Assessment of Electric Mobility Targets for Nepal’s 2020 Nationally Determined Contributions (NDC)

Government of NepalMinistry of Forests and Environment

March 2021

Government of NepalMinistry of Forests and EnvironmentClimate Change Management DivisionSingha Durbar, Kathmandu, Nepal

Phone: (+977-1) 4211567Fax: (+977-1) 4211868Website: www.mofe.gov.npE-mail: info@mofe.gov.np

© Government of Nepal, Ministry of Forests and Environment (MoFE), March 2021.

Report Prepared by: Climate Analytics under the IMPACT project, supported by the German Federal Ministry for the Environment, Nature Conservation Building and Nuclear Safety; and under the Climate Action Enhancement Package (CAEP) initiative coordinated by the NDC-Partnership.

Contributors:Ministry of Forests and Environment: Dr. Radha Wagle, Dr. Maheshwar Dhakal, Raju Sapkota, Dr. Keshab Goutam, Hari Laudari, Shreejana BhusalClimate Analytics: Bhushan Tuladhar (consultant), Eriko Shrestha, Manjeet Dhakal, Sneha Pandey, Dr. Jan Sindt, Rachel PhamNDC Partnership Support Unit: Abhishek Yadav

Citation: MoFE. 2021. Assessment of Electric Mobility Targets for Nepal’s 2020 Nationally Determined Contributions (NDC), Ministry of Forests and Environment (MoFE), Kathmandu.

Cover Photo Details:Electric tempo (three-wheeler) in the streets of Kathmandu Valley. Photo Courtesy: Bhushan Tuladhar.

Table of Contents

Foreword 3Acknowledgments 41. Transport Sector and E-Mobility in Nepal 11

1.1 Vehicle Growth in Nepal 111.2 EV in Nepal 12

2. Energy Sector in Nepal 142.1 Energy Sources 142.2 ConsumptionofPetroleum 142.3 ConsumptionofElectricity 15

3. GHG Emissions from the Transport Sector 183.1 GHG Emissions in Nepal 183.2 EmissionProjectionsforNepal 20

4. Policies Related to E-Mobility in Nepal 214.1 PeriodicPlans 224.2 EnvironmentandClimateChangeRelatedPolicies 244.3 TransportRelatedPolicies 254.5 EnergyRelatedPolicies 274.6 PolicyGaps 28

5. Policies to Promote E-Mobility Globally 295.1 EVRelatedPolicies 295.2 EVRelatedTargets 305.3 CaseStudiesofEVPoliciesinDifferentCountries 315.4 E-MobilityinNDCs 325.5 KeyLessonsfromInternationalExperiencesRelatedtoEVPolicies 33

6. E-Mobility Market, Technology, and Finance Trends 336.1 GlobalMarketTrendsofDifferentVehicleSegments 346.2 MarketTrendsofDifferentVehicleSegmentsinNepal 366.3 FutureEVProjectionsforNepal 37

7. ChallengesandOpportunitiesforPromotingE-MobilityinNepal 388. ReviewofExistingE-MobilityTargetstoInformthe2020NDC 39

8.1 TypesofNDCTargets 398.2 ExistingE-MobilityTargetsinNepal 40

9. E-MobilityTargetsinthe2020NDCandBackgroundLEAPAnalysis 439.1 FutureVehicularSalesUnderBAUScenariovs.AmbitiousE-MobilityScenario449.2 FossilFuelUsageReductionsAttributabletoAmbitiousE-MobilityScenario 459.3 EmissionReductionsAttributabletoAmbitiousE-MobilityScenario 45

AnnexI:ListofExpertsandStakeholdersConsultedDuringtheStudy 49

List of TablesTable1: Nepal’sDirectGHGEmissionsandRemoval,2011 19Table2: EVRelatedPoliciesinSelectedCountries 29Table3: AnnouncedTargetsfor100%Zero-EmissionVehicles 30Table4: ComparisonofCostofDieselandElectricBusesin2017 38Table5: KeyChallenges&OpportunitiesRelatedtoE-MobilityinNepal 38Table6: TargetsRelatedtoEVinNepal 42

List of FiguresFigure1: GrowthofRegisteredVehiclesinNepal(1989/90-2018/19) 11Figure2: TypesofVehiclesRegisteredinNepal 12Figure3: SourceofEnergy(left)andEnergyConsumptionbySectors(right)inNepal 14Figure4: ConsumptionofDieselandPetrolinNepalOverthePast20Years 15Figure5: ElectricityConsumptioninNepal(2010-2019) 16Figure6: SystemLoadCurveinDrySeason(10January2019) 16Figure7: SystemLoadCurveinWetSeason(30June2019) 17Figure8: EmissionsfromNepal’sTransportSectorin2011 19Figure9: GDPGrowthRate(2010-2020) 20Figure10: ProjectedGHGfromtheEnergySectorunderDifferentScenariosinNepal 21Figure11: FallinLithium-ionBatteryPrices 34Figure12: ShareofDifferentTypesofEVinGlobalVehicleFleet 35Figure13: ProjectionofVehicleSalesUnder(a)BAUScenarioand

(b)AmbitiousE-MobilityScenario 44

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Acronyms

AFOLU Agriculture,ForestryandOtherLandUse

BAU BusinessAsUsual

BMU German Federal Ministry of the Environment, Nature Conservation andNuclearSafety

BS BikramSambat

CAEP ClimateActionEnhancementPackage

cc cubiccentimetres

CDES CentralDepartmentofEnvironmentalScience,TribhuvanUniversity

CH4 Methane

CO2 CarbonDioxide

CO2e CarbonDioxideequivalent

COVID-19 CoronavirusDisease2019

DoTM DepartmentofTransportManagement

E-mobility Electricmobility

EU EuropeanUnion

EV Electric Vehicles

FAME FasterAdoptionandManufacturingof(Hybrid&)ElectricVehiclesinIndia

FY FiscalYear

GDP GrossDomesticProduct

Gg Gigagrams

GgCO2e GigagramsofCO2equivalent

GGGI GlobalGreenGrowthInstitute

GHG Greenhouse Gases

GJ Gigajoules

GoI GovernmentofIndia

GoN GovernmentofNepal

HFC Hydrofluorocarbon

ICE Internalcombustionengine

IEA InternationalEnergyAgency

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IMF InternationalMonetaryFund

IKI InternationalClimateInitiative

INR IndianRupees

kV kilovolt

kWh Kilowatt-hour

LEAP LowEmissionsAnalysisPlatform

LDV LightDutyVehicles

MoEWRI MinistryofEnergy,WaterResourcesandIrrigation

MoF MinistryofFinance

MoFE MinistryofForestsandEnvironment

MoPIT MinistryofPhysicalInfrastructureandTransport

MW Megawatt

NDC NationallyDeterminedContributions

NDC-P NDCPartnership

NEA NepalElectricityAuthority

N2O NitrousOxide

NOC NepalOilCorporation

NPC NationalPlanningCommission

NPR NepaleseRupees

NRB NepalRastraBank

PM2.5 ParticulateMatter2.5

SDG SustainableDevelopmentGoals

UNFCCC UnitedNationsFrameworkConventiononClimateChange

USAID U.S.AgencyforInternationalDevelopment

USD UnitedStatesDollar

VAT ValueAddedTax

WECS WaterandEnergyCommissionSecretariat

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About the StudyGlobally,thetransportsectorisamajorcontributortogreenhousegas(GHG)emissionsandthis contribution continues to grow rapidly with increasing urbanization and motorization,particularlyindevelopingcountries.ItisthereforeimportantforcountrieslikeNepal,whohaveasmallbutrapidlygrowingvehiclefleet,toaggressivelydecarbonizethetransportsector.InadditiontoreducingGHGemissions,decarbonizationofthetransportsectorwillalsocontributetowards lowering air pollution and its negative health impacts, reducing the budget deficitcaused by the import of petroleum products, and increasing energy security. Realizing thisopportunity,theGovernmentofNepal(GoN)includedtargetsforelectricmobility(e-mobility)in itsfirstNationallyDeterminedContributions(NDC)thatwascommunicatedtotheUnitedNationsFrameworkConventiononClimateChange(UNFCCC)SecretariatinOctober2016aswellasthesubsequentrevisedNDCwhichwascommunicatedinDecember2020.

Throughanalysisofnationalandinternationalpolicyframeworks,markets,technologies,finance and electricity availability and through numerous expert and stakeholderconsultations (seeAnnex I), this reportwasprepared tohelp informNepal’s 2020NDCtargetsone-mobility.Additionally,thisassessmentalsohelpsinformNDCimplementationby recognizing crucial gaps in Nepal’s policy, markets, finance and energy sector andidentifyingsolutionstomeetthem.

Chapter1and2ofthisreportdiscussthecurrentstatusoftransportandenergysectorinNepal.Chapter3tabulatespastGHGemissionsofNepalandoutlinesemissionsprojectedbyNepal’sThirdNationalCommunicationundervariousGDPgrowthratescenarios.Chapter4analyzespoliciesrelatedtoe-mobilityinNepalanddiscussesgapswhileChapter5examinese-mobilityrelated policies in other countries and identifies key lessons. Chapter 6 analyzes markets,technology,andfinancingtrendsbothnationallyandinternationallyandprovidesprojectionsofelectricvehicles(EV)pricesinNepalinthenearfuture.Chapter7discusseskeychallengesandopportunities inpolicies;governance;technology, infrastructureandmarkets;financing;andknowledgemanagementrelatedtoEV.Chapter8explorespossiblee-mobilitytargetsforthe2020NDC.

Chapter9liststhe2020NDCtargetsandpresentstheBusinessasUsual(BAU)ScenarioandtheAmbitiousE-MobilityScenariosthatinformedthesetargets.TheAmbitiousE-MobilityScenarioinformedthe2020NDCtargetsonmobilitywhiletheBAUScenarioprovidedabasisforcomparison.ThesescenariosweredesignedusingthepolicyandtrendanalysispresentedfromChapter1toChapter8ofthisreport,aswellastherecommendationsofnumerousexperts(seeAnnexI),theGoN-appointedNDCWorkingGroup,andotherlineministriesandgovernmentagencies.Theimpactsofthesescenariosonvehiclefleet,fossilfuelusageandGHGemissionsfrom2020to2030wereprojectedusingtheLEAPmodelingsoftware.Whilethisreportpresentstheresultsofthisanalysis,theaccompanyingNepalMitigationAssessmentReport(2021)describesthisLEAPmethodologyinmoredetail.

To supportMoFE inNepal’s 2020NDC revision process, ClimateAnalytics has providedtechnical services, including this e-mobility sectoral assessment, through the IMPACTprojectwithfinancialsupportfromtheGermanBMUandIKIcluster,aswellasthroughtheNDC-Partnership’sClimateActionEnhancementPackage(CAEP)initiative.

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1. Transport Sector and E-Mobility in NepalThetransportsectorinNepalisdominatedbyroadtransport,whichaccountsforabout90%ofall trips (Acharyaet.al,2015).Whileaviationhasgainedsomepopularity,particularlyforthosetravellingtoruralmountainousareasorwantingtoavoidlongandoftenunsafehighways, the use of rail and waterways has been limited due to difficult terrain. Railtransport,however,mayseeanincreaseinthefutureastheGoNisplanningseveralrailprojectsthatwouldconnectmajorcitiesandalongtheeast-westcorridorinthesouthernplains(NPC,2019).

1.1 Vehicle Growth in Nepal

AlthoughNepalisstillintheearlystagesofmotorization,thenumberofvehiclesisgrowingrapidly.Thenumberofvehiclesregisteredinthecountrygrewatarateof14%perannumfrom1990to2018andinthepast10yearsthisgrowthratehasexceeded16%perannumasdemonstratedin Figure 1.Thisgrowthinthenumberofvehiclesisexpectedtocontinueinthefuturewithincreasingroadinfrastructure,rapidurbanizationandgrowingincomes.Thegrowthinthenumberofvehiclesisparticularlyhighfortwo-wheelers,whichgrewatanannualrateof17%from1990to2018(DoTM,2019).

Figure 1: Growth of Registered Vehicles in Nepal (1989/90-2018/19)Note:DataforFY2018/19onlyconsidersthefirst9monthsofthefiscalyear.Source:DoTM,2019

TheDepartmentofTransportManagement(DoTM),whichkeepsarecordofallvehiclesinthecountryonlyhasrecordsofnewvehiclesregisteredindifferentyearsinthedifferent

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zonesofthecountry.AstheDepartmentdoesnothaveanyrecordsonhowmanyvehiclesareremovedfromtheroads,thedataindicatecumulativenumbersofregisteredvehicles.

