Final Report

Upland Poverty in Nepal: the Role of Environment

Shyam K. Upadhyaya

Institute for Integrated Development Studies (IIDS) Mandikhatar, P.O.Box 2254 Kathmandu, Nepal Telephone: 977-1-4378830/4371006 Email: iids@wlink.com.np

December 2010

The views expressed in this paper/presentation are the views of the author(s) and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Directors, or the governments they represent. ADB does not guarantee the source, originality, accuracy, completeness or reliability of any statement, information, data, finding, interpretation, advice, opinion, or view presented, nor does it make any representation concerning the same.

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Summary

Upland areas (hills and mountain) of Nepal comprise about 77 percent of total area and inhabit about 52 percent of total population of Nepal. All indicators of poverty indicate a high level of poverty in upland areas. In 2003/04, the incidence of poverty in the mountain, hills, and terai was about 33, 35, and 28 percent respectively. Environment and poverty are closely interlinked. Environment is a major causal factor of upland poverty in Nepal. Upland poor are highly dependent on natural resources such as land and forest for their livelihood. The quality of environmental resources in upland areas is poor. The productivity of land and forest is low. Upland poor live in harsh climatic conditions. The loss of human lives caused by water-induced disasters such as flood and landslide is higher in upland areas. Climate change has further worsened the conditions of upland poor. The rate of increase in temperature is higher in the hills and mountains than in Terai. Environment is also a major asset of upland people for alleviating poverty. There are good opportunities for green economy in upland areas. Snow-capped mountain peaks of Nepal are major attractions for tourists. Tourism has made significant impact in economic development in major trekking routes of Nepal. Nepal has been a pioneer in adopting alternate energy technologies such as micro-hydro, biogas, solar energy, and improved cooking stoves, and in innovative forest management practices such as leasehold and community forestry. These programs are beginning to make positive contribution to poverty reduction and environment conservation. Hills and mountains of Nepal are important sources of valuable environmental services of local and global significance. There is an enormous potential for the generation of hydropower. The government response to tackle adverse impact of climate change in upland areas is inadequate. There is a need for more research and monitoring on the impact of climate change and adaptation measures. Programs to enhance the capacity of upland poor to cope with adverse impact of climate change need to be implemented. Investment in income generating activities and infrastructure development such as roads, communication, renewable energy, irrigation, education, and health facilities need to be increased greatly.

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Upland Poverty in Nepal: the Role of Environment 1
Shyam K Upadhyaya2

BACKGROUND 1. Environment is a major causal factor of poverty. Poor people often inhabit marginal lands, flood-prone areas, slum and squatter areas, etc, which are characterized by poor environmental resources. The impact of environment on poverty is more evident in a developing country like Nepal. 2. Environment is also an important resource for alleviating poverty. While poor environmental conditions make adverse impact on poverty, there are also evidences that improvement in environment have made positive contribution in poverty alleviation. This paper explores the impact of natural environment on poverty in the upland areas of Nepal. 3. Nepal is divided into three ecological belts – mountain, hill, and Terai. The mountain belt lies between 4, 877 and 8,848 meters above the sea level. The hills lie between 610 and 4,876 meters. Similarly, the terai belt runs up to an altitude of 609 meters above the sea level. For administrative purpose, Nepal is divided into five development regions (eastern, central, western, mid-western, and far-western), and 75 districts. Table 1 presents number of districts in development and ecological regions. The term "upland" is a relative term. For the purpose of this paper, hills and mountain are considered as the "upland areas." (Figure 1)

Table 1: Number of Districts by Ecological and Development Regions Development Region Eastern Central Western Mid-Western Far-Western Total Mountain 3 3 2 5 3 16 Hill 8 9 11 7 4 39 Terai 5 7 3 3 2 20 Total 16 19 16 15 9 75

Figure 1: Map of Nepal Showing Ecological Regions
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Background Paper for Conference on the "The Environment of the Poor in the Context of Climate Change and the Green Economy: Making Sustainable Development More Inclusive", 24-26 November 2010, New Delhi.
2

The author is associated with the Institute for Integrated Development Studies (IIDS) as a consultant. He can be reached at shyamkupadhyaya@gmail.com.

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4. Upland areas of Nepal comprise about 77 percent of total area and inhabit about 52 percent of total population of Nepal. Nepal has a total of 147,181 square Km area. The mountain, hills, and terai comprise 35.3 percent, 41.7 percent, and 23.1 percent of the total area of Nepal. According to the latest census in 2001, the total population of Nepal was 23.1 million. The shares of mountain, hills, and terai in total population were 7.3 percent, 44.3 percent, and 48.4 percent respectively. 5. The remaining part of the paper is organized as follows. Section two identifies characteristics of poor. Section three discusses causes of poverty. Section four examines regional dimension of poverty in Nepal. Section five discusses how climate change is further aggravating environment poverty problem. Section six discusses coping mechanisms of the vulnerable and poor. Section seven discusses government programs to address climate change. Section eight explores opportunities for a green economy in upland areas. The final section provides some recommendations. REGIONAL DIMENSION OF POVERTY IN NEPAL 6. Despite decades of planned development efforts, poverty is still severe and widespread in Nepal. Latest estimate indicates that about a quarter (25.4%) of the population of Nepal (about 7 million people from 1.25 million households) is living below the poverty line.3 Nepal Living Standard Survey (NLSS) has been the main source of data for poverty measurement. Two NLSS have been conducted in Nepal. NLSS defines a poverty line income as the income level needed to buy basic calorie requirement (21,144 Kcal per person per day in
3

See NPC (2010).

