WB supports Nepal’s Clean Air and Prosperity Project to reduce air pollution from industries, strengthen air quality management

The World Bank’s Board of Executive Directors has decided to provide Nepal a $52 million credit for the Nepal Clean Air and Prosperity Project. This initiative is designed to significantly reduce air pollution and strengthen national air quality management systems by transitioning industries from traditional fuel-based systems to cleaner, electric, and more efficient technologies.

The project will help reduce fine particulate matter (PM2.5) emissions, particularly from industrial and commercial boilers and furnaces, while strengthening national systems for air quality management. It will focus on the Kathmandu Valley, the Terai, and surrounding foothill regions where air pollution poses severe risks.

Industrial emissions are projected to become the largest source of air pollution in the coming years as the country continues to industrialize, underscoring the urgency of cleaner production technologies. Through a combination of clean technology financing, incentives, and technical assistance, the project will support around 400 industrial and commercial enterprises to adopt electric boilers/furnaces, modern biomass boilers/furnaces, or advanced emission control technologies, leading to substantial air quality improvements.

The project will be implemented by the Department of Industry under the Ministry of Industry, Commerce and Supplies and the Department of Environment under the Ministry of Forests and Environment. Rastriya Banijya Bank will serve as the handling bank for the clean technology financing facility.

“Air pollution is not only a public health crisis but also a significant economic burden in Nepal, costing the country more than six percent of GDP each year through health costs and lost labor productivity,” said David Sislen, Division Director for Maldives, Nepal and Sri Lanka. ”This project aims to protect millions of people from harmful pollution by helping Nepali enterprises adopt cleaner and more efficient technologies that at the same time also lower operating costs, improve competitiveness, and support sustainable industrial growth.”

“The adoption of clean technology is limited in Nepal due to a combination of high upfront investment costs, constrained access to long-term financing, and low technical capacity among enterprises,” said Martin Heger, World Bank Senior Environmental Economist, South Asia Region. ”This project addresses these barriers by pairing long tenor financing and targeted capital incentives with hands-on technical assistance, helping industries to transition to cleaner production.”

The project financing from the World Bank is complemented by a $5 million grant from the World Bank’s Resilient Asia Program – funded by the United Kingdom’s Foreign, Commonwealth and Development Office and Swiss Agency for Development and Cooperation. The project is part of the World Bank’s Regional Air Quality Management Program in the Indo-Gangetic Plains and Himalayan Foothills (IGP-HF), a global air pollution hotspot.

Nepal Clean Air and Prosperity Project comprises the result oriented activities.

The project aims to reduce PM2.5 emissions and enhance air quality management through several key initiatives. It focuses on promoting Cleaner Production Technologies in industrial sectors, particularly targeting micro, small, and medium enterprises. Three main sub-components will facilitate this transition: First, building enterprise readiness for clean technology will involve a Clean Technology Implementation Support Team offering technical assistance and capacity building for enterprises and financial institutions. Second, financing options will be provided through a Clean Industrial Technology Financial Facility, offering longer-tenor loans and capital grants for adopting cleaner systems and equipment. Third, strengthening monitoring and quality assurance will establish a national management information system, develop quality control standards, and improve inspections by relevant departments.

Additionally, the project will enhance air quality monitoring and management, reinforcing regulatory frameworks and institutional capabilities through two sub-components. This includes upgrading monitoring stations, enhancing data management, and fostering partnerships for capacity building and information sharing. It will also strengthen industrial emissions oversight by operationalizing stack measurement methods and tightening emission standards. Project management will support effective implementation, fiduciary compliance, and responsiveness to emergencies with a dedicated Contingent Emergency Response Component. Overall, the project integrates technical, financial, and regulatory strategies to address air quality concerns effectively.