Because the vehiclemarket is very price-sensitive, smaller vehicles, which are also lessexpensive,aregenerallypreferredasprivatevehicles.While79%oftheregisteredvehiclesaremotorcycles,7%arelight-dutyvehicles(LDV)consistingofcars,jeepsandvans,3%aretrucksandotherheavyvehicles,2%arebusesand1%areminibusesandminitrucks.EvenamongLDV,thepreferenceseemstobetowardssmallcars(CEN,2019).

Ofthe3.5millionvehiclesregisteredinthecountry,over90%arepassengervehicles,whileonly about 10% are freight and other vehicles. Among the passenger vehicles, 96% areprivatevehicleswhiletheremaining4%arepublicvehicles.Theshareofpublictransportvehicles(buses,minibuses,microbusesandthree-wheelers)intheoverallvehiclefleetofthecountrydecreasedfrom11%in1990to5%in2018,indicatingashifttowardsprivatevehicles. Figure 2belowshowsthepercentageofdifferenttypesofregisteredvehiclesinthe country.

Figure 2: Types of Vehicles Registered in NepalSource:DoTM,2019

1.2 EV in Nepal

E-mobility has a rich history in Nepal. The first ropeway connecting Kathmandu toDhorsingwas introduced in 1922 andwas later expanded toHetaudawith the totallength of 42 km in 1964. Electric trolleybuseswere introduced in KathmanduValleywith support from the Chinese government in 1975. These trolleybuses operated

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successfullyalonga13kmroutebetweenKathmanduandBhaktapuruntil2001whenitwasshutdownduetomanagementproblems.Itopenedagainpartiallyin2003butclosed again in 2008. Theexperience from the trolleybusdemonstrates that electricbustechnologycanbesuitableforNepal,butoperationsmustberunprofessionally.Simplyhavingthebusesoperatedbyagovernmententitymaynotresult ineffectiveandefficientservices.

In1995,electricthree-wheelers,locallyknownasSafaTempo,werefirstintroducedinthecountrybyGlobalResourcesInstitutewiththesupportofUSAID.TheprojectsuccessfullyoperatedthefirstsevenSafaTemposbeforehandingthemovertoaprivatecompany.ThenumberofSafaTemposincreaseddramaticallyafterdieselthree-wheelerswerebannedinthecapitalcityintheyear2000.Today,thereareover700SafaTemposoperatingaspublictransportationin28differentroutesintheKathmanduValley.TheSafaTempohasbeenasuccessstoryastheyhavebeenoperatingsuccessfullyasameansofpublictransportfor25yearswithoutanygovernmentsubsidy.However,exceptsmallscaleinitiativesuchas10SafaTemposswitchtoLithium-ionbatteries,therehasnotbeenany improvement intheSafaTempotechnologyover theyearsandtheirnumbershavealsonotgrownoverthelastfewyears.Thisdemonstratesthatalthoughtheprivatesectorcanoperateelectricvehicles(EV),theywillneedsupportinitiallywhenthetechnologyisfirstbeingintroduced.Additionally,thegovernmentalsoneedstoprioritizeresearchanddevelopmenttoensurethetechnologycanevolveandgrowwithtime.

BesidesSafaTempos,inrecentyearsmanythree-wheelere-rickshawsarealsorunningonthestreetsofNepal,particularlyinthecitieslocatedinthesouthernplains.Someofthesee-rickshawsareassembledinNepalwhileothersareimportedfromIndiaorChina.Vehicleregistration records of DoTM recorded e-rickshaws for the first time in the FY 2015/16when11,894e-rickshawswere registered.ByMarch2019, therewerea totalof26,466e-rickshawsregisteredinthecountry(DoTM,2019).

Recently, a private bus operator started to operate four electric buses in Kathmandu.Additionally,theGoNhasalsoimportedfiveelectricbusesforLumbinibutthesehavenotyetcomeintooperation.TheGoNhasalsoannouncedplanstoprocure300moreelectricbuses.

Electric-twowheelersandelectriccarshavealsobeenintroducedinNepalasprivatevehicles inthepastfewyears.ElectricVehicleAssociationofNepal(EVAN)estimatesthatatpresentthereareapproximately6,000electrictwo-wheelersand1,000electriccarsinNepal(Shrestha,2020).Thisindicatesthataltogether there are currently about thirty-four thousand EV in the country,whichwouldbeabout1% of the total vehicle fleet in the country.Amongthese,morethan80%arethree-wheelersthatoperateaspublicvehicles.

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2. Energy Sector in Nepal

2.1 Energy Sources

Traditionalenergysources,suchasfirewood,dungandagriculturalresidue,continuetobethemainenergysourcesinNepal.However,theuseofcommercialsourcessuchasfossilfuelsandelectricityissteadilyincreasing.AsshowninFigure 3,biomassprovides69%ofthetotalenergywhich ismainlyused inhouseholdsforcookingandheating,whilepetroleumproductsprovide17%,electricityprovides4%andother renewablesources provide 3%. Figure 3 also shows that the residential sector has the highestenergyconsumptionat75%,followedbytheindustrialsectorandthetransportationsectorat10%each(MoF,2019).

Figure 3: Source of Energy (left) and Energy Consumption by Sectors (right) in NepalSource:MoF,2019

2.2 Consumption of Petroleum

Theconsumptionofpetroleumproductssuchasdieselandpetrol,whichareprimarilyusedintransportation,isgrowingatarapidpaceasseeninFigure 4.Overthepast10yearsfrom2008/09to2018/19,theconsumptionofdieselandpetrolgrewatarateofover21%peryear.Althoughtherewasaslightreductioninconsumptionin2015,mostlybecauseofthemegaearthquakeandenergycrisis1,insubsequentyearsthegrowthhaspickedupagainwithincreasedeconomicactivity.

PetroleumimportsarethemajorcontributorstoNepal’stradedeficit,whichwasequivalentto38.1%ofthecountry’sGDPin2018/19,whenthetotalvalueofimportswasalmost15timeshigherthanthevalueoftotalexports.Petroleumproductsmadeupmorethan15%ofallthegoodsimportedintothecountry.ThetotalvalueofallthepetroleumproductsimportedinthecountrywasmorethandoublethevalueofNepal’sexports(NRB,2019).

1 To meet its domestic needs, Nepal imports all petroleum products, including LPG, from India. The undeclared economic and transit embargo imposed by India, which began on 23rd September 2015 and lasted for over two months, sharply curtailed the supply of these petroleum products, including petrol and diesel in Nepal.

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Figure 4: Consumption of Diesel and Petrol in Nepal Over the Past 20 YearsSource:NOC,2020

2.3 Consumption of Electricity

Overthepast10years,theamountofelectricitysoldinNepalisincreasingatanaveragerateof11%peryear.NepalElectricityAuthority(NEA)isthemajorgeneratoranddistributorofelectricityinNepal.AccordingtotheNEA,therateofannualincreaseinelectricitysoldhasbeenover19%inthelastthreeyears.Atotalof7,741GWhofelectricitywasgeneratedor imported inNepal in2019/20.Of thisamount,approximately39%wasgeneratedbyhydropowerplantsownedbyNEA,39%weregeneratedbyindependentpowerproducersinNepalandabout22%wasimportedfromIndia.TheamountofelectricityimportedfromIndiadecreasedby38.55%in2019/20comparedtothepreviousyear(NEA,2020).Asmosthydropowerplantsarerun-of-rivertypeplantswithverylittlestoragecapacity,electricitygenerationissignificantlyhigherrightafterwinterwhenthesnowbeginstomeltandduringthe monsoon.

Electricitydemandvariessignificantlywithtimeover24hours. Figure 6 shows a system loadcurveforNEAover24hoursduringthedryseason.Thegraphshowsthatpeakdemand(load)was1200MWataround7pmintheevening,whereastheminimumdemandwasonly600MWfrom1amto5amatnight.Themorningdemandwas1000MWaround6amwhichdecreasedto800MWduringthedaytimebeforepeakingagainintheevening.

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Figure 5: Electricity Consumption in Nepal (2010-2019)Source:NEA,2019

Figure 6: System Load Curve in Dry Season (10 January 2019)Source:NEA,2019

Similarly, Figure 7showsthesystemloadcurveinthewetseasonof2019whenthepeakdemandwas1300MWataround8pmintheevening,whereastheminimumdemandwasonly900MWduringthenight.Themorningdemandwas1000MWaround8amwhichgraduallyincreasedoverthedaybeforepeakingagainintheevening.

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Figure 7: System Load Curve in Wet Season (30 June 2019)Source:NEA,2019

Thesesystem loadcurvesshowthat there isaneed toutilizeelectricityduringoff-peakhours from10 pm to about 7 am to balance the load in the grid.NEA realizes that EVcanbeaneffectivewaytoutilizethiselectricityduringoff-peakhours.Atan interactionprogrammeorganizedbyMoFE,thethen-DeputyManagingDirectorofNEA,HitendraDevShakya2statedthatinthewetseasonof2020,therewouldbeexcesssupplyinthegridandelectricitymayhavetobespilledduringtheoff-peakhours(MoFE,2020b).Thisproblemofexcesselectricityintheoff-peakhourswillprobablyincreaseasseveralnewhydropowerplantsarescheduledtostartoperationssoon(Ghising,2020).NEA is thereforeplanningtopromoteEVtoutilizetheoff-peakelectricitybyinitiallyestablishingatleast50chargingstations.

Nepalhadaninstalledcapacityof1142MWbymid-March2019whichsupplieselectricityto78%ofthehouseholds(MoF,2019).TheEnergy,WaterResourcesandIrrigationWhitePaper,(MoEWRI’sWhitePaper)2018statesthattheGoNplansto increasetheinstalledcapacityto3000MWinthreeyears,5000MWinfiveyearsand15,000MWin10years(MoEWRI, 2018&NPC, 2019). TheGoNalsoplans to increase theper capita electricityconsumptionfromthecurrentrateof245kWhto700kWhby2023and1500kWhby2028.ThisisanambitioustargetasWECS(2017)estimatesthatinthebusinessasusualscenario(whichassumesanannualGDPgrowthrateof4.2%)thepercapitaelectricityconsumptionwillgrowto462kWhin2025and716kWhby2030.OnlyinhighGDPgrowthratescenarioof9.2%(alongsideaseriesofpolicyinterventions)WECS(2017)estimatesthepercapitaelectricityconsumptiontoreach867kWhand1474kWhby2025and2030respectively.Thepolicyinterventionsassumedforthehighgrowthscenarioconsider18%ofthetotalpassengerkilometresdemandfulfilledbyelectriccarsand7%byelectricmetrosinurbancitiesby2025.WECS(2017)alsoestimatesthattomeettheelectricitydemandforthehigh

2 Hitendra Dev Shakya is currently the Managing Director at NEA. At the time of this interaction programme in July 2020, he was the Deputy Managing Director at NEA.

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GDPgrowthratescenario,theinstalledcapacityneedstoreach10,803MWby2025and18,371MWby2030.

Withthecompletionofnewpowerplants,theamountofelectricityimportedfromIndiaisexpectedtodecreasesignificantlythisyear,andoverthecomingyears,itisexpectedthattherewillbesurpluselectricityinthegrid.InFY2019/20thetotalenergyimportedfromIndiawas1,729GWhascomparedto2,814GWhinFY2018/19,adecreaseof38.55%(NEA,2020).NEAestimatesthattheelectricityconsumptionneedstogrowat25%peryear,upfromthecurrentgrowthrateofabout19%peryeartomeettheGoN’stargets(Ghising,2020).Thiswillnecessitateasignificantconsumptionofelectricitybythetransportsectoraswell.MoEWRI’sWhitePaperissuedbytheMinistrythushasatargettoensurethat50%ofnewvehicleswillbeelectricby2023(MOEWRI,2018).

3. GHG Emissions from the Transport SectorCurrently, transport contributes almost a quarter of the global energy-related GHGemissions and is growing faster than anyother energyend-use sector. Transport is thethird-largestsourceofCO2emissionsafterthepowersectorandotherformsofindustrialcombustion.GHGemissionsfromtransportareanticipatedtorisefromtoday’slevelsbynearly20%by2030andcloseto50%bytheyear2050unlessmajoractionisundertaken.Within the transport sector, freight emissions are now growing faster than passengertransportemissions.ThefreightemissionsshareintotaltransportCO2emissionsincreasedfrom35%in2000to41%in2015(SLOCAT,2018).