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2003/04) and other essential non-food needs. Poverty lines at current prices for 1995/96 and 2003/04 were computed as NRs. 5,088.7 and NRs. 7,695.7 respectively. According to NLSS, the incidence of poverty was about 42 percent in 1995/96 which fell to about 31 percent in 2003/04 (Table 2). 7. Poverty varies greatly among different regions of Nepal. Table 2 presents incidence of poverty in different regions of Nepal for 1995/96 and 2003/04.4 In 2003/04, poverty in rural areas was more than three times than that of urban areas. It is also evident from the table that poverty is higher in upland areas (hills and mountains) than in low lands (Terai). In 2003/04, incidence of poverty in rural western hill was slightly lower than that of rural western terai, but the incidence of poverty in rural eastern hill was much higher than that of rural eastern terai (Figure 2). Of the total population of Nepal's poor, 7.5 percent live in mountains, 47.1 percent in the hills, and 45.4 percent in the terai (MOF, 2010). Between 1995/96 and 2003/04, mountain region experienced largest decline in poverty which is mainly due to migration and remittance income.

Table 2: Incidence of Poverty in Nepal
Region Urban Rural Ecological Belts Mountain Hill Terai Development Regions Eastern Central Western Mid-western Far western NLSS Regions Kathmandu Other urban Rural Western Hill Rural Eastern Hill Rural Western Terai Rural Eastern Terai Nepal Source: CBS (2005). 1995-96 21.6 43.3 57.0 40.7 40.3 38.9 32.5 38.6 59.9 63.9 4.3 31.6 55.0 36.1 46.1 37.2 41.8 2003-04 9.6 34.6 32.6 34.5 27.6 29.3 27.1 27.1 44.8 41.0 3.3 13.0 37.4 42.9 38.1 24.9 30.8

Figure 2: Regional Dimension of Poverty in Nepal, 2003/04

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NLSS regions are defined as follows. Rural western hills includes hills and mountains from the Western, Mid-Western, and Far-Western Development regions, rural eastern hills includes hills and mountains from the Eastern and Central Development regions. "rural western terai" includes terai belt from the western, mid-western, and far-western development regions, "rural eastern terai" includea terai belt from eastern and central development regions. "Kathmandu" comprises urban areas in the districts of Kathmandu, Lalitpur, and Bhaktapur. "Other Urban" comprises all other urban areas outside Kathmandu Valley.

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8. Multidimensional measures of poverty such as Human Poverty Index (HPI) indicate higher level of poverty in the hills and mountains. HPI was highest in the mountains (Figure 3). HPI values for the hills and terai were almost equal. Human Development Index (HDI), on the other hand, was lowest for the mountains (Figure A1).

Figure 3: Human Poverty Index (HPI), 2006

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9. Anthropometric indicators of poverty show a higher level of poverty in the upland areas of Nepal. Stunting is highest in the mountains followed by the hills and Terai (Table 3). Underweight was highest in the mountains followed by terai and hills. Wasting, however, was highest in Terai followed by hills and mountain. About 40 percent of the population of Nepal was consuming less than the required calories of food. The calorie intake shortfall was highest in the mountains (45.2 percent) followed by the hills (41.8 percent) and terai (37.4 percent) respectively (Table 3).

Table 3 : Status of Calorie Consumption and Malnutrition, 2006
Region Calorie Intake Shortfall (<2124 kcal/person/day) 45.2 41.8 37.4 39.8 Malnutrition under age 5 Stunting (%) 62.3 50.3 46.3 49.3 Underweight (%) 42.4 33.2 42.3 38.6 Wasting (%) 9.4 8.4 16.6 12.6

Mountain Hills Terai Nepal

10. Food security is lower in the hills and mountains. Food balance, as defined by the requirement and availability of main cereals (rice, wheat, maize, millet, and barley) is negative in the hills and mountains and positive in the terai (Figure A2)

CHARACTERISTICS OF POOR 11. Majority of the poor live in rural areas. In 2003/04, about 35 percent of the rural population was living below poverty line compared to the 10% of urban population. The proportion of rural population is highest in mountains. 12. Poverty varies greatly according to caste/ethnicity of people. Poverty is higher among Dalits (untouchable groups) and indigenous population. The indigenous people of hills and mountain were the largest social group of poor in 2003/04. Poverty increases with the decrease in education level of household heads and increases with the increase in household size and number of children. 13. Poverty and agriculture are closely interlinked in Nepal. Table 4 presents the incidence of poverty by employment sector of the household head. About 78 percent of the poor are associated with agriculture. About 33 percent of the people self-employed in agriculture and 54 percent of the agricultural laborers fall below poverty line. Proportion of poor people associated with the agriculture was higher than the proportion of people involved in agriculture.

