For a country that contributes little to global greenhouse gas emissions, Nepal is paying an increasingly high price for climate change.

Floods, landslides, glacial lake outburst floods and other climate-related hazards are destroying homes, roads, farms and other infrastructure with growing regularity. Each disaster brings an immediate bill for rescue and reconstruction. It also raises a less visible cost: making development more expensive and less secure, experts say.

“Higher disaster risks mean increased cost of development,” said Mani Nepal, an applied economist at the International Centre for Integrated Mountain Development (ICIMOD).

Nepal can reduce the disaster damage, he said, but only by spending more before disasters happen. “If we do not make these investments and continue with a business-as-usual approach, the future costs will be much higher when the next disaster strikes.”

That is the economic dilemma Nepal faces. The country has limited public resources, while the cost for preparing for climate change runs into billions of dollars. Its latest climate commitments estimate that implementing its targets will require substantial external financing, with adaptation accounting for the largest share of the need.

The question of climate finance, then, moves beyond how much money Nepal can secure, and transforms into: How that money is spent and what form it takes.

For investments that strengthen communities or protect ecosystems without generating an immediate financial return, grants are more appropriate than loans, economist Nepal said. Renewable energy projects that can generate revenue, by contrast, may be better suited to concessional or subsidised lending.

“The question is where the investment needs are and what kind of financial instruments are appropriate in those sectors,” he said.

The economic case for adaptation is relatively simple. Spending before a disaster can reduce what has to be spent afterwards, but no amount of preparation can prevent all losses.

“Both aspects, adaptation and reconstruction, are equally important,” Nepal said. “Adaptation helps reduce losses and damages when a disaster strikes. But not all kinds of losses and damages could be avoided or prevented due to adaptation.”

That distinction is important for a country where infrastructure is often built to last decades.

Anil Aryal, a hydrologist and executive director of the Center of Research for Environment, Energy and Water, said climate risk needs to be considered much earlier—when infrastructure is being planned and designed.

Hydropower plants, dams, irrigation systems and other major projects can remain in operation for 50 to 80 years. Designing them only around historical patterns of flooding and rainfall can leave them exposed to increasingly extreme events as those patterns change.

Flood-risk assessments should therefore be incorporated into long-term infrastructure planning, Aryal says, rather than conducted as a procedural requirement after major decisions have already been made.

The same scrutiny should apply to the land on which infrastructure is built.

“Soil testing should not be tolerated as a routine formality,” Aryal said.

Nepal needs to identify areas that are geologically suitable for development and require proper soil and geological assessments for major and high-risk projects, he said. Recent infrastructure failures have shown the consequences of overlooking site-specific risks.

Land-use planning may therefore be one of the most consequential parts of Nepal’s climate strategy, yet it remains poorly integrated into development decisions.

As cities expand and development pressures grow, cheaper land can appear attractive to governments, developers and households. That can mean construction near rivers and wetlands or on unstable slopes. The immediate savings can be substantial. The eventual cost can be much higher.

“The best climate investment is one that not only reduces climate risks but also raises productivity and prevents Nepal from repeatedly paying for the same disaster,” Nepal said.

Better land-use planning may raise the upfront cost of development, he acknowledged. But it can also reduce future losses and make infrastructure and settlements more resilient.

The principle extends beyond construction. Nepal also needs a more diverse energy system, combining hydropower with solar and wind, while expanding alternatives such as biogas and improved cookstoves for communities without reliable access to clean cooking energy, Nepal said.

The costs of climate disasters are also distributed unevenly.

When a flood destroys a road, the government must pay to rebuild it. When farmland is damaged, farmers lose income. When homes and livelihoods disappear, poorer households often have fewer savinsga nd assets to fall back on.

Geeta Pandey, director of policy, planning and research at KIRDARC, said Nepal has made significant progress in establishing laws and institutions for disaster management. But the system’s formal architecture has not always translated into effective action.

“There is a painful distance between an impressive legal framework and the reality faced by communities on the ground,” Pandey said.

Nepal’s Disaster Risk Reduction and Management Act, the National Disaster Risk Reduction and Management Authority and local governments have created a framework for preparedness and response. Yet, many plans remain on paper, while local governments and communities lack the resources needed to implement them effectively.

The burden is particularly heavy for women, people with disabilities and other marginalised communities, who can face greater barriers to relief and recovery.

Recovery, Pandey said, cannot be reduced to rebuilding physical infrastructure. Social networks, emotional wellbeing and the participation of vulnerable communities need to be part of recovery planning.

That matters economically as well. A disaster can wipe out years of progress within hours. The speed and extent of recovery then depend largely on the resources available to those affected.

This is where Nepal’s argument for climate justice meets the practical demands of economic planning.

Nepal contributes very little to the emissions responsible for global warming, yet its communities are increasingly exposed to its consequences.

Shreya KC, a climate justice activist and advocacy coordinator at the Loss and Damage Youth Coalition, said countries and fossil fuel companies that have contributed disproportionately to the climate crisis bear greater responsibility for its consequences.

But international accountability cannot substitute for action at home.

After years of engaging in United Nations climate negotiations, KC said international climate finance needs to be tied more closely to what communities actually need. That includes investment in local risk reduction, early-warning systems and anticipatory action, as well as better monitoring and data on glaciers and glacial lakes.

“We might forget that some of the action has to start at home,” she said.