3.1 GHG Emissions in Nepal

TheFirstNationalCommunicationsubmittedbyGoNtotheUNFCCCin2004withbaseyear1994/95estimatedtheemissionsfromthetransportsectortobe456Ggin1994(MoPE,2004).Thiswas4.67%ofthetotalemissionsofthecountryand14%oftheemissionsfromtheenergysector.Similarly,theSecondNationalCommunicationsubmittedtoUNFCCCin2014withbaseyear2000/01estimatedtheemissionsfromthetransportsectortobe818Ggintheyear2000(MoSTE,2014).Thiswas6%ofthetotalGHGemissionsand12%oftheemissionsfromtheenergysector.Thisshowsthattheemissionsfromthetransportsectorhaveincreasedannuallyatanaveragerateofabout10%from1994to2000and7.1%from2000to2011.3

Nepal’sThirdNationalCommunicationprovidesaninventoryofGHGemissionsbysourcesandtheirremovalbysinksforthebaseyear2011.ItestimatedthenetdirectGHGemissionsinthecountrytobe31,998.91GgCO2e

4.Ofthis,1,740GgCO2ewasfromthetransportsector,whichaccountsfor5.44%ofthetotalnetGHGemissionsand11.84%ofnetemissionsfromtheenergysector(CDES,2017).Nepal’sGHGemissionsandremovalforthebaseyear2011havebeenpresentedin Table 1.

3 It must be considered, however, that the methodologies for estimating GHG emissions were different in the first and second national communication reports.

4 This does not take into account direct GHG emissions under memo items, nor indirect GHG emissions.

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Table 1: Nepal’s Direct GHG Emissions and Removal, 2011

Sector / SubsectorEmission/SinkofDirectGas(Gg)

CO2 CH4 N20 HFC CO2eTOTAL -7,335.82 1,259.61 26.25 0.01 31,998.911. Energy 4,678.20 354.90 3.90 14,713.36

Energyindustries 2.38 0.00 0.00 2.38Manufacturingindustries&construction 2,237.34 0.04 0.06 2,256.10Transportation 1,708.92 0.27 0.08 1,740.97Others(Commercial,Institutional,Residential,Agricultural) 729.58 354.59 3.89 10,753.00

2.IndustrialProcessesandProduceUse 355.40 0.00 0.01 379.803.AFOLU -12,371.79 882.36 21.12 15,982.16

Livestock 705.49 0.09 17,665.29Land(ForestandCropland) -16,436.14 -16,436.14Land(Grassland,SettlementandOtherLand) 3,253.36 3,253.36

AggregatesourcesandNon-CO2EmissionSourcesonLand 810.99 176.87 21.03 11,499.68

4. Waste 2.36 22.35 1.22 923.595. Memo items

InternationalBunker 172.51BiomassCombustionforEnergyProduction 34,990.76

Source:CDES,2017

Themain sourcesofGHGemissions areheavy vehicles such as trucks, buses andotherheavyequipment followedby light-dutyvehicles suchas cars, jeepsandvans.Althoughtwo-wheelersmakeupabout79%ofthetotalvehiclefleet,theircontributiontotheoverallGHGemissionsfromthetransportsectorisestimatedtobeonly8%asshownin Figure 8 (CDES,2017).

Figure 8: Emissions from Nepal’s Transport Sector in 2011Source:CDES,2017

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The GHG emissions from the transport sector have been calculated using standardemission factors. For more reliable estimates, however, it is important to developnationalemissionsfactoraswellasdevelopaninventorythataccuratelyrepresentsthenationalvehiclefleetandthedistancetravelled.

3.2 Emission Projections for Nepal

GHGemissionsarecloselyrelatedtoeconomicactivities.Therefore,futureprojectionsforemissionswilldependonGDPgrowthrates.Followingthemegaearthquakeof2015,NepalhasmanagedtoachieveafairGDPgrowthrateof7.3%peryear.AlthoughtheGoNplanstoincreaseaverageGDPgrowthrateof9.6%peryearduringthe15thFive-YearPlanperiod(i.e.2019-20to2023-24),COVID-19inducedeconomicdownturnmeansthatthistargetisnotlikelytobemet.Infact,theGDPgrowthratewaspredictedtodecreaseto2.5%intheyear2020(IMF,2020)andwillprobablyremainlowinthenearfuture.

Figure 9: GDP Growth Rate (2010-2020)*ProjectedSource:IMF,2020

TheThirdNationalCommunicationReportusedLEAPmodelingtoestimatetheprojectedenergydemandandcorrespondingemissionsunderfourdifferentscenarios–(i)BusinessAsUsualScenariowithGDPgrowthrateof4.4%;(ii)MediumGDPGrowthRateScenarioof5.6%;(iii)HighGDPGrowthRateScenarioof6.5%;and(iv)CombinedPolicyInterventionScenario.TheCombinedPolicyInterventionScenarioassumedamediumGDPgrowthrateof5.6%togetherwithintroductionofmasstransportationsystems,andelectricandbio-fueltransportation technologiesamongother initiatives. It showeda significant reduction inGHGemissionsby2030.Otherinterventionsassumedinthisscenariowerethereplacementoftraditionalbiomassandfossilfuelswithcleanerenergyalternativessuchaselectricity,Liquefied Petroleum Gas (LPG), and improved cookstoves; promotion of electrificationinall sectors for lighting,heatingandotherpurposes; andadoptionofefficientprocesstechnologiesinindustries.

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Figure 10: Projected GHG from the Energy Sector under Different Scenarios in NepalSource:CDES,2017

4. Policies Related to E-Mobility in NepalNepalhasintroducedseveralpolicieswhichincludeprovisionsrelatedtoe-mobility,aswellas aNationalActionPlan forElectricMobility. The challenge,however, is to implementthesepoliciesaswellasidentifyandaddressgapsinthepolicyandlegislativeframeworktopromotee-mobility.ManyofNepal’spoliciesandlegislationarecurrentlybeingrevisedtoensurethattheyare in linewithNepal’snewconstitution,whichwaspromulgatedin2015.Part3Section30ofNepal’sConstitutionclearlymentions“RighttoCleanandHealthyEnvironment”asafundamentalrightofeveryNepalicitizen.Therefore,theGoNisobligedtodeveloprelevantlegislation,plansandprogrammestoensurethatallNepalipeoplecanenjoythisconstitutionalright.

TheConstitutionofNepalalsomentionstheresponsibilitiesofthefederal,provincialandlocalgovernments.Schedule5oftheConstitutionliststheresponsibilitiesoftheFederalGovernmentwhile Schedule 6 of the Constitution lists the responsibilities of the sevenProvincialGovernmentsandSchedule8oftheConstitutionliststheresponsibilitiesoftheLocal Governments. Transport management is primarily the responsibility of provincialgovernments with the Federal Government and local governments also sharing someresponsibilities.

Somekeypolicymeasuresrelatedtoe-mobilityinNepalarediscussedinthesectionsbelow.

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4.1 Periodic Plans

15thFive-YearPlan(2019/20–2023/24)TheNationalPlanningCommission(NPC)haspreparedaseriesofperiodicNationalPlansoverthepastdecades,whichprovidestrategicguidancetotheGoNforoveralldevelopmentand investmentpriorities. The latest in this series is the15thFive-YearPlan (2019/20–2023/24)whichhasavisionof“ProsperousNepal,HappyNepali”thataimstohaveNepalgraduatetoadevelopingcountrystatusfromits leastdevelopedcountrystatusby2022andachievetheSustainableDevelopmentGoals(SDG)before2030.

The 15th Five-Year Plan has listed three National Objectives, one of which is, “Qualityeducation and health, healthy and balanced environment”. This plan has also listedseven strategies which include: (i) Sustainable development of human settlements; (ii)Conservationandutilizationofnaturalresources;and(iii)InternalizationoftheSDG.

Amongvariousnationallevelindicatorsandtargets,theplanhasalsolistedonetargetrelatedtopollutionandcleanenvironmentwhichhasanindicatorrelatedtoairpollutioncontrol.TheplanmentionsthetargetofreducingtheaveragePM2.5levelfrom53microgramspercubicmeterin2017/18to40microgramspercubicmeterby2033/24.However,itisnotclearifthistargetisforthewholecountryorKathmanduValleyonly,andanyfurtherdetailsonhowthistargetistobeachievedarecurrentlymissing.

Chapter8ofthe15thFive-YearPlandealswithinfrastructureandsection8.1isrelatedtoenergy.Oneofthethreeobjectivesrelatedtoenergyistoreducetheimportofpetroleumproducts.Theworkingpoliciesrelatedtoenergyinclude:(i)fixinganappropriatetariffforEV;and(ii)establishingchargingstationsforEV.TheplanalsomentionsthattheGoNaimstoincreaseaccesstoandutilizationofelectricityandstatesthat“studieswillbedoneandnew tariff ratewill be introduced to promote electric vehicles,” but it neither providesdetailedplansnortargetsforEVpromotion.

Section 8.2 of the plan dealswith transportation underwhich Section 8.2.1 focuses onroads,Section8.2.3onrailway,andSection8.2.5ontransportmanagement.Thesectionontransportmanagementrecognizesthatthetransportservicesinthecountryareneithersustainablenorreliableandtherefore inneedofsignificant interventions.Thevisionfortransport management is “competitive, safe and environment-friendly transportationsystemsthatareaccessibleforall.”Thestrategylistedundertransportmanagementincludes“emphasize sustainable and environment-friendly transport system.” Furthermore, theworkingpoliciesrelatedtotransportmanagementinclude(i)emphasizemasstransitandbusrapidtransit;(ii)prioritizeEV;and(iii)encouragelocalgovernmentsandcooperativestoinvestinpublictransportandeffectivelyregulatetheprivatesector.

Regarding rail transport, the plan focuses on preparing feasibility studies and detailedproject reports for long-distance as well as urban rail systems. Itmentions that duringthe five-year period of the plan, detailed project reports will be prepared and private

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sectorinvestmentwillbemobilizedfortheconstructionofmetro-andmono-railservicesinKathmanduValleyandotherpossible cities.Similarly, it states thatadetailedprojectreportfortheEast-Westtrainwillbepreparedandconstructionofrailserviceforthe200kilometerssectionconnectingBardibas toNijgadhandBirgunjwillbecompleted. Italsomentions thatshorter railway linesconnecting Jayanagar-Janakpur-Bardibas,Bathanaha-Biratnagar-Katahari, Jalpaiguddi-Kakadbhitta, Nautanuwa-Bhairahawa, and NepalgunjRoad-Nepalgunj,willbecompletedandoperated.Thesefivesectionstogetheradduptoapproximately180kilometersofrailwaylines.

Section8.6ofthe15thFive-YearPlan,whichdealswithurbandevelopmentrecognizesthattoachievethenationalvisionof“ProsperousNepalandHappyNepali”thereisaneedtoestablishmodern,well-planned,environment-friendly,well-managed,economicallyvibrantandsociallyinclusivecitiesbecause60%oftheNepalipopulationalreadyliveincitiesandurbanareascontinuetogrow.Oneof the fourstrategies relatedtourbandevelopmentasmentioned inthe15thFive-YearPlan istodevelopKathmanduValleyasanattractive,prosperousandenvironment-friendlyculturalcapitalcity.Asvehiclesarethemajorsourceofairpollutionincities,EVwillbeimportantfordevelopingenvironment-friendlycities.

PeriodicPlansofLocalGovernmentsAll seven provinces have prepared their first periodic plan aswell as annual plans andbudgets. Among the plans prepared by the different provincial governments, BagmatiProvince(Province3),whichincludesKathmanduValley,istheonlyonethatmentionsplansandtargetsforEV.TheFirstPeriodicPlanforBagmatiProvincementionsthatelectricpublictransportwillbe introducedinpublic-privatepartnershipandtheprovincialgovernmentwillfacilitatethepromotionofEVandestablishmentofchargingstationsbymunicipalities(Province3, 2018). It also states the targetof replacing all petroleum-powered vehiclesfromitsurbancentres,mainlyKathmanduValley,Chitwan,HetaudaandDhulikhel/Banepa/Panautiby1stBaishakh2085BS(mid-April,2028AD)byvehiclesoperatingonrenewableenergy.TheProvince,however,doesnothavedetailedplansonhowthisambitioustargetistobeachieved.TheannualbudgetforBagmatiProvincehasallocatedfundsforinitiatingelectricmasstransitthroughpublic-privatepartnership.