Table 4: Poverty by Employment Sector of the Household Head in Nepal, 2003/04

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Self-Employed Self-Employed Agriculture Manufacturing Trade Services Wage Earners Agriculture Professional Other Unemployed Nonactive Total

Poverty Head Count Rate 32.9 31.2 11.1 14.4 53.8 2.1 28.8 2.9 26.9 30.8

Distribution of the Poor 66.9 4.5 1.6 1.5 10.9 0.2 10 0 4.4 100

Distribution of the Population 62.7 4.4 4.5 3.2 6.2 2.9 10.7 0.2 5.1 100

14. Farm income constitutes an important source of total household income of the poor (Table 5). The share of farm income in total household income was highest (59 percent) in mountains. The importance of farm income increases as the households move toward the lower rungs of economic ladder. The share of farm income in total household income of the poorest 20 percent of the population was more than twice than that of the richest 20 percent of the population.
Table 5: Share of Household Income from Various Sources, 2003-04 Region Ecological Region Mountains Hills Terai Consumption Quintile Poorest Second Third Fourth Richest Nepal Farm Income 59 45 49 62 58 56 47 25 48 Non-Farm Income 19 28 28 23 25 24 25 38 28 Remittances 9 11 12 8 9 10 14 13 11 Other 13 17 11 7 11 10 14 24

15. Majority of the poor own smaller landholdings. In general, the incidence of poverty increases with the decrease in the size of landholdings (Table 6).
Table 6: Poverty Measurement by Land Ownership in Rural Areas of Nepal Land holdings Less than 0.2 ha of land 0.2-1 ha of land 1-2 ha of land More than 2 ha of land Total Source: CBS (2005). 1995-96 47.7 45.0 38.8 38.9 41.8 2003-04 39.3 38.1 27.3 23.8 30.8 change in % -18 -15 -30 -39 -26

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CAUSES OF POVERTY 16. Several factors including low economic growth, low agricultural productivity, low levels of social and economic infrastructures, high population growth, lack of non-agricultural employment opportunities, historical inequities in the distribution of social and economic power, environment, and governance have been identified as causing poverty (UNDP, 2001). This paper focuses on the role of environmental factors. 17. The quantity of agricultural land is a major cause of poverty in upland area. The proportion of land suitable for agricultural cultivation is lower in hills and mountain than in terai. Agricultural and grasslands as a proportion of total land area was 10 percent in the mountains and 27 percent in the hills as compared to 55 percent in terai. Agricultural land holdings are smaller and fragmented in the upland areas. The average size of agricultural land holding is lowest in the hills followed by mountains and Terai (Table 7). About 42 percent of the households in the mountain and 46 percent of the households in the hills own less than 0.5 ha of agricultural land.

Table 7: Average size of landholdings by regions Region Mountain Hills Terai Nepal 1991/92 0.679 0.771 1.230 0.950 2000/01 0.733 0.655 0.944 0.789

18. The quality of agricultural land determines the level of poverty. Most agricultural land in the hills and mountain are steeply sloped and highly-prone to landslides. Soil is stony and less fertile. Soil erosion rate is high (Tiwary et al, 2002). Irrigation facilities are poor. Only about 28 percent of the cultivable land in the mountain and 26 percent of the cultivable land in the hills had irrigation facilities (Figure 4). Agricultural land holdings are highly fragmented. The average number of parcels was 5.46 in the mountain, 3.80 in the hills, and 3.34 in the Terai. Even in the hills and mountain, the poor have the most marginal and fragile land (UNDP, 2002). Consequently, productivity of land and labor is low in the hills and mountains.

Figure 4: Irrigated land as a percent of total cultivable land

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19. Forests are important determinants of poverty and well-being in upland areas. Forests are main sources of fodder for livestock in the hills and mountains of Nepal. Forests also provide bedding materials for livestock. Livestock farming, on the other hand, is an integral part of crops farming. The use of chemical fertilizer is very low in the hills and mountains. Chemical fertilizers need to be transported from Terai. Given the poor road infrastructures, it is very expensive and time-consuming to transport fertilizers to hills and mountains. Livestock dungs and fallen tree leaves are used to prepare compost manure which is the main source of nutrients for crops. It has been estimated that about 2 to 6 hectares of forest land is needed to support 1 hectare of cultivated land in the hills of Nepal (APROSC and JMA, 1995). Forests are main sources of energy in the upland areas of Nepal. About 96 percent of households in the mountains and 72 percent of households in the hills use fuelwood for cooking fuel (Table 8). A report indicates that as many as three fourth of people in Karnali zone, which suffers from highest level of poverty in Nepal, are using resin wood for lighting (Pokharel and Dhital, 2006). Hence, the quantity and quality of forests have a direct impact on upland poverty in Nepal.

