Nepal's flood catastrophe exposes the empty promise of the global climate fund

Nepal has become the first nation to invoke the emergency procedures of the world's climate disaster fund, but the money on offer is a fraction of what is needed. The Himalayan kingdom, one of the poorest countries on Earth, is now the test case for a mechanism that experts warn is dangerously underfunded.

Flash floods triggered by a glacial lake collapse in late August killed more than 1,300 people and left thousands missing. Finance Minister Swarnim Wagle puts the cost of rebuilding at $4-5 billion, roughly 10 per cent of Nepal's annual GDP. Yet the maximum the country can draw from the Fund for Responding to Loss and Damage (FRLD) is a mere $20 million, less than one per cent of the bill.

What is the Fund for Responding to Loss and Damage?

The FRLD was established by the United Nations in 2023 after years of pressure from developing countries for a dedicated pot of money to help those hit by climate disasters they did little to cause. It holds $822 million in total pledges, but only around $350 million is currently available for disbursement. Against that, developing nations have already submitted 180 applications requesting a combined $2.8 billion.

Richard Sherman, a South African climate negotiator and board member, told The Independent that the board hopes to provisionally allocate money to Nepal within one to two months. No country has ever invoked the fund's emergency provisions before, and the process is meant to take six to eight weeks, compared with six to eight months under normal rules.

Why is Nepal's case a crucial test?

Andreas Sieber of the campaign group 350.org, which has tracked the fund since its creation, said Nepal's case is a real test of the fund's founding promise. 'There is not enough money to cover these disasters and people are left alone with those impacts, or governments in poor countries that are already strained have to deal with them,' he explained.

Harjeet Singh, who has worked on the fund's design for nearly two decades, said the scale of Nepal's need had long been predictable. 'We already knew the scale of damage and loss has reached that level and we've been saying that this fund doesn't even have a billion dollars,' he said. 'Nepal's case actually demonstrates it very well.'

How does the funding shortfall compare with global needs?

A 2024 study in the journal Nature estimated that developing countries would need $395 billion a year by 2025 to cover climate-driven loss and damage. That is broadly consistent with Intergovernmental Panel on Climate Change estimates of around $400 billion annually. At Cop29 in Baku last year, countries agreed on a global climate finance target of $300 billion a year, a figure still far from being met.

The shortfall is not confined to one fund. The Green Climate Fund lost $3 billion in pledged money when the United States withdrew its support. The UK has separately cut its own climate finance contribution by roughly half in recent months, even as the fund is meant to serve 134 developing countries.

Is the money simply not there?

Singh rejects the idea that the shortfall reflects a lack of money in the global economy. 'Let's look at the money going to the wars,' he said. 'Let's look at the money that has gone for several bailouts in the past. And we also were able to mobilise trillions of dollars to respond to Covid.'

An estimated $7 trillion a year in direct and indirect subsidies goes to fossil-fuel companies worldwide, he added. 'If you look at the global GDP, which has been growing, of course we have money. Now, where's the money? Money is now with those oligarchs and those billionaires, and now a trillionaire. Inequality has increased. Money is there, it's just that it's going in the wrong direction, and that has to be pointed out.'

Will richer nations rethink their priorities?

The timing of Nepal's disaster is awkward for the international community. The UN general assembly meets this month, and climate talks are due in Istanbul. But Sherman is cautious. 'The environment right now isn't very favourable for all these funds,' he said, adding that a longer-term model for the loss and damage fund is due by December, ahead of a fresh replenishment round expected to take one to two years.

'It's unfortunate, but we knew that this was always going to be a scenario. We can't control what happens.'

What does this mean for Nepal's future?

Nepal's foreign minister, Shisir Khanal, said his country is 'paying the ultimate price for a global crisis we did not create'. Nepal is one of the least developed countries in the world and contributes negligibly to global heating, yet it is among the most vulnerable to the climate crisis.

Sherman notes that the word 'compensation' carries no legal weight in this context. 'The request for compensation is a political one that is not resolved,' he said. 'Developed countries have been very clear that for them, supporting loss and damage is not about compensation for losses, nor is it about them being held liable for the impact of climate change.'

Experts say the gap between what Nepal needs and what it can get from the loss and damage fund will likely force it into debt. The likeliest source of further support is the World Bank, which gives loans rather than grants. Pakistan, after its 2022 floods that caused $30 billion in damage and killed more than 1,700 people, was compelled to take billions in fresh loans on top of existing debt, including $400 million to rebuild homes and infrastructure.

Sherman says Nepal will likely follow a similar path, taking on sovereign debt as a consequence of an 'event that was not of their making'. Singh describes the pattern as 'a double injustice', in which countries least responsible for climate change and least prepared for its impacts are forced into debt to recover from disasters linked to it.

Scientists broadly agree that rising temperatures have destabilised glaciers across the Himalayan region for years, although the precise mechanism behind the August collapse, whether the initial failure began in glacial ice or in permafrost and rock, remains under investigation. Nepal's president, Ramchandra Paudel, has made a formal international appeal for 'climate justice', while the prime minister, Balendra Shah, is due to raise the matter at the UN general assembly later this month.

Frequently asked questions

How much money can Nepal get from the climate fund?

Nepal can receive a maximum of $20 million from the Fund for Responding to Loss and Damage, which is less than one per cent of the estimated $4-5 billion needed for rebuilding after the floods.

Why is Nepal's case a test for the climate fund?

Nepal is the first country to invoke the emergency procedures of the FRLD, testing whether the fund can respond quickly to disasters. The fund has only $350 million available for disbursement against $2.8 billion in requests from 180 applications.

What will happen if the fund cannot cover Nepal's needs?

Nepal will likely have to take on sovereign debt from institutions like the World Bank, as Pakistan did after its 2022 floods, a pattern experts describe as a 'double injustice' for countries least responsible for climate change.