Province1statesthat itwillencourageelectrificationof thepublic transportsector,butit does not have any specific programmes for this. The results framework presented initsperiodicplanstates that railwaysandbus rapid transit systemswillbedevelopedby2079/80(2022/23),althoughitisnotclearifthesewillbeelectric(Province1,2018).

TheperiodicplanforProvince2mentionstheneedforawell-managedandreliabletransportsystembutdoesnotspecificallymentione-mobility(Province2,2018).

Amongmunicipalities, Kathmanduand LalitpurMetropolitanCitieshaveallocated somefundstointroduceelectricpublictransportintheirannualbudget.Detailsonhowthefundsfromthemunicipalityaretobeutilized,however,stillneedtobeworkedout.

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4.2 Environment and Climate Change Related Policies

NationalClimateChangePolicy,2019The National Climate Change Policy, 2019, which replaces the earlier National ClimateChange Policy from 2011, states that its main goal is to contribute towards the socio-economicprosperityofthenationbydevelopingaclimate-resilientsociety(MoFE,2019a).Toachievethisgoal, thepolicyhas listedsevenobjectives,oneofwhich is to“promotegreeneconomybyreducingcarbonemissions.”Thedocumentalsolistsasetofpoliciesandstrategiesgroupedaroundeightthemes.Theseinclude(i)agricultureandfoodsecurity;(ii)forests,biodiversityandwatershedconservation;(iii)waterresourcesandenergy;(iv)ruralandurbansettlements;(v)industry,transportandphysicalinfrastructure;(vi)tourismandnature/culturalheritage;(vii)health,drinkingwaterandsanitation;and(viii)disasterriskreductionandmanagement.

Strategiesandpoliciesunderthe“industry,transportandphysical infrastructure”themeinclude: (i) energy-efficient technologies and promotion of electrical energy in industry,transportandphysicalinfrastructuresectors;(ii)promotionofelectricalvehicles;and(iii)privatesectormobilizationforreductionofemissionsinindustryandtransport.Similarly,oneofthepoliciesunderthetheme“Tourismandnature/culturalheritage”,statesthatthe“conceptofzero-emissionwillbeimplementedbypromotingtheuseofrenewableenergyandenergy-efficienttechnologiesintouristspots.”

AlthoughthepolicyhasexplicitlymentionedthatEVwillbepromotedandthatalow-carboneconomicdevelopmentstrategywillbeformulatedandimplemented,itdoesnotincludetargetsandtimelinesforthetimelyimplementationofthesestrategies.

NationalEnvironmentPolicy,2019ThegoaloftherecentlyformulatedNationalEnvironmentPolicy isto“controlpollution,managewasteandpromotegreenerytoensureallcitizenscanenjoytheirrighttoacleanandhealthyenvironment”(MoFE,2019b).Thepolicyincludesalistof10objectives,oneofwhich is tominimize and control all sourcesof pollution, and23 strategies includingonethatstatesthat“cleanvehiclessuchaselectricvehicles,hybridvehiclesandhydrogen-poweredvehicleswillbepromoted.”

KathmanduValleyAirQualityManagementActionPlan,2076[2020]On24February2020,thecabinetapprovedtheKathmanduValleyAirQualityManagementActionPlan, 2076which has listed promotionof EV as oneof fourmeasures to reducevehicularpollution.ThefollowingactivitieshavebeenincludedtopromoteEV(MoFE,2020):

• Withinoneyear,establishchargingstationsandbusterminalswithchargingfacilitiesinpartnership with the private sector

• Withintwoyears,developlegalmeasuresfortheconversionofoldvehiclestoEV• Withinfiveyears,operateonlyzero-emissionvehiclesintouristandculturallysensitive

areas

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AlthoughthesethreeactionsarenotenoughbythemselvestopromoteEV,itisstillgoodthatatimelinehasalsobeenproposedfortheactivities.

4.3 Transport Related Policies

NationalTransportPolicy,2001TheNationalTransportPolicyisthemainpolicydocumentrelatedtothetransportsectorinNepal.Oneoftheobjectivesofthepolicyistomakethetransportsectorenvironmentfriendly.Thepolicyliststhefollowingactivitiesrelatedtoe-mobility:(i)expansionofsolarpoweredandelectricity-driventransportmeansthroughoutthecountry;(ii)specialattentionto improving ‘the comfort, reliability, safety, frequency, availability and affordability ofpublictransport’toreducetheharmfulemissionsfrommobilitysources;and(iii)provisionofeconomicinstrumentsintheformofcustomandtaxincentivestopromoteprivatesectorinvolvementintheconstruction,maintenanceandrehabilitationoftransportinfrastructureandtoencouragenon-pollutingvehicles(MOPIT,2001).

Environment-FriendlyVehicleandTransportPolicy,2014TheEnvironment-FriendlyVehicleandTransportPolicy,whichwasintroducedtopromoteclean transport in thecountryaims to reduceairpollution fromthe transport sectorbyincreasingtheshareoftheelectricvehicleupto20%by2020,promotetheconversionofotherregularvehiclestoEV,andprovidesubsidiesforthepromotionofelectricandnon-motorizedvehicles(MoPIT,2014).Ithasastrategicapproachtoavoidunnecessarytravel,reducetripdistance,promotetheshifttowardsmoresustainabletransportmodessuchasnon-motorizedtransportandfurtherpromotepublictransportsystems.

Thepolicycallsforanimprovementintransportpracticesandtechnologiesbydiversifyingto vehicles that run on electricity, hybrid and natural gases; by promoting progressiveand affordable standard for fuel quality; and by regulating vehicle emissions to ensurecompliancewithairqualitystandards.ThepolicyhasalsomadeprovisionsfortheformationofaCentralCommitteefortheoperationandpromotionofenvironment-friendlyvehicles,headedby theMinisterorStateMinisterofPhysical InfrastructureandTransportandaWorking Committee for the promotion of environment-friendly vehicles headed by theSecretaryofMinistryofPhysicalInfrastructureandTransport(MoPIT).Thepolicyalsocallsfortheestablishmentofafundtopromoteenvironment-friendlyvehicles.

WhereastheNationalTransportPolicyunderlinestheneedforcleantransportandsetsoutbroadprovisions,theEnvironment-FriendlyTransportPolicysetsoutmoredetailedtargetsanddirections.Thefollowingarespecificprovisionsandtargetsfore-mobilityincludedinthepolicy:

• Increasing the share of what the policy terms “environment-friendly vehicles” to aminimumof20%ofthetotalvehiclefleetby2020.

• Encouragingmanufacturingofenvironment-friendlyvehicles,includingEV.• Encouragingtheprivatesectortoinvestintheconstructionandmanagementofelectric

vehicleparkingstationsandservicecentres.

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• Facilitating land for the constructionof tencharging stations inKathmandu,underapilotinitiative.

• Installing charging stations in retail outlets such as shoppingmalls, hotels and largeparkingareas.

• Improving the possibility of local vehicle assembly by improving access to requiredvehicleparts,includingbatteries.

Overall, thepolicy is veryprogressive, but it hasnot yet been implemented. Thepolicyneedstobefollowedupwithplansandprogrammes,whichhasnotbeendoneandwillrequire further investment from theGoN.Thecommitteesand fundsenvisionedby thepolicytopromoteenvironment-friendlyvehiclesalsohavenotyetmaterialized.Althoughthepolicydidhaveatargetof20%EVby2020,thiswillnotbemetmainlybecausetheGoNhasnotbeenabletoprepareandinvestinprogrammestoimplementthepolicy.

NationalActionPlanforElectricMobility,2018Thisplan,preparedwithsupportfromGGGIaimstochartapathfortheachievementofthee-mobilitytargetadoptedbythe[2016]NDC(GGGI,2018).Theactionplanrecognizesthatrobustpoliciesandfiscal incentivesareinplaceforthepromotionofe-mobilitybutidentified 15 different barriers for the promotion of EV. Thesewere grouped into fourkeybarriers: (i)policyandgovernance; (ii) infrastructureandmarkets; (iii)financingandresources;and(iv)dataandmonitoring.

Toovercomethesebarriers,theactionplancallsforthreepriorityactions:(i)establishaunitforpromotinge-mobility;(ii)developandimplementanationalprogramfore-mobility;and(iii)establishfinancingmechanismfore-mobility.Theseprioritiesactionsarebroadandoperateacrossboththesupplyanddemandsidesofthee-mobilitysector.Eachofthesepriorityactionsisdesignedtoovercomefourtofiveoftheidentifiedbarriersandtheyalsoincludeseveralinitiativeswithinthem.Theplanproposesatotalof24initiativeswhichareactivitieswithlimitedscopeandrespondtoaddresstheidentifiedbarriers.

Overall,theactionplaniscomprehensiveandfollowsalogicalpattern.However,itdoesnotcomewithatimelineandaninvestmentprogramme.TheactionplanwaslaunchedbythePrimeMinisterin2018butitwasneverimplementedasitwasnotfollowedupwithprogrammesandbudgetsfromMoPITorMoFE,twooftheministrieswhichwereoriginallyinvolvedinpreparingtheplan.AsthegoaloftheplanistoachievethetransporttargetssetoutintheNDC,thisplanneedstoberevisedalongwiththe2020NDC.

Road,RailandTransportDevelopmentforProsperousNepal–FiveYearStrategicPlan(2073-2078)PreparedbyMoPIT, the strategy focuseson thedevelopment and strengtheningof theroadnetwork,expandingtherailnetworkandmakingthetransportmanagementsystemeffective.Thestrategymentionsthatthegovernmentwill formulatepoliciestopromotepublic transport andwalking,whilediscouraging theuseofprivatevehicles, inorder tosecure safe, effective, pollution-free and accessible transport for all.While the strategyprimarilyfocusesonexpandingtheroadnetwork,ithasproposedtheconversionof20%ofvehiclesinNepaltocleanvehiclesbythenextfiveyears.

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4.4 Fiscal Policies and Incentives

FinancialIncentivesforImportofEVInthebudgetfortheFY2016/17,theGoNreducedcustomsdutyontheimportofEVusedforpublictransportto1%from30%andforprivatevehiclesto10%from30%.Furthermore,EVwerenotrequiredtopayexcisedutyandtheyonlypaid4%roadtax,comparedto8-10%paidbyothervehicles.Internalcombustionengine(ICE)vehicleshadtopay80%customsdutyand55-100%exciseduty,dependingontheirsize(MoF,2016).

ThebudgetfortheFY2020/21has,however,increasedthecustomsdutyonprivateEVto40%,addedanexcisedutyrangingfrom30-80%dependingonthepowerofthemotorandincreasedtheroadtaxto5%(MoF,2020).AlthoughthenewcustomsdutyforEV isstilllowerthanthatforICEvehicles,thedrasticincreaseincustomsdutyandexcisedutywillalmostdoublethepriceofEVandmakethemlesscompetitiveinthemarket.

ReducedTariffforChargingofEVNepalElectricityhasannouncedreducedelectricitytariffforchargingEV,particularlyduringoff-peakhours(11pmto5am).Thetariffratesvarydependingonthetimeofyear,thecapacityofthechargingstationandtimeofday.However,overallratesforchargingEVarelowerthanthatforothersegmentssuchashouseholdsandindustries.Forexample,duringthe eightmonths Baishakh toMangsir (Mid-April toMid-November), a charging stationconnectedtoa33kVlinewillpayRs.3.70perkWhduringoff-peakhours(11pmto5am),butduringthesametime,anindustrywouldpayRs.5.25andacommercialentitywouldpayRs.6.75perkWh.Onlycommunitywatersupplyschemesandstreetlampshavealowertariffthanchargingstations.Thetariff isalso lowerforchargingelectricpublictransportvehiclescomparedtoprivatevehicles(NEA,2020).

PollutionTaxonFuelTenyearsago,theGoNintroducedapollutiontaxofNPR0.50perlitreonpetrolanddieselsoldinNepal.LastyearthiswasincreasedtoNPR1.50perlitre.Asaresult,everyyearoverthreebillionNepalirupeesiscollectedthroughthistax.However,thisamountisnotbeingused.ThistaxcouldbearegularsourceforfundingprogrammesrelatedtoEVpromotion.Furthermore,astheoilpriceshavedecreasedsignificantlyintheinternationalmarket,thepollutiontaxrateofNPR1.50perlitreofpetrol/dieselcanbeincreasedfurthertogenerateadditionalrevenuewithoutincreasingthepriceofpetroleumforconsumers.Besidesthepollutiontax,theGoNalsoimposesaninfrastructuretaxofNPR5perlitreofpetrol,dieselandaviationfuelandroadmaintenancefeeofNPR4perlitreofpetrolandNPR2perlitreofdieselsold.

4.5 Energy Related Policies

NationalEnergyStrategy,2013TheNationalEnergyStrategyaimstoincreaseenergysupplyandensurethattheenergyproducediscleanandefficient.Ithassetgoalstopromoterenewableenergytechnologiesandenergyefficiencyandsupplyadequateenergyatanaffordableandreasonableprice;

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develophydropowerastheleadenergysource;reducedependencyonfossilfuelimports;andensuresustainabilityintheconsumptionofbiomassenergyresources(WECS,2013).

MinistryofEnergyWaterResourcesandIrrigation’sWhitePaper,2018MoEWRI’sWhitePapermentionsthattheMinistrywillprepareandimplementaworkplantointroduceappropriatepoliciesandchargingstationstoincreasetheuseofEVsothatby2023halfofthevehiclesimportedintothecountryareelectric(MoEWRI,2018).

4.6 Policy Gaps

Overall,NepalhasseveralpoliciesrelatedtoEV,andthepromotionofEVisalsoreflectedinsectoralpoliciesfortransport,energyandenvironment.Furthermore,italsohasaNationalActionPlanforElectricMobility,andEVpromotionisalsomentionedinperiodicplansforfederalandprovincial/localgovernments.However,althoughEVpromotionismentionedinseveralpoliciesandplans,theirimplementationisfracturedandweak,asshownbytheslowdeploymentofEV.Somekeypolicygapsareasfollows:

Lackofcleartargets–Targetsinthedifferentpoliciesvaryfromoneanotherandareunclear.For example, while the Environment-Friendly Vehicle and Transport Policy mentions atargetof20%EVby2020,the2016NDCmentions20%increaseinEVby2020comparedto2010.Similarly,MoEWRI’sWhitePapermentionsthatby2023halfthevehiclesimportedinthecountrywillbeelectricwhileBagmatiProvince’sPeriodPlanaimstohave100%EVby2028infourofitsmainurbancentres,includingKathmanduValley.Givensuchvariability,itseemsunlikelythatthesetargetswereidentifiedthroughthoroughmarkettrendanalysisorconsultationwithkeystakeholders.

Lackofdetailedplans,programmesandbudget–Policiesneedtobe followedupwithdetailedimplementationplansandprogrammesandthebudgetneededtoimplementthemhastobesetaside.However,thishasnothappenedaspoliciesoftenlosetractiononcetheyarepassed.OperationalplanshavenotbeenpreparedtoimplementtheEnvironment-FriendlyVehicleandTransportPolicyortheNationalActionPlanforElectricMobility–twoofthemostimportantpolicydocumentsforpromotingEV.

Poorcoordinationamongkeystakeholders–AspromotionofEVisnotthemandateofasingleinstitution,thereneedstobegoodcoordinationbetweenseveralagencieswithinthe federal government, provincial/local governments and the private sector. Both theEnvironment-FriendlyVehicleandTransportPolicyandtheNationalActionPlanforElectricMobilityhavesuggestedthatcoordinationcommitteesbeformedatthefederallevel.Butthishasnothappenedyet.

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5. Policies to Promote E-Mobility Globally

5.1 EV Related Policies

Globally,thenumberofEVisgrowingrapidlyandthisgrowthismainlydrivenbygovernmentpolicies,togetherwithimprovementsintechnologyandfallingpricesofbatteries.CountriesareusingavarietyofpolicymeasuressuchasprovidingincentivestopromoteEV;supportingtheestablishmentofcharginginfrastructure;andintroducinghighemissionstandardsandtaxes todiscourage fossil fuel vehicles.Governmentsarealso supportingmanufacturersof EV and components through research and development; formulation of standards;and provision of financial incentives and public procurement to stimulate demand andconsumerconfidence.GovernmentshaveeitherintroducedspecificpoliciestopromoteEVorincludede-mobilityasanintegralpartoftheirtransportorenvironmentalpolicies.

AccordingtotheInternationalEnergyAgency(IEA),atleast20%ofallroadtransportvehiclesgloballyneedtobeelectricallypoweredby2030,ifglobalaveragewarmingistobelimitedto2°Corless.Toachievethis,IEAmodelspredictthatEV(battery-electric,plug-inhybrid,andfuelcellvehicles)needtorepresent35%ofglobalsalesin2030.

Policies to promote EV typically start with a vision statement or targets. This is oftenfollowed by the adoption of standards for EV and charging infrastructure. In order tostimulatedemandandsupportsuppliers,publicprocurementoftenprovidestheimpetusforthe initialrolloutofEV&charging infrastructure inthemarket.Themostusedfiscalsupport isadirect subsidyon thecostofEV,which ismeant topartiallyoffset thehighinitialcostofEVandassistmarketpenetrationbyreducingperceivedriskforbuyersandrewardingearlyadopters.ThesesubsidiesaregenerallyreducedovertimeasthecostofEVbeginstodecreaseandtheshareofEVinthemarketincreases.Otherincentivesincludefreeparkingandwaivertoaccessrestrictions.Besidesincentives,regulatorymeasuressuchas EV charging requirements in buildings have also been introduced in some countries.SomerelevantEVpoliciesinselectedcountrieshavebeenidentifiedin Table 2.

Table 2: EV Related Policies in Selected CountriesPolicy Canada China EU India Japan USARegulations(vehicles) ZeroEmissionVehicleMandate √* √ √*

Fueleconomystandards √ √ √ √ √ √Incentives(vehicles) Fiscalincentives √ √ √ √ √Targets(vehicles) √ √ √ √ √ √*Industrialpolicies Subsidy √ √ √Regulations(Chargers) Hardwarestandards √ √ √ √ √ √

Buildingregulations √* √* √*Incentives(chargers) Fiscalincentives √ √ √ √ √*Targets(chargers) √ √ √ √ √ √*

*indicatesthatthepolicyisonlyimplementedatastate/province/locallevel.Source:IEA,2019

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5.2 EV Related Targets

ManycountrieshaveintroducedtargetsthatincreasethenumberoroverallshareofEVorbansalesofICEwithinatargetdate.ThePartnershiponLowCarbonTransportlistsover77countriesthathaveannouncedtargetsorplansforEV(SLOCAT,2020).Althoughsomeoftheseareintentionsorplansannouncedbygovernmentofficials,ratherthanofficialtargets,manyareambitioustargetssetbygovernments.SometargetsannouncedbygovernmentsarepresentedinTable 3.

Table 3: Announced Targets for 100% Zero-Emission VehiclesCountry 2025 2030 2035 2040 2045 2050CostaRicaDenmarkFranceIcelandIrelandIsraelNetherlandsNorwayPortugalSloveniaSpainSriLankaUnitedKingdom

Legend: ICEsalesban; 100%zero-emissionvehiclessalestargetwithoutICESource:IEA,2019

Thecountrythathasthemostambitioustarget isNorway,whereitwillbe illegaltosellpetrol or diesel cars from 2025. The government of Norway has introduced attractiveincentivesthatencouragepeopletoshifttoEV inordertomeetthis target.Asaresult,themarketshareforEVcontinuestoincrease.InMarch2020,over75%ofallpassengervehiclessoldinNorwaywereelectric,while7.1%werehybridandonly17.7%werepetrolordieselvehicles(Holland,2020).

The8thCleanEnergyMinisterialmeetingin2017launchedtheEV30@30CampaignwithagoalthatallmembersoftheElectricVehicleInitiative(EVI),amulti-governmentpolicyforum,wouldachieve30%marketshareforEV(excepttwo-wheelers)by2030.Asof2018,tencountries,whichtogetherrepresentaroundtwo-thirdsoftheglobalelectriccarstock,haveendorsedtheEV30@30Campaign(IEA,2019).

Besides countries, numerous cities have also announced bold targets and actions forpromotingEV.Forinstance,Seattleisaimingfora30%shareforEVby2030.HongKongwantstoreplaceallconventionalbuseswithzero-emissionbusesandLondonplansforazero-emissiontransportsystemby2050.Agroupof35citieshavesignedtheC40FossilFuelStreetsDeclaration,whichaimstoprocureonlyzero-emissionbusesfrom2025andensurethatmajorareasofthesecitiesarezero-emissionby2030.

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5.3 Case Studies of EV Policies in Different Countries

TheEVpoliciesofNorway,whichisthegloballeaderintermsofelectriccarmarketshare;China,whichhas the largestnumberof EV in theworld; and India,which is the largestexporterofvehiclestoNepal,arebrieflydescribedbelowascasestudies.

NorwayNorwayhasbeenpromotingEVsince1990whentheyalsoabolishedany import taxonthem.ItsgenerousEVpolicyisnowanintegratedpartoftheso-calledClimateAgreement(‘Klimaforliket’)amongthepartiesintheNorwegianParliament(HoltsmarkB.andSkonhoftA.,2014).SomeoftheincentivesofferedtopromoteEVinNorwayareasfollows:

• EVareexemptfromVATandothertaxesduringpurchase;• FreeparkingisavailableforEV;• EVcanusemosttollroadsandseveralferryconnectionsfreeofcharge;• EVcanusethebusandcollectivetrafficlanes;• Companycartaxis50%loweronEVandtheannualmotorvehicletax/roadtaxisalso

lower;and• Batterychargingisfreeatarapidlygrowingnumberofpubliclyfundedchargingstations.

ChinaChinaisbyfarthelargestproducerandconsumerofEV.ItsdominanceintheEVmarketismainlybecauseofthestrongsupportprovidedbytheChinesegovernmenttothisindustryoverthepastdecade.Chinahassetatargettohave5millionEVonChina’sroadsby2020.Inordertoachievethis,ithasputEVquotasforvehiclemanufacturersandimporters,providedmanufacturingsubsidiesandtaxexemptions,implementedgovernmentprocurement,andsupported the construction of EV charging stations. Many provincial governments alsosupportEVandprovidepreferentialaccessto licenseplatesandother incentives.Thesepolicieshavethreemajorgoals:tocleantheairinChinesecities,toreduceChina’soilimportandtopositionChinaforgloballeadershipinastrategicindustry.

Since2009,when theChinesegovernmentdecided to aggressivelypromoteEV, severalpolicieshavebeenintroducedtosupporttheindustry.Someofthese,whichmayberelevanttoNepal,areasfollows(Sandalow,2019):

• Zero-emissionvehiclemandates:In2019,allChinesevehiclemanufacturersandimporterswererequiredtomakeorimportatleast10%EV,whichincreasedto12%in2020.

• Subsides to vehiclemanufactures: Although in recent years, these subsidies have beengraduallyreducedasEVnumbersrise,manufacturersstillreceiveuptoUSD3600pervehicle.

• Taxexemptions:GovernmentexemptsEVfromconsumptionandsalestaxes,whichcanbethousandsofdollars,andalsowaives50%ofvehicleregistrationfees.

• Publicprocurement:AMay2016orderrequiredthathalfofthenewvehiclespurchasedbyChina’scentralgovernmentbeEVwithinfiveyears.

• Supportforcharginginfrastructure:Bothcentralandlocalgovernmentshavesetambitioustargetsforsettingcharginginfrastructure,providedfundingandmandatedstandards.

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IndiaIntroduced in 2013, India’sNational ElectricMobilityMissionPlan2020had a target ofdeployingfive to sevenmillion EV in Indiaby2020.Under thismission, inMarch2015,theSchemeforFasterAdoptionandManufacturingof(Hybrid&)ElectricVehiclesinIndia(FAMEIndia)waslaunchedfortwoyearsunderPhase-I,whichwassubsequentlyextendeduptoMarch31,2019.FAMEhadabudgetofINR8.95billion(USD130million)andfocusedontechnologydevelopment,demandcreation,pilotprojectsandcharging infrastructureinstallations.

TheGovernmentofIndia(GoI)thenlaunchedFAMEIIinApril2019withabudgetofINR100billion (USD1.4billion)over threeyears.Of the totalbudget,86%wasallocatedasdemandincentivesforprocurementofEV,mainlypublicvehicles,whiletheremainingwasforcharginginfrastructure.Theamountofdemandincentiveprovidedismainlybasedonbatterycapacity–INR20,000perkWhforbusesandINR10,000perkWhforotherEV.ThiswouldmeanthatanaveragebuswouldgetanincentiveofINR5millionwhileanaveragetwo-wheelerwith2kWhbatterywouldgetanincentiveofINR20,000.Thegovernmentwillrevieweachyear.Altogether,FAMEIIwillsupportonemilliontwo-wheelers,halfamillionthree-wheelers,55,000four-wheelers,and7090electricbuses(GoI,2019).

NITIAayog,apolicy think tankof theGoIhasproposedseveralpolicies relatedtoEV inIndia.ItstatesIndia’sEVpolicyshouldinitiallyfocusonpublicvehiclesandsmallvehicles,(NITI Aayog andWorld Energy Council, 2018) and it has also proposed that from 2023onwardsallthree-wheelersandfrom2025onwardsalltwo-wheelerssoldinthecountryshouldbeelectricandthatby2030allvehiclessoldinIndiashouldbeelectric.In2017,aseniorministerannouncedthatIndiawasplanningtogo100%electricby2030(Dash,2019).Theseproposedtargetsarestillbeingdiscussedandasofnow,theGoIisstilladheringtothetargetofEV30@30Campaignthatithasendorsed–30%EVby2030.

BesidestheFederalGovernment,sevenstategovernments,Karnataka,Maharashtra,UttarPradesh,Telangana,AndhraPradesh,Kerala,andUttarakhandaswellasDelhi,havealsointroducedpoliciesandplanstopromoteEV,whicharequiteambitious.ManystatessuchasUttarPradeshandMaharashtrahavezeroroadtaxforEV.

5.4 E-Mobility in NDCs

Differentstudieshaveshownthate-mobilitycanbeanimportantpartofNDCs.AlthoughsomeoftheinitialNDCsaddresstransport ina limitedmanner,therearepossibilitiestofurtherexpandandenhancethetargets.Ofthe166NDCssubmittedinthefirstround,76%highlightedtransportasamitigationsource,butonly35NDCsincludedquantifiedtargetsforthetransportsector(ClimateWatch,2019).MostNDCsdidnotoffermeasurestoavoidunnecessary travel incarbon-intensivemodesorshiftto low-carbonmodesof transportsuchaspublictransport,cycling,andwalking.Onlyafew(under15%)mentione-mobility.ThesehavebeenidentifiedbyFransenet.al.(2019)asoneofthekeygapsinthecurrentNDCs.

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Fransenet.al.(2019)mentionsthreeopportunitiestousetransportsectorforenhancingNDCs:(i)accelerateelectrification;(ii)strengthen“avoidandshift”measuresthatsupporttravelbylow-carbonmodes;and(iii)seizenewopportunitiestoaddressfreightemissionsviaelectrificationanduseof informationtechnology.ThesethreeopportunitiesareveryrelevantforNepalande-mobilitycanaddressallthreeofthem.

5.5 Key Lessons from International Experiences Related to EV Policies

Somekey lessons from international experiences related to EVpolicies are summarizedbelow:

Targetsandincentivesareuseful–ManycountrieshavemanagedtostimulategrowthintheEVmarketbyintroducingtargets,mandatesandincentives.Intheinitialstages,thesearecriticaltoensurecompetitivenessandboostconsumerconfidence.AlthoughNepalmaynotbeabletoprovideasmuchincentivesaswealthycountrieslikeNorwayorChina,inaprice-sensitivemarketsuchasNepal’sevensmallincentivescanstimulatethedemandforEV.

Longtermconsistencyinpolicieswillgiveaclearmessagetotheindustry–CountrieslikeNorwayandChinaareworldleadersinEVbecausetheyintroducedpoliciesfavourabletoEValongtimeagoandcontinuedovertheyearstosupporttheindustryandmarkets.TherecentincreaseincustomsdutyandexcisedutyonEVandtheimpactthatthishashadintheprivatesectorinNepalisanexampleofhowfrequentchangesinpolicycandiscourageinvestmentinEVandsignificantlyslowdowntheprogressmade.

Setambitiousbutrealistictargetsthatarerevisedasneeded–CountrieshavesetambitioustargetstostimulatetheEVindustryandperiodicallyrevisedthesetargetsbasedonmarkettrendsandtechnologydevelopment.Nepalhasalsodeclaredsometargetsbuttheseareeitherunrealisticorarenotambitiousenough.Moreanalysisandstakeholderconsultationsneedtobedoneandthesetargetsrevisedaccordingly.

Politicalcommitment isnecessary–Ownership,commitmentand leadershiparecriticaltoconvertingpoliciesintoaction.InNorway,theEVpolicyis integratedintotheClimateAgreementamongpoliticalparties,andincountrieslikeChinaandIndia,EVarestronglypromotedbythehighestlevelsofgovernment.

6. E-Mobility Market, Technology, and Finance Trends

ThetechnologyforEV,batteriesandrelatedaccessoriesandsystemsareevolvingrapidlyandtheglobalmarketforEVcontinuestoexpandinresponsetogrowingdemandaswellasfavourablepoliciesinmanycountries.

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6.1 Global Market Trends of Different Vehicle Segments

Electric carsIn2018alone,over2millionelectriccarswereaddedonroadsglobally taking thetotalnumbertomorethan5millionelectriccars(IEA,2019).AccordingtoBloombergNEF(2020),thisgrowthtrendwilldropin2020,mostlyduetotheCOVID-19pandemicbutafterthatannualEVcar saleswill likely increase to8.5million in2025,26million in2030and54millionby2040.By2040,itexpects58%ofallpassengervehiclesales,andover30%oftheglobalpassengervehiclefleettobeelectric.WhileChinawillcontinuetodominatetheEVmarket,EuropeandUSAmarketswillalsoremainclosebehindinthisrace.

While the upfront cost of EV is still slightly higher than similar ICE vehicles, this cost isdecreasingandBloombergNEF(2020)expectsthatbymid-2020stherewillbepriceparitybetweenEVandICEsinmostsegments.OneofthemainreasonsforthedecreasingpriceofEVisthedecreaseinthepriceofLithium-ionbatteries,whichareusedinEV.Between2010and2019,thepriceofthesebatteriescamedownby86%fromUSD1160/kWhtoUSD156/kWh.ThepricesofbatteriesareexpectedtodropfurthertoUSD87/kWhin2025andUSD62/kWhin2030(BloombergNEF,2020).

Figure 11: Fall in Lithium-ion Battery PricesSource:BloombergNEF,2020

ElectricBusAmongthedifferentsegmentsofEV,itisestimatedthatelectricbuseswillmostrapidlygrabalargeshareofthetotalfleetasshowninFigure 12.Thisismainlydrivenbygovernmentmandates and subsidies. China gave up to USD $150,000 per electric bus while IndiaprovideduptoINR10millionpere-busduringthefirstphaseofFAMEscheme.Aspublicbusesnormallyusediesel fuelandtravel longdistances throughout theday, theycausehighlevelsofairpollutionaswellasemitGHG.Therefore,electrificationofthebusfleetisapriorityformanygovernments.InthecityofShenzhen,theentirefleetofoversixteen

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thousandbuseshavebeenelectrifiedandinIndia,theFAMEIIschemeplanstosupporttheintroductionof7,090publicelectricbusesinthreeyears(GoI,2019).

Figure 12: Share of Different Types of EV in Global Vehicle FleetNote:CommercialvehicleadoptionfiguresincludethemainmarketsofChina,EuropeandtheU.S.Source:BloombergNEF,2020

Electric Two-wheelersAsalmost80%ofthevehiclessoldinNepalaretwo-wheelers,thissegmentisimportantfortheNepalesemarket.Globally,theelectrictwo-wheelersmarketisdominatedbyChina,whichproduced26millionelectrictwo-wheelersin2018andhasabout250millionunitsonitsstreets,whichisoveraquarteroftheglobalmotorisedtwo-wheelerstockofaround800millionunits(IEA,2019).Vietnamhasabout0.9millionandIndiahas0.6millionelectrictwo-wheelers.Two-thirdsoftwo-wheelersinChina,however,havelimitedrange(0.5-0.8kWhbatteries thatgiveabout50kmpercharge)and low-speed(typically20-25kmperhour).Althoughthisisgenerallysufficientforurbantraffic,manyNepaleseconsumersfindthisinsufficientastheexistingICEmotorcyclesandscootersinNepalgivehigherrangeandspeeds.Now,however,severalmodelsoflargeandsmallelectricscootersfromChinaandIndiahaveenteredtheNepalesemarketandthereisapossibilitythatatleastsomeofthemwillmeetthesemarketdesiredcharacteristicsinthefuture.

In India,0.1millionelectric two-wheelersweresold inFY2018-19,whichwasdouble thevolumefromthepreviousyear(IEA,2019).Thisindicatesthatalthoughelectrictwo-wheelersalesinIndiamakeuplessthan1%ofthevehiclemarketshare,theiruptakeisincreasing,mainlyduetosupportivepolicies.ThefirstphaseFAMEschemegavearebateofINR7500

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–22000 (USD110–320) for thepurchaseof62eligiblemodels from11manufacturers.About40%oftheeligiblemodelswerelow-speed(25km/hmax)andlowrangemodelsthattypicallyusealead-acidbatteryanddonotrequireadrivinglicenseorvehicleregistrationandtheyrepresented80%ofelectrictwo-wheelerssales(SocietyofManufacturersofElectricVehicles,2019asquotedinIEA,2019).However,thiscategoryofelectrictwo-wheelershasbeenexcluded fromFAMEsince thescheme’s revision (FAME II)whichhasaprovision tosupportupto1millionelectrictwo-wheelers.Therefore,itisexpectedthattheIndiantwo-wheelermarketforbiggertwo-wheelerswillincreaseinthefuture.Thiswillalsomeanmoremodelsoftheseelectrictwo-wheelerswillbeavailableintheNepalesemarket.

Becauseoftheincreasinginterestinelectrictwo-wheelersinIndia,inthepasttwoyears,Indianelectrictwo-wheelercompanieshavebeenabletoraiseoverUSD600millionofnewinvestment.Themarketforelectrictwo-wheelersinIndiaislikelytogrowfrom0.15millionunits in FY 2020 to about 3.45 units by FY 2025,which represents a compound annualgrowthrateof87%(GuliaandThayillum,2020).

FreightComparedtopassengervehicles,themarketforelectricfreightvehicles,particularlythelarge heavy-duty trucks have not grown significantly. Overall, the use of smaller lightcommercialvehiclesforfreighttransportationisgrowingbecauseofincreasingurbanization,cityrestrictionsandriseofe-commerce.ThissegmentcouldseesignificantgrowthinEVinthefuture.Theuseofrailandropewaysforfreighttransportis,however,wellestablishedandwidelyusedglobally.

6.2 Market Trends of Different Vehicle Segments in Nepal

MostofthevehiclessoldinNepalaremotorcyclesandsmallcars,whichfallunder1,500cccategorywiththeaverageenginecapacityof1,400cc(CEN,2019).Althoughinrecentyears,theaveragesizeofthevehicleshasincreasedslightlywithsomecustomerspreferringlargerSUV-typevehicles,smallcarsstilldominatethecarmarketinNepal.Thisismostlybecauseitisaprice-sensitivemarketwheremostpeopleprefervehicleswithlowercapitalandoperatingcosts.Therefore,EVneedtobecompetitiveintheseconsumersegmentsforittoabletoclaimasignificantmarketshare.Inthepastfewyears,thenumberofmodelsofelectrictwo-wheelersandcarsenteringtheNepalesemarketisincreasing,andduetolowercustomdutyandfinancingprovidedbybanks,theirpricesarebecomingcompetitiveinthemarket.However,themarketisstilldominatedbyICEvehiclesandmostconsumersarenotconfidentaboutinvestinginEVjustyet.AdditionalincentivesandeffectivemarketingandpublicprocurementofEVcouldassistinstimulatingthemarketfurther.

Afewcompanieshavestartedtoassembleelectrictwo-wheelersinNepalandoneNepalistart-up,YatriMotorcycles,hasalsodesignedandbuiltapremiumelectricmotorcycle.Theseinitiativesarepraiseworthyandneedsupportfromthegovernment.BecauseEVtechnologyisrelativelysimplecomparedtoICEandbecausethetechnologyiscontinuous,thereisapossibilitytoexpandlocalassemblyandmanufacturing.TheGoNshould,therefore,investinresearchanddevelopmentaswellassupportlocalinitiatives.