Table 8: Distribution of households by various sources of fuel use for cooking, 2001 (percent) Region Wood Mountain 95.5 Hill 72.3 Terai 55.6 Urban 33.2 Rural 72.4 Nepal 66.2 Source: CBS (2008). Kerosene 3.2 16.0 12.8 34.1 9.8 13.7 Main Source of Fuel used for Cooking LPG Biogas Cow Dung 0.4 0.1 0.7 8.9 1.9 0.1 7.7 1.7 21.5 27.3 1.8 2.5 4.0 1.7 11.5 7.7 1.7 10.1 Others 0.2 0.8 0.7 1.0 0.6 0.7 Total 100 100 100 100 100 100

Table 9 presents the status of forest in Nepal. About 39.5 percent of the total area of Nepal is covered by forest and shrubs. The proportion of total area under forest cover was lowest in the mountain followed by terai and hills. Moreover, forests in the hills and mountains 8

are less productive. Although the forests in the mountains have good potential for non-timber forest products (NTFPs) like medicinal herbs, lack of transportation and marketing infrastructure prevent mountain people benefiting from those NTFPs.

Table 9: Status of Forest in Nepal Region Total Area (sq km) Total Forest and Shrub Area (sq km) 3,959 40,266 14,059 58,284 Forest and Shrub Area as a % of Total Area 7.64 65.64 41.33 39.6 Forest Area as a % of Total Area 4.4 43.27 40.99 29.05

Mountain 51,817 Hills 61,345 Terai 34,019 Nepal 147,181 Source: CBS (2008).

20. Changes in the management regime of the forest have caused poverty. Prior to 1950s, Nepal's forests were managed mostly by local people. Nepal nationalized forests in the late 1950s. Nationalization led to the loss of ownership of forests by local communities and set the "tragedy of commons" in motion. In the following decades, Nepal experienced massive deforestation. The rate of deforestation was higher in the hills and mountains. Deforestation caused scarcity of fuelwood and fodder, loss of grazing land for livestock, and increased time spent by rural households for fetching forest products. Poor households suffered more as the richer households were able to cope with it to some extend by planting trees in their private lands. With the passage of 1992 Forest Act, Nepal embraced participatory forest management concept and encouraged local communities to participate in forest management. Under community forestry, groups of households form Community Forest Users' Groups (CFUGs) to manage patches of forests in their vicinity which they were using traditionally. The CFUGs prepare management plans for the forest and apply to the District Forest Office (DFO) of the government for registration. Once the management plans are approved by the DFO, the CFUGs are given rights to forest management. There are 15,051 CFUGs in Nepal managing about 1, 138, 066 hectare (about 21 percent of total forest area) of forest area. About 90 percent of community forest user groups and 85 percent of community forests are located in the hills and mountains (Table 10).

Table 10: Status of Community Forests

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Region

Number of Forest Users Groups 2,638 (17.5) 10,871 (72.2) 1,542 10.24) 15,051 (100)

Community Forest Area (ha) 244,225 (18.52) 876,443 (66.4) 197,337 (14.9) 1,318,006 (1000

Number of Beneficiary Households 269,222 (15.2) 1,155,795 (65.6) 336,562 (19.1) 1,761,579 (100)

Mountain Hills Terai Nepal

Source: MIS, Community Forestry Division, Department of Forest (As of October 4, 2010)

The success of community forestry in regenerating forests in the hills and mountains of Nepal is widely recognized. However, community forests have also made adverse impact on the poor in some cases. Community forests put restrictions on the collection of forest products and livestock grazing. Wealthier households are able to cope with such restrictions by planting trees in their private lands, or by buying forest products from the market. Many poor people in upland areas derive their livelihood by collecting and selling forest products such as fuelwood and nontimber forest products. Landless poor households use forests for grazing their animals. Restrictions put by CFUGs led to the loss of livelihoods of these poor households. Some households also charge membership fees which the poor ultra-poor households are unable to pay. For example, herders and traders from the mid-western mountain district of Humla used to earn their living by rearing sheep and Tibetan mountain goats which were used to transport foodgrains from lower plains to upland areas. The herders and traders used forests along the walking trails to feed their animals. After the formation of community forests, the CFUGs in the lower hills banned those herders and traders from using forests along the trekking routes. Such ban on the use of forests led to the drastic decline in the population of sheep and goat in Humla causing loss of livelihood to poor herders and traders (Winrock International, 2003)5 21. The improper development of some natural resource based infrastructure projects such as certain hydropower projects have displaced livelihoods of local people and pushed them into poverty (Upadhyaya, 2002). Adequate attention was not given in the resettlement of people displaced by hydropower projects and national parks. 22. There is distinct correlation between climatic conditions and level of poverty in the upland areas of Nepal. Climatic conditions are harsh at higher altitude of mountain districts. These areas are subjected to natural hazards such as hailstorms, floods, ill-timed snowfall, and landslides. Natural disasters lead to loss of human lives, livestock, agricultural land, and infrastructures every year. The loss of human lives caused by water induced disasters is higher in the upland areas (Figure 5). About 80 people died from landslides in 2009 out of which 79 deaths occurred in hills and mountains. Similarly, out of 55 flood-related deaths, 39 deaths occurred in the hills and mountains.
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Winrock International (2003) writes: "In 1998, 400 people died in Humla due to famine and a diarrhea epidemic. Although a variety of events contributed to this tragedy, excluding Humlis from traditionally used land through community forestry certainly contributed to their food insecurity."

