ICIMOD’s long standing efforts in the area of payments for ecosystem services (PES) has contributed to the integration of PES in Nepal’s Forest Act (2019). Incentives for ecosystem services, and financial and marketbased instruments for ecosystem sustainability, are now supported by the Act through a dedicated provision on environmental services.

ICIMOD has conducted pilot research and workshops, developed an issue brief, and also provided inputs as a member of the committee that drafted the policy on PES. The Act requires that management, use and benefit sharing of ecosystem services, including carbon sequestration, be included in forest operational plans. Benefits from hydropower, drinking water, tourism and other sectors have to be shared with relevant stakeholders. The Division Forest Office can process an Environmental Services Tender by inviting bids as per its annual plan. Grants or other forms of payment may also be arranged for owners of private forests who wish to manage environmental services and meet the requirements of the tender.

The Forest Act was promulgated in 2019 in Nepal. Several pilot scale studies have been undertaken on incentives for ecosystem services. However, due to lack of policy mechanism, large scale incentives for ecosystem services have not been implemented in Nepal. The Forest Act 2019 opens the door for incentives for ecosystem services to be institutionalized at various scales in the country and presents a model for other countries in the region.