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Asforelectricbuses,theirpricesarestillmuchhigherthandieselbusesandgovernmentsubsidieswouldberequiredtomakethemcompetitiveinthemarket.

SharedmobilitysystemssuchasthoseofferedbyTootleandPathao,haverecentlybeenintroduced and they have grown significantly in recent years. Experience from othercountriesindicatesthatthisformofmobilitywillprobablycontinuetogrowinthefuture(BloombergNEF,2019).Thegrowthofsharedmobilitywill leadtoan increase invehicleutilizationrates.Vehiclesusedinsuchsharedmobilityneedtorunmoreperdaycomparedtoordinaryprivatevehicles.SoEV,whichhaveloweroperatingcosts,wouldbebeneficialunderthesecircumstances.

6.3 Future EV Projections for Nepal

ThenumberofEVinNepalisincreasingandthistrendwillcontinueinthefuture.However,itisdifficulttoassessfutureprojectionsorscenariosbecauseoflackofreliabledataandbecauseofeconomicuncertaintiescreatedbytheCOVID-19pandemic.

AstheGoI isalsofocusingonscalinguptheuseofsmallandpublice-vehiclesandmostof thevehiclessold inNepalcomefromIndia, there isastrongpossibility thatdifferentmodelsofelectrictwo-wheelers,three-wheelers,light-dutyvehiclesandbuseswillbemorewidelyavailableandaffordable in theNepalesemarket in thenear future. IfGoN takesadvantageofthistrendtoboostthedemandfortwo-wheelers,smalle-vehiclesandbusesthroughattractiveincentives,thenwithinthenextfiveyears,themarketshareforEVinthesesegmentscouldincreasedramatically.

TheGoNhasalreadytakentheinitiativetostarttheprocurementof300e-buses,whichisagoodmove.IftheGoNcancomeupwithagoodfinancingschemealongwithoperationalguidelinessimilartotheFAMEandFAME-IIschemesinIndia,thiscouldsignificantlyboostthedemandforelectricbuses.Astheoperationalcostofe-buseswillbesubstantiallylowerthanofdieselbuses,privateoperatorswilllikelyshowinterestine-busesiftheinitialcostisaffordable.

A2017costcomparisonofdieselandelectricbusesinNepal,recordedinTable 4 below,showedthatwhiletheinitialcostofanelectricbuswas7-13timeshigherthanasimilarly-sizeddieselbus,ifthelifetimefuelandmaintenancecosts,alongwithenvironmental,socialand ensuing economic costswere considered, then electric buseswere cheaper (GGGI,2018).Astheeconomic,socialandenvironmentalbenefitsprovidedbytheelectricbusarebenefitsthatthesocietyreceivesandnotthebusoperators,theGoNcanjustifysubsidyprovisionduring e-busprocurement. It should alsobenoted that theestimated cost ofdieselbuseswas theactual costbasedona competitivebiddingprocessdoneby SajhaYatayatwhilethecostsofelectricbuseswerebasedonestimatesprovidedbylocaldealers.Therefore,thecostofelectricbusesmaybeloweriftherewerealsobasedoncompetitivebidding.Furthermore,inthepastthreeyearssincethisstudywasdone,thepriceofelectricbuseshasdroppedinternationally.

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Table 4: Comparison of Cost of Diesel and Electric Buses in 2017

Cost ComponentCostfordifferente-busmodels(NPR)

Diesel(Viking) Electric(K7) Electric(K9) Electric(Circuit)Acquisitioncost 3,198,345 23,104,100 30,618,500 42,738,500

Lifetimefuelcost 13,087,901 2,861,036 2,861,036 2,861,036

Lifetimemaintenancecost 6,576,587 3,288,293 3,288,293 3,288,293

Economic cost 10,393,303 - - -Social cost 11,723,683 - - -Environmental cost 3,338,927 - - -Total(NPR) 48,318,746 29,253,429 36,767,829 48,887,829Total(USD) 470,027 284,566 357,664 475,563% cheaper than diesel - 39% 24% -1%

Source:GGGI,2018

7. Challenges and Opportunities for Promoting E-Mobility in Nepal

Nepal’sElectricMobilityActionPlanidentified15differentbarriers,whichweregroupedintofourkeycategories:(i)policyandgovernance(ii)infrastructureandmarkets(iii)financingandresources,and(iv)dataandmonitoring.Thesecontinuetobethemainchallengesinpromotinge-mobility.AslightlymodifiedlistoutliningchallengesidentifiedbytheActionPlanorbyconsultedkeystakeholders,alongsidekeyopportunities,ispresentedin Table 5.

Table 5: Key Challenges & Opportunities Related to E-Mobility in NepalISSUES CHALLENGES OPPORTUNITIES

Policies • Absenceofcleartargetsbasedonkeyindicators,suchasthesaleofdifferenttypesofEV,ormarketshareofEV,andownershipoftargetsbyalllevelsofgovernmentandprivatesector

• Lackofoperationalplansandbudgettoimplement policies

• LackofstandardsforEV,chargingsystems,conversionofICEvehiclestoEV,andtestingprotocols

• Somepolicies,suchasEnvironmentFriendlyTransportPolicy,andplanssuchasNationalActionPlanforElectricMobility,areinplace

• Fewtargetsone-mobilityhavebeenidentifiedbyfederalandprovincialgovernments

Governance • Poorplanning,managementandmonitoringofthepublictransportsystem

• Inadequatepoliticalsupportfore-mobility

• Poorcoordinationamongkeystakeholders

• AnewbillonestablishingaNationalTransportAuthorityisbeingprepared

• ThenewConstitutiongivessignificantresponsibilitiesrelatedtotransportationtolocal governments

• Some local governments such as BagmatiProvinceandKathmanduandLalitpurMetropolitanCitieshavemadecommitments to promote EV

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ISSUES CHALLENGES OPPORTUNITIESTechnology,InfrastructureandMarkets

• Alimitednumberofsuitablevehiclemodelsareavailableinthemarket

• Insufficientchargingfacilities• Lowconsumerconfidenceanddemand,

particularlyfortwo-wheelersandsmallcars

• EVtechnologyisimprovinggloballyandpricesarefalling,particularlyinIndiaandChinafromwhereNepalimportsmostofitsvehicles

• NEAhasstartedtheprocessofestablishingchargingstations

• EntrepreneursinNepalareworkingonlocalmanufacturing,assemblingandconvertingEV

FinancingandResources

• Lackofcomprehensivefinancingpackagewithadequateincentivesfromthegovernmentforentrepreneurs,consumersandoperators

• Lackofinvestmentine-busandmasstransit

• Insufficienthumanresources

• PollutiontaxcurrentlyimposedonfossilfuelcanbeasourceforfinancingEV

• Increasedsupplyofelectricityfromdomestichydropowerplantstomeetincreaseddemand

• Decreasedoff-peakelectricitycharges

KnowledgeManagement

• Insufficientdataontransportdemand,travelpatterns,vehicleoperationandemissionsfromdifferenttypesofvehicles

• Inadequateprocessinganddisseminationoftransportdata

• Limitedresearchanddevelopmentonvariousaspectsofmobility,includinge-mobility

• SomelocaluniversitiessuchasTribhuvanUniversityandKathmanduUniversityandotherinstitutionssuchasNationalInnovationCentreareconductingresearchon EV

8. Review of Existing E-Mobility Targets to Inform the 2020 NDC

8.1 Types of NDC Targets

BasedoninternationalpracticesandNepal’sownexperiences,Nepalcansetdifferenttypesoftargetsrelatedtoe-mobilityinits2020NDC.Someofthesehavebeenlistedbelow:

ExamplesoftargetsrelatedtoGHGreduction• Economy-wideemissionreductiontargetthatalsotakesintoconsiderationambitious

emissionreductioninthetransportsector• TransportspecificGHGtarget(e.g.,reduceGHGemissionsfromthetransportsectorby

X%by2030)

Examplesoftargetsrelatedtovehicleelectrification• TotalnumberofEVinthevehiclefleet• EVasapercentageofthetotalnumberofvehicles• Changeinmarketshareorsalesoveraperiod• Phase-outofICE• Targetsrelatedtocharginginfrastructure

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Examplesoftargetsrelatedtopoliciesandmeasures• Financingsupportforproduction,procurementoroperationofdifferenttypesEV• LowertaxesforEV• Electricitypricingpoliciesthatrewardoff-peakchargingorchargingofpublicvehicles• Establish standards fordifferent typesofEV,chargingstationsandconversionof ICE

vehicle to electric ones• MandatesforpublicprocurementofEV• Increaseinfossilfueltaxationandmobilizationofothersourcesforpromotionofclean

transport• Preparationofcomprehensiveplansfore-mobility

Amongthese,GHGrelatedtargetsmaybedifficulttomonitorintheabsenceofreliabledataandestablishedmonitoringsystems.Targetsrelatedtotheelectrificationofvehicleswouldbemoretangibleandeasiertomeasure.Becauseofthelackofreliabledataonexistingvehiclestockandhowitchangesovertime,targetsbasedonEVsalesoveraperiodwouldbemosttherelevantandeasytomonitor.Manyothercountrieshavealsousedthisasanindicatorfortargets.Additionally,othersupportingpolicytargetsmayalsobeincludedinthe2020NDC.

8.2 Existing E-Mobility Targets in Nepal

The Environment-FriendlyVehiclesandTransportPolicy,2014setatargetthat20%ofthetotalvehiclefleetinthecountrywouldbeelectricby2020.Thiswasanambitioustargettobeginwithandintheabsenceofanyimplementationplan,Nepalisnowhereclosetomeetingthistarget.Globally,EVconstituteonly0.5%ofthevehiclefleetandinNepal,thisnumberiscloseto1%.Achievingthisjumpto20%by2020isnotfeasible.

The 2016NDCsetatargetofincreasingtheshareofEVin2020upto20%fromthe2010level.ThistargetisnotasambitiousasthenumberofEVin2010wasverylow,probablycloseto1000.Therefore,assumingtherewere1000EVin2010,increasingitby20%meansaddingonly200EVin10years.Thishasalreadybeenachievedquiteeffortlessly.

Anothertargetinthe2016NDCis“by2050,Nepalwilldecreaseitsdependencyonfossilsinthetransportsectorby50%.”Thistargetisabitunclearasthebaseyearisnotmentioned.Ifthetargetmeanttosay50%ofthetotalenergyusedbythetransportsectorin2050,thenthisagainshouldbeaneasytargettomeetconsideringtheglobaltrendinthesaleofEVandfutureprojections.BloombergNEF(2019)predictsthatby2037halfofthepassengercarssoldgloballywillbeelectricandby2040,57%ofthepassengervehiclessoldandover30%ofthetotalvehiclefleetwillbeelectric.NepalshouldbeabletoelectrifyitstransportsectorfasterthantheglobalaverageconsideringthefactthatitdoesnothaveafossilfuelorICEvehicleindustryandNEAclaimsthatitwillsoonhaveexcesselectricityinthenationalgrid(NEA,2020).AtaninteractionprogrammeorganizedbyMoFE,thethen-DeputyManagingDirectorofNEA,HitendraDevShakya5statedthatalackofelectricitywillnotbeabarrierfor thegrowthofEVsector inNepal (MoFE,2020b).Therefore, it shouldbepossible todecreasetransportsectordependencyonfossilfuelsby50%by2050.

5 Hitendra Dev Shakya is currently the Managing Director at NEA. At the time of this interaction programme in July 2020, he was the Deputy Managing Director at NEA.

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Athirdtarget inthe2016NDCisto“developelectrical (hydro-powered)railnetworkby2040tosupportmasstransportationofgoodsandpubliccommuting.”ThistargetcanalsobemetconsideringthatworkonconstructingarailnetworkintheTerairegionisalreadyunderwayandstudiesforotherrailwaylines,includingametrosystemforKathmanduValleyisalsobeingdone.Whilethetargetdoesnotspecifyhowlongtherailnetworkshouldbeorwhichlocationswillbeconnectedbythenetwork,asthetargetdateisstill20yearsaway,thistargetshouldbefairlyeasytomeet.