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Most mountain districts receive less than average amount of annual precipitation. In general, precipitation increases with altitude from south to north up to an altitude of about 3,000 meter and then starts decreasing (ANZDEC, 2002). The hills and mountain of the mid-western and far-western development regions of Nepal receive less amount of rainfall than the hills and mountains of eastern and central development regions.6 Monsoon rainfall also starts relatively late in the western regions than in the eastern regions. The incidence of poverty is highest in the hills and mountains of the mid-western and far-western development regions. Such correlation is expected given the dependence of the poor people in agriculture.

Figure 5: Number of deaths caused by Landslides and Floods in 2009

Landslides

Floods

IMPACT OF CLIMATE CHANGE 23. Climate change is having a noticeable impact on the environment of Nepal. Between 1975 and 2005 the mean temperature of the country increased at the linear rate of 0.04 0 C/year (Baidya et al, 2007). The number of warmer days and nights has increased whereas the number of cooler days and nights has decreased. The rate of increase in temperature was higher in the hills and mountain than in Terai. Monsoon rainfall increased slightly between 1971 and 2005 but given the large year-to-year variations the increase in rainfall was insignificant (Baidya et al, 2007). The number of rainy days has decreased. However the number of high-intensity rainfall events has increased. The start of monsoon has also been delayed. Winter rainfall has decreased.

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However, the northwestern mountain and hills receive more winter (December to March) precipitation than other regions. About 80 percent of rainfall in Nepal occurs during monsoon (June to September). Winter precipitation accounts for about 3 to 5 percent of total annual precipitation.

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24. Climate change is expected to have a negative impact on a wide range of areas including agriculture, water resources, biodiversity, and health. The increase in temperature would lead to more water stress in the hills and mountains. MOPE (2004) predicts that an increase in temperature up to 40 C would have adverse impact on the production of maize which is a staple crop of the hills. Baidya et al (2008) predict that the number of highintensity rainfall events is likely to increase in future. The increase in high-intensity rainfall during monsoon increases the water-induced disasters such as landslides and floods. The increase in temperature would also lead to flooding from the outburst of glacial lakes. Mool et al (2001, 2010) report the existence of 2,315 glacial lakes in Nepal with a total area of 75 square kilometer out of which 12 lakes are considered potentially dangerous. Nepal has already experienced 25 Glacial Lakes Outburst Floods (GLOF) events in the past. The outburst flood from Baqu glacial lake in Tibet in 1981 damaged the diversion weir of Sunkoshi Hydroelectricity project, two bridges, and sections of Arniko Highway in Nepal causing about US$3 million loss. Similarly, the outburst of Ding Tsho lake in Khumbu Himal in 1995 destroyed nearly completed Namche Small Hydel Project in Solukhumbhu district of Nepal (Mool et al, 2010). Climate change has increased the variability of the run-offs of the rivers leading to shortages of water in dry season. Mosquotoes have begun to appear in higher altitude areas posing disease risks to poor people.

COPING MECHANISMS OF THE VULNERABLE AND POOR 25. Migration has been the main coping mechanism for the poor and vulnerable in the recent years. NLSS data indicates that about 32 percent of households in Nepal were receiving remittances in 2003/04 (CBS, 2005). About 29 percent of the households from the poorest 20 percent of population received remittances from migration. The proportion of people migrating for work was highest in rural western mountain and hills. About 45 percent of male 15 years and older from the rural western hills migrated for work in 2003/04. For the poorest, India remains the most popular destination for migration followed by other rural and urban parts of Nepal.7 26. Poor people also adopt a variety of other mechanisms to cope with poverty and food insecurity in the short term. They reduce their food intake and switch to less preferred food items. They take loans from moneylenders at high interest rates. They consume wild foods from forests such as mushroom, yams, etc. Poor people also resort to distress sale of their livestock, land, and other valuable to cope with severe crisis (Adhkari, 2008; Tiwari et al, 2002).

GOVERNMENT PROGRAMS TO ADDRESS CLIMATE CHANGE IN UPLAND AREAS 27. Nepal began to take active interest in environment management since the mid-1980s. Main achievements so far have been the developments of policies, institutions, and legislations for environment management. The policy documents include the National Conservation Strategy (1988), the Nepal Environment Policy and Action Plan (1993), and the Sustainable Development Agenda (2003). The laws and regulation include Environment Protection Act (1996) and Environment Protection Regulations (1997). Development projects are required to
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See CBS (2006) for an analysis of migration and poverty in Nepal.

