Nepal has become the first country to invoke the emergency procedures of the world's fund for climate disaster support, testing a mechanism that experts say does not have enough money to respond.
The Himalayan nation sought emergency funding after flash floods, triggered by a glacial lake collapse, killed more than 1,300 people in late August and left thousands missing.
Finance minister Swarnim Wagle estimates the cost of rebuilding at $4-5bn, describing the figure as preliminary. That is roughly 10 per cent of the country's annual GDP, so it cannot do it alone.
But the figure is also more than 200 times the limit of what it can get from the global fund meant to respond to such disasters.
The money would come from the Fund for Responding to Loss and Damage, or FRLD, which was set up by the UN in 2023 after years of pressure for a dedicated pot of money for developing countries hit by climate disasters they did not cause.
Eight board members from developing nations called for an emergency meeting of FRLD's board after Nepal's finance and environment ministries formally wrote to its co-chairs requesting support. Richard Sherman, a South African climate negotiator and board member, tells The Independent that the board hopes to use the meeting to provisionally allocate money to Nepal.
"If this happens, we could be in a position to approve money for Nepal, I would say in a month or two months," he says.
The money Nepal is expected to get totals $20m – less than one per cent of what Nepal needs. That's the limit the fund has for a single disaster. Still, getting the money in itself will be a major victory for Nepal.
No country has invoked the fund's emergency provisions before.
Requests can take six to eight months to process under the fund's normal rules, and the board was not scheduled to meet until December. However, an emergency case is meant to move from application to disbursal in six to eight weeks.
As of early September, no project had been approved and no money had reached any country for any disaster.
Andreas Sieber of the campaign group 350.org, which has tracked the fund's progress since its creation, said Nepal's case is a real test of the fund's founding promise.
"There is not enough money to cover these disasters and people are left alone with those impacts, or governments in poor countries that are already strained have to deal with them," he explains.
The fund holds $822m in total pledges, but only around $350m is currently earmarked for disbursement. Against that, developing countries have already given 180 applications for a combined $2.8bn.
Harjeet Singh, who has worked on the fund's design for almost two decades, said the scale of Nepal's need had long been predictable.
"We already knew the scale of damage and loss has reached that level and we've been saying that this fund doesn't even have a billion dollars," he says. "Nepal's case actually demonstrates it very well."
A study published in the journal Nature in 2024 estimated that developing countries would need $395bn a year by 2025 to cover the cost of climate-driven loss and damage, a figure broadly consistent with estimates from the Intergovernmental Panel on Climate Change of around $400bn annually.
Countries agreed on a global climate finance target of $300bn a year at Cop29 in Baku last year. The target remains far from being met.
Sherman says the board has deliberately chosen to begin disbursing money now as a test phase, rather than waiting years to design a full long-term model first.
"We could choose to launch a pilot phase now with the money that's available, start getting money out the door, test the systems of the secretariat, test the eligibility process," he says.
"Nobody's suggesting it's anywhere near the requirement of the need for developing countries but it's what we have, and that's why the cap is $20m."
The funding shortfall isn't confined to one fund. The Green Climate Fund lost $3bn in pledged money when the US withdrew its support.
The UK has separately cut its own climate finance contribution by roughly half in recent months, even as the fund is meant to serve 134 developing countries.
Singh rejects the idea that the shortfall reflects a lack of money in the global economy.
"Let's look at the money going to the wars," he says. "Let's look at the money that has gone for several bailouts in the past. And we also were able to mobilise trillions of dollars to respond to Covid."
An estimated $7trillion a year in direct and indirect subsidies, he adds, goes to fossil-fuel companies worldwide.
"If you look at the global GDP, which has been growing, of course we have money," he argues. "Now, where's the money? Money is now with those oligarchs and those billionaires, and now a trillionaire. Inequality has increased. Money is there, it's just that it's going in the wrong direction, and that has to be pointed out."
But could Nepal's disaster push wealthier nations to rethink priorities and contribute more towards climate funding ahead of the upcoming UN general assembly and climate talks in Istanbul?
"The environment right now isn't very favourable for all these funds," Sherman says, adding that a longer-term model for the loss and damage fund is due to be agreed by December, ahead of a fresh replenishment round expected to take one-two years.
"It's unfortunate, but we knew that this was always going to be a scenario. We can't control what happens."
Nepal's foreign minister, Shisir Khanal, says his country is "paying the ultimate price for a global crisis we did not create".
Nepal is one of the least developed countries in the world and contributes negligibly to global heating. Yet, it's one of the most vulnerable to the climate crisis.
Many countries in Nepal's position have been demanding compensation from the world's richest countries responsible for the crisis.
Sherman notes that the word "compensation" carries no legal weight in this context.
"The request for compensation is a political one that is not resolved," he says. "Developed countries have been very clear that for them, supporting loss and damage is not about compensation for losses, nor is it about them being held liable for the impact of climate change."
Experts say the gap between what Nepal needs and what it can get from the loss and damage fund will likely leave it under debt.
The likeliest source of further support is the World Bank, which gives loans rather than grants. Before Nepal, Pakistan was compelled to take billions of dollars in fresh loans on top of existing debt, including $400m to rebuild homes and infrastructure, after floods in 2022 caused $30bn in damage and killed more than 1,700 people.
Sherman says Nepal will likely follow a similