. The upcoming Nepal Investment Summit in April presents an opportunity to position Nepal as an attractive destination for green and clean energy investments. Conducive policies and laws should be established to facilitate businesses in this regard.

IPPAN’s role

While there was no prior preparation for participation in the COP28, we participated in the global climate conference. During COP28, we held discussions with key individuals and organizations, including those from Japan, China, India, the USA, the United Arab Emirates, and the European Union. Topics included information about climate fund operations, technology preparedness, and experiences in reducing carbon and using hydrogen equipment. A particular emphasis was placed on understanding the carbon fund’s payment process and how hydropower plants and energy projects can directly benefit from it.

Discussions also covered the unprecedented climate change-related damages incurred by various hydropower projects and power stations in Nepal’s eastern regions due to floods and landslides last year. Insights were gathered on claiming compensation for loss and damage, managing procedures, and fund operations.

It is crucial to ensure clarity on how Nepal’s private sector can directly benefit from climate funds received from developed countries through the World Bank and the Asian Development Bank. IPPAN, in collaboration with national and international agencies, should actively engage in discussions about the climate fund, payment for carbon emissions reduction, and the implementation of government action plans. IPPAN should also advocate for the representation of its officials in the Climate Change Mitigation and Adaptation National Implementation Plan chaired by the Prime Minister. Establishing a dedicated climate task force and coordinating with relevant entities will be instrumental in realizing these objectives.