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do Environment Impact Assessment (EIA). However, the implementation of laws and regulations is weak in Nepal. 28. Lately, the climate change issues have received increased attention from policymakers and researchers. In 1992, Nepal became the signatory of the United Nations Framework Convention on Climate Change (UNFCC). Nepal ratified the Kyoto Protocol of the UNFCC on 16 September 2005. Nepal submitted Initial National Communication Report to the COP of the UNFCC in 2004. The new Development Plan (2009/10 – 2012/13) has devoted a separate chapter for environment management and climate change.8 However, the focus till now has been mainly on the analysis of trend and likely impacts of climate change. The Sustainable Development Agenda for Nepal (2003) and the Initial National Communication Report to the COP of the UNFCC (2004) provide some analysis of trends and likely consequences climate change issues in Nepal. Nepal is responsible for only about 0.025% of annual global greenhouse gas emissions. Nepal's response to climate change issues involves two-pronged strategy – enhance capacity to benefit from the new opportunities created by Clean Development Mechanism and Carbon trade, and enhance the capacity of people to adapt to the impacts of climate change. 29. Nepal is aware of the opportunities created by CDM and other international carbon finance mechanisms. Nepal is also preparing itself to benefit from the Reducing Emission from Deforestation and Forest Degradation (REDD). In 2008, the Ministry of Forest and Soil Conservation (MOFSC) prepared a Readiness Plan Idea Note (R-PIN) and submitted to the World Bank. The World Bank provided US$200,00 to MOFSC from its Forest Carbon Partnership Facility (FCPF) to prepare a Readiness Plan. In April 2010, Nepal has submitted a Readiness Preparation Proposal (R-PP) to FCPF. 30. The government has initiated some adaptation works. In late 1990s, Nepal, with the help of donors, established early warning systems in 19 villages downstream of Tsho Rolpa glacial lake. About 3 meter of water from Tsho Rolpa was drained reducing risks of GLOF by about 20 percent. The government of Nepal finalized and approved a National Adaptation Programme of Action (NAPA) on 28 September 2010. The NAPA has identified priority adaptation action programs. A national climate change policy and a National Strategy on Climate Risk Prevention and Mitigation are under preparation. 31. The general development programs implemented by the government including the agriculture commercialization projects, rural water supply and sanitation projects, poverty alleviation programs, alternate energy development programs, and remote area development programs are likely to enhance the capacity of upland poor to cope with climate change problems.

OPPORTUNITIES FOR A GREENER ECONOMY 32. Environment not only causes poverty in the upland areas of Nepal, it is also a major asset of upland people for alleviating poverty. Nepal's development plans and policies have
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In earlier plan documents, the chapter heading on environment used to be environment management.

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clearly recognized the value of environment in poverty alleviation (APROSC and JMA, 1995). Soil and climatic conditions in the hills are suitable for cultivating high-value crops such as offseason vegetables and citrus fruits that have high demand in Nepal's plains as well as in India and Bangladesh. Mountain regions are suitable for growing temperate fruits such as apples. Mountains are also suitable for rearing specific types of livestock such as yak and sheep. 33. The innovation of specific management concept of natural resources such as leasehold forestry is making contribution to poverty alleviation. Under leasehold forestry, patches of degraded forest land are leased to groups of poor households (leasehold forest users' groups) for 40 years. Leasehold forest users groups are allowed to grow fodder, nontimber forest products, medicinal plants, and practice agro-forests in such forests. About 99 percent of leasehold forest users groups and 99 percent of leasehold forest area are located in the hills and mountains. About 23,534 hectare of degraded forest land have been leased to 5,206 leasehold forest groups which is benefiting 44,197 families. Studies indicate that leasehold forestry program is making positive impact on poverty reduction and forest regeneration (FAO and DOF, 2009). 34. Responding to the earlier criticism of neglecting poor, community forestry programs have started to pay more attention to poor member households. The Ministry of Soil and Watershed Conservation (MOFSC) issued a guideline for community forestry development in 2009 that, among other things, requires CFUGs to allocate 35 percent of their income on programs that benefits poor and disadvantaged groups (MOFSC, 2009). Some CFUGs have started leasing parts of degraded forest land to their poor household members for income generation. Leasehold forestry is being practiced in some community forests. A recent impact study of community forests supported by Livelihoods and Forestry Programme (LFP) in 7 hill districts has found that the percentage of households living in income poverty fell from 65% in 2003 to 28% in 2008.9 The average household income increased by 61%, about 25% of such increase was attributed to income generation activities related to community forestry program (LFP, 2009). 35. Hills and mountains of Nepal are important sources of environmental services such as biodiversity, carbon sequestration, hydrological services, and eco-tourism. Snowcapped mountain peaks of Nepal are major attraction for tourists.10 A total of 500,277 tourists visited Nepal in 2008 of which 20 percent visited for trekking/mountaineering (MOF, 2010). Nepal has a policy of sharing royalty from tourism with the districts in trekking routes. Mountain districts in major trekking routes such as Solukhumbhu, Manag, and Mustang have benefitted from tourism and fare relatively better in development performance. 36. Forests and wildlife are other attraction for tourists. Nepal has 9 national parks, of which 5 are located in mountains, 2 in hills and 2 in terai. Most national parks have declared surrounding areas in its vicinity as buffer zones. A total of 291,040 tourists visited protected areas of Nepal in 2007/08. In the same year, the protected areas generated about NRs. 117898991 of revenue. By law, National parks are required to invest 30 to 50 percent of their income in the buffer zones. With proper targeting such investments could make substantial impact on poverty alleviation. 37. Forest conservation in the upland watersheds provide valuable hydrological services that benefit communities and infrastructures located. If appropriate institutions and policies
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The study districts are Dhankuta, Terathum, Sankhuwasabha, Bhojpur, Baglung, Parbat, and Myagdi. See Millennium Ecosystem Assessment (2005) for a discussion of various ecosystem services.