The 2016 NDC also mentions that “Nepal will formulate the Low Carbon EconomicDevelopmentStrategy.”Thisshouldnothavebeenadifficulttargettomeet,consideringthatadraftversionoftheLowCarbonEconomicDevelopmentStrategywaspreparedin2015beforethe2016NDChadbeensubmitted.Therewasplentyoftimetofinalizethestrategybuttheprocesshasstalled.

MoEWRI’sWhitePaper (2018)mentions that by 2023, half of the vehicles imported inthe countrywill be electric. This is a very ambitious target, although not an impossibleone.Asabout80%ofthevehiclesimportedinthecountryarecurrentlytwo-wheelers,inordertoachievethistarget,theimportofelectrictwo-wheelerswillhavetobeincreasedsignificantly.Althoughelectrictwo-wheelersareavailableinthemarketatreasonablecosts,the demand for these is still relatively low. Therefore, substantial investmentwould berequired,intheformofincentivesandregulations,toboostthedemandforEV,particularlyelectric two-wheelers tomeet this target.Asnotmuchwasdone tomeet this target inthefirsttwoyearsafterthewhitepaperwaspublished,andnowbecauseoftheeconomicconsequencesofCOVID-19,ithasbecomedifficulttomeetthistarget.

NPCpublishedtheNationalPreliminaryReportonSDGin2015,whichproposedvarioustargetsandindicatorsforachievingthesegoals.OneoftheindicatorsforachievingSDG7‘Ensureaccesstoaffordable,reliable,sustainableandmodernenergyforall’was‘Electricvehicles in public transport systems (%).’ Initially, the baseline for this indicator wasestimatedtobe1%in2014andtargetsweresetat19.4%by2017,37.8%by2020,50%by2022,68.8%by2025and100%by2030(NPC,2015).In2017,NPCrevisedthetargetas5%by2019,20%by2022,35%by2025and50%by2030(NPC,2017).However,thelatestreviewofSDGdoesnotmention this target forEV in thepublic transport system (NPC,2020).

BagmatiProvince has set a targetof removingall petroleum-poweredvehicles from itsurbancentres,mainlyKathmanduValley,Chitwan,HetaudaandDhulikhel/Banepa/Panautibymid-April,2028.Thisisaveryambitioustargetasmanyofthefossilfuelvehiclesthatareonthestreetsnoworthosethatwillbeaddedintheupcomingyearswillcontinuetooperatebeyond2028andconvertingallofthemtoelectricwillnotbeeasy.Furthermore,inthelasttwoyearssincethepolicywasannounced,theProvincialGovernmenthasnotyetintroducedanyplansorschemesforimplementingthispolicy.Thisseemsmorelikeapoliticalstatementorvisionratherthanacarefullythoughtoutstrategy.Amoredetailedanalysiswillberequiredtoassessthefeasibilityofthisstrategyandwhatcanbedonetoacceleratethemovementtowardspetroleum-poweredvehiclefreeProvince.

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Overall, among thefive sets of targets related to EV that havebeen announcedby theGoNinvariouspolicydocuments,thetargetsinthe2016NDCarenotveryambitiousandthereforedonotinspireanynewinnovativeactionsforpromotingEV,whiletheothersetsoftargetsareprobablytooambitious.Thesetargets,andtheirstrengthsandweaknesses,havebeendiscussedin Table 6.

In addition to the targetsmentioned in the policies discussed above, inApril 2018, theFinanceMinisterhadannouncedtheGoN’sintentiontoreplaceallvehicleswithEVby2030.Thistargetwas,however,neverformallyadoptedbythegovernment.

Table 6: Targets Related to EV in NepalPOLICY TARGET COMMENTS

Environment-FriendlyVehiclesandTransportPolicy,2014

20%ofthetotalvehiclefleetinthecountrytobeelectricby2020

Nofollowupplansandprograms.Sofar,onlyabout1%ofthetotalvehiclefleetiselectric.

NDC

(i)IncreaseshareofEVupto20%from2010level.(ii)By2050,Nepalwilldecreaseitsdependencyonfossilsinthetransportsectorby50%.(iii)Developelectrical(hydro-powered)railnetworkby2040tosupportmasstransportationofgoodsandpubliccommuting.

(i)AlreadyachievedbecauseofverylownumberofEVin2010.(ii)Neitherclearnorambitious.(iii)Neitherclearnorambitious.

MoEWRI’sWhitePaper,2018By2023,halfofthevehiclesimportedinthecountrywillbeelectric.

Intheabsenceoffollowupplansandprograms,thiswillbedifficulttoachieve.

BagmatiProvincePeriodicPlan

Removeallpetroleum-poweredvehiclesfromfoururbancentres(KathmanduValley,Chitwan,HetaudaandKavre)by2028.

Veryambitioustargetwhichisnotbackedbyanalysisandplans.

SDGTargets&indicators

7.3.1:ShareofEVinpublictransportsystems2015:1%2019:5%2022:20%2025:35%2030:50%

Thetargetwassetinitiallysetin2015andrevisedin2017.Thesetargetsarerealistic,providedthattheGoNprovidessupporttopublictransport operators.

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9. E-Mobility Targets in the 2020 NDC and Background LEAP Analysis

Takingintoconsiderationsthefindingsandrecommendationsofthisreport(discussedinthechaptersabove),aswellasthesubsequentfeedbackprovidedbynumerousexperts(seeAnnexI),theGoN-appointedNDCWorkingGroup,andotherlineministriesandgovernmentagencies , two e-mobility scenariosweredeveloped. The impacts of these scenarios onvehiclefleet,fossilfuelusageandcorrespondingGHGemissionswasthenmodeledusingtheLEAPsoftware.Thischapterdiscussesinbriefthee-mobilitytargetsofthe2020NDCandthescenariosthesetargetswerebasedon.6

Nepal’s2020NDC(GoN,2020)setthefollowingtargetsforthetransportationsub-sectoroftheenergysector:

• By2025, sales of electric vehicleswill be25%of all privatepassenger vehicles salesincludingtwo-wheelersand20%ofallfour-wheelerpublicpassengervehiclesales(thispublic passenger target does not take into account electric-rickshaws and electric-tempos)7

• By2030,increasesalesofe-vehiclestocover90%ofallprivatepassengervehiclesalesincludingtwo-wheelersand60%ofallfour-wheelerpublicpassengervehiclesales(thispublicpassengertargetdoesnottakeintoaccountelectric-rickshawsandelectric-tempos)

• By2030,develop200kmoftheelectricrailnetworktosupportpubliccommutingandmasstransportationofgoods.

LEAPmodelingsoftwarewasusedtomakeprojectionsforeveryyearfrom2020(yearofNDCsubmission)till2030(thefinaltargetyearofthe2020NDCandSDGRoadmap).Theprojectionsaremadefortwopossiblescenarios:i)Business-as-usual(BAU)Scenario,andii)AmbitiousE-MobilityScenario.TheBAUScenario involveshighertaxesandotherfeesonEVascurrentlyimposedbytheGoNleadingtoahighshareoffossilfuelvehiclesandlowpenetrationofEV.Thisscenarioisaconservativescenariothatmeansacontinuationof thecurrent trajectory thatyieldsminimumachievement in the stipulatedtimeframe.TheAmbitiousE-MobilityScenario,ontheotherhand,isanoptimisticscenariobaseduponaspirationsenvisagedinthepoliciesandprogrammesoftheGoN.Inthisscenario,policyintervention, technological innovation andmarket penetration is expected to drive thesalesofEV.The2020NDCtargetsone-mobilityarebasedonthisambitiousscenario.BAUprojectionswereincludedintheNDCforcomparison.

Thevehiclesconsideredinthisstudyareasfollows:• Fossil fuel based: two-wheelers;cars;pickups;heavydutytrucks;taxis;bus;microbus;

minibus;tempo;tractors.• Electricity based: electrictwowheelers;electriccars;electricpickups;electricheavyduty

vehicles;electricbus;electricmicrobus;electricminibus;electrictempo;electrictractors6 The LEAP modeling methodology has been described in detail in the accompanying Nepal Mitigation Assessment Report

(2021). 7 A large proportion of tempos and rickshaws in Nepal are predominantly electric while other types of vehicles run on

petroleum fuels. In order to prioritize the electrification of these fossil fuel-based vehicles, the 2020 NDC does not include rickshaws and tempos in its e-mobility targets.

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Thedataforthebaseline(2010-2019)wasobtainedfromvehicleregistrationdataprovidedbytheDoTM.Thetwoscenarios (2020-2030)weresynthesizedusingexpert judgementbasedontargetssetinthe15thFive-YearPlan,MoEWRI’sWhitePaper,EVtaxpolicyintheBudgetSpeech2020/2021,andtrendsintheBloombegNEFElectricVehicleOutlook2020and IEA’sGlobal EVOutlook2020.Estimations inboth scenariosaremade for the totalpopulationofNepalconsideringanannualpopulationgrowthrateof0.8%(CBS,2014).

9.1 Future Vehicular Sales Under BAU Scenario vs. Ambitious E-Mobility Scenario

AsseeninFigure 14below,salesoffossilfuel-basedvehiclesaregraduallydecreasingintheBAUScenariobutitstillaccountsforthedominantshareofnewvehiclesales.Ontheotherhand,thesalesofpassengerEVincreasesmorerapidlyintheAmbitiousE-MobilityScenarioandaccountsforthedominantshareofnewvehiclesalesby2030.

a)BAUScenario

b)AmbitiousE-MobilityScenarioFigure 13: Projection of Vehicle Sales Under (a) BAU Scenario and (b) Ambitious E-Mobility Scenario

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9.2 Fossil Fuel Usage Reductions Attributable to Ambitious E-Mobility Scenario

TransportrelatedfossilfuelenergydemandintheBAUScenarioisapproximately39.4millionGJin2025and48.4millionGJin2030;whereas,transportrelatedfossilfuelenergydemandintheAmbitiousE-MobilityScenarioisaround36millionGJin2025and34.7millionGJin2030.ComparedtotheBAUScenario,theAmbitiousE-MobilityScenariodecreasesfossilfueldependencyfromthetransportationsectorbyaround9%in2025and28%in2030.

9.3 Emission Reductions Attributable to Ambitious E-Mobility Scenario

Compared to the BAU Scenario, the Ambitious E-Mobility Scenario reduces petrol anddieselusageinthetransportationsector,leadingtosubstantialdecreaseinemissions.ThetransportrelatedemissionsintheBAUScenarioisapproximately2,988GgCO2ein2025and3,640GgCO2ein2030,whereas,thetransportrelatedemissionsintheAmbitiousE-MobilityScenarioisaround2,734GgCO2ein2025and2,619GgCO2ein2030.ComparedtotheBAUScenario,theAmbitiousE-MobilityScenariodecreasesemissionsfromthetransportationsectorbyaround8%in2025and28%in2030.Thisdecreaseinemissionscomesfromthereplacementoffossilfuel-basedpassengervehiclesliketwowheelers,pickups,cars,buses,microbusesandminibuseswiththeirelectricalternatives.

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Annex I: List of Experts and Stakeholders Consulted During the Study

Person AffiliatedInstitutionDr.ArunPrakashBhatta MinistryofForestsandEnvironmentMunaNeupane MinistryofForestsandEnvironmentSomnath Gautam MinistryofForestsandEnvironmentYamNathPokharel MinistryofForestsandEnvironmentRamPrasadAwasthi MinistryofForestsandEnvironmentSuresh Ghimire MinistryofForestsandEnvironmentSubhadraBhattarai MinistryofForestsandEnvironmentJyotiPrajapati MinistryofEnergy,WaterResourcesandIrrigationParsuRamPokhrel NationalPlanningCommissionNarayanKhatiwada NationalPlanningCommissionKiranGautam WaterandEnergyCommissionSecretariatHitendraDevShakya NepalElectricityAuthorityAshishGajurel InvestmentBoardNepalYunchaoYang UnitedNationsDevelopmentProgramme-NepalAparPaudyal UnitedNationsDevelopmentProgramme-NepalMs.AnantaaPandey GlobalGreenGrowthInstitute(GGGI)

Prof.BhimP.Shrestha KathmanduUniversity(KU)AbhisekKarki KathmanduUniversity(KU)Mr.DeepakAgrawal NepalAutomobileDealersAssociation(NADA)Mr.SubhashishThapaliya NepalAutomobileDealersAssociation(NADA)Mr.UmeshR.Shrestha ElectricVehicleAssociationofNepal(EVAN)Mr.BijayaManSherchan PashupatiEnergyDevelopmentCompany

Government of NepalMinistry of Forests and Environment