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are put in place, upland areas would be able to secure payments for such environmental services from the beneficiaries which could be used for the improving the life of the poor and environmental conservation in the hills and mountains. Some pilot efforts are already being made. For example, local government of the Makawanpur district have started paying some royalty to the uplands communities of Kulekhani watershed for providing environmental services that reduce sedimentation in hydropower reservoir located downstream and increase the power production (Upadhyaya, 2005, 2006). 38. The hills and mountains of Nepal have enormous potential for the generation of hydropower. All of the existing hydropower plants of Nepal except two are located in hilly districts. The development of hydropower in a socially and environmentally responsible way generates employment to local poor people of the upland areas. Hydropower projects pay royalty to the government which could be used to support poverty alleviation programs in the upland areas. 39. Nepal has been a pioneer in adopting alternate energy technologies such as microhydro, biogas, solar energy, and improved cooing stoves. The gradient of rivers in the hills and mountains is very suitable for micro-hydro development even with a small volume of water. Studies have shown that micro-hydro have made positive contribution towards poverty alleviation and the achievement of the MDGs. More than 220,000 biogas plants have been installed in Nepal half of which are located in the hills and mountains. The biogas program have generated employment to more than 13,000 persons. Biogas programs also make positive contribution to human health as they encourage people to construct improved toilets.11Similarly, more than 200,000 Improved Cooking Stoves (ICS) have been installed in the hills and mountains of Nepal. ICSs save time spent by poor rural women in fuelwood collection, and contributes to health by reducing indoor air pollution.12 Many rural poor get employment in installing and repairing ICS. The use of alternate energy saves carbon which could be sold in the international carbon market. Nepal has registered two biogas projects of 19,396 plants with the Clean Development Mechanism (CDM). Nepal has already started to receive carbon payments of about US$607,000 for these two projects from the Community Development Carbon Fund (CDCF) of the World Bank. Another CDM project of micro-hydro plants have been prepared. Several other projects related to biogas, ICS, improved water mills, and solar energy are under preparation.

RECOMMENDATIONS

11 12

About 63 to 69 percent of toilets are connected with biogas plants. See www.bsp-nepal.org. ICS saves 10 to 30% of energy compared to traditional stoves.

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40. There is a need for more research and monitoring on the impact of climate change and adaptation measures. Programs to enhance capacity of local people to cope with adverse impact of climate change need to be implemented. 41. Research is also needed on the economic valuation of environmental resources of the upland areas including the values of ecosystem services. Institutions and policies need to be designed for enabling poor local people from ecosystem services. 42. Research is needed on the development of appropriate mechanisms for the equitable distribution of carbon and other ecosystem services payments to ensure that such payments benefit poor people of hills and mountains. 43. More investment in infrastructure such as roads, irrigation, communication, and energy is needed in upland areas. Studies have found that road connectivity makes a significant impact on reducing poverty (CBS, 2006). Road connectivity improves the access of poor to basic social services such as health, and education, and also provides access to markets. 44. More investment is also needed in commercialization of environmental friendly agriculture in the hills and mountains. Government policies of Nepal have advocated for the cultivation of horticultural crops in the sloppy lands of the hills and mountains. However, Nepal needs to increase investment in agricultural research and extension, and infrastructure development greatly to put this policy in practice. Water conservation technologies need to be developed and adopted. Crop varieties that thrive in adverse environment such as drought need to be developed.

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LITERATURE CITED Adhikari, Jagannath. 2008. Food Crisis in Karnali: A Historical and Politico-economic Perspective. Kathmandu: Martin Chautari. ANZDEC Limited. 2002. Nepal Agricultural Sector Performance Review (ADB TA No. 3536 NEP), Final Report. ANZDEC Limited, New Zealand in association with CMS Limited, Nepal. APROSC/Nepal and JMA/USA. 1995. Nepal Agriculture Perspective Plan. Kathmandu: Agriculture Projects Services Centre and John Mellor Associates, Inc. Baidya, Saraju K., Madan L. Shrestha, and Muhammad Munir Sheikh. 2008. "Trends in daily climatic extremes of temperature and precipitation in Nepal. Journal of Hydrology and Meteorology, 5(1). Baidya, Saraju K., Ramesh K. Regmi, and Madan L. Shrestha. 2007. Climate Profile, Observed Climate Change and Climate Variability in Nepal. Final Draft. Department of Hydrology and Meteorology, Kathmandu, Nepal. CBS. 2008. Environment Statistics of Nepal 2008. Government of Nepal, National Planning Commission, Central Bureau of Statistics (CBS). CBS. 2006. Resilience Amidst Conflict: An Assessment of Poverty in Nepal, 1995-96 and 200304. Government of Nepal, National Planning Commission, Central Bureau of Statistics (CBS). CBS. 2005. Poverty Trends in Nepal (1995-96 and 2003-04). Government of Nepal, National Planning Commission, Central Bureau of Statistics (CBS). DWIDP. 2010. Annual Disaster Review. Government of Nepal, Ministry of Irrigation, Department of Water Induced Disaster Prevention (DWIDP), Kathmandu, Nepal. FAO and DOF. 2009. Effectiveness of Leasehold Forestry to Poverty Reduction. Food and Agriculture Organization of the United Nations (FAO) and Department of Forests (DOF), FAO/NEP/3102 Working Document, Kathmandu, Nepal. LFP. 2009. Community Forestry for Poverty Alleviation: How UK AID has increased Household Income in Nepal's Middle Hills. Livelihoods and Forestry Programme (LFP), 2009. Millennium Ecosystem Assessment. 2005. Ecosystems and human well-being: synthesis. Island Press, Washington, D.C., USA. MOAC. 2008. Statistical Information on Nepalese Agriculture, 2007/08. Government of Nepal, Ministry of Agriculture and Cooperatives (MOAC), Kathmandu, Nepal. MOF. 2010. Economic Survey, 2009/10. Government of Nepal, Ministry of Finance (MOF), Nepal.

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MOFSC. 2009. Guidelines for Community Forests Development Program (in Nepali). Ministry of Forest and Soil Conservation (MOFSC), Department of Forest, Community Forest Division. Mool, P.K., Wangda, D., Bajrachary, S.R., Kunzang, K., Gurung, D.R., Joshi, S.P.2001. Inventory of glaciers, glacier lakes, and glacial lake outburst floods, monitoring and early warning systems in the Hindu Kush-Himalayan Region, Nepal, Kathmandu, ICIMOD. Mool, P.K., Rajendra Shrestha, and Jack D. Ives. 2010. Glacial lakes and associated floods in the Hindu Kush-Himalayas. Information Sheet # 2/10, ICIMOD, Kathmandu, Nepal. MOPE. 2004. Initial National Communication to the Conference of the Parties of the United Nations Framework Convention on Climate Change. Ministry of Population and Environment (MOPE), Kathmandu, Nepal. NPC. 2010. Approach Paper to the Three Year Plan (2010/11 – 2012/13). Government of Nepal, National Planning Commission (NPC), Kathmandu, Nepal. NPC and MOPE. 2003. Sustainable Development Agenda for Nepal. Government of Nepal, National Planning Commission (NPC) and Ministry of Population and Environment (MOPE), Kathmandu, Nepal. Pokharel, Govind R. and Ram P. Dhital. 2006. Report on Assessment of Renewable Energy Intervention Possibilities in Karnali Districts. A Report submitted to SNV/Nepal, Lalitpur, Nepal. Shardul A., Vivin R. Maarten, V.A., Peter, L. Joel, S and John, R. 2003. Development and Climate Change In Nepal: Focus on Water Resources and Hydropower. OECD. Tiwary, Manish, Ganapati Ojha, Shyam Upadhyaya, Krishna Hari Maharjan, Ameena Shrestha, and Barbara Huddleston. 2002. Profiles of Vulnerable Livelihood Groups in Nepal. Food and Agriculture Organization of the United Nations, Romre. UNDP. 2001. Nepal Human Development Report 2001: Poverty Reduction and Governance. Kathmandu: United Nations Development Program (UNDP). UNDP. 2009. Nepal Human Development Report 2009: State Transformation and Human Development. Kathmandu: United Nations Development Program (UNDP). Upadhyaya, Shyam K. 2005. Payments for environmental services: Sharing hydropower benefits with upland communities. RUPES Working Paper 1, Kathmandu, Nepal: Winrock International. Upadhyaya, Shyam K. "Characteristics of Environmental Service Providers in Kulekhani Watershed, Nepal: Implications for the Development of PES Mechanism," Insight: Notes from the Field, RECOFTC, Bangkok, Thailand, 2007. Upadhyaya, Shyam K. 2003. How can hydropower royalty lead to social equity and environmental justice?, Equitable Hydro Working Paper 2, Winrock International, Nepal, January, 2003. 18

Upadhyaya, Shyam K. 2002. Hydropower Development in Nepal: Issues of Equity and Environmental Justice. Equitable Hydro Working Paper 1, Winrock International, Nepal. Winrock International. 2006. Assessment of Impacts of Rural Energy Development Programme (REDP) in MDGs. A Report submitted to REDP, Kathmandu, Nepal.. Winrock International. 2002. Emerging Issues in Community Forestry in Nepal. Winrock International, Nepal.

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APPENDIX

Figure A1: Human Development Index (HDI), 2006

Figure A2 : Food Balance in Nepal, 2007/08

Source: MOAC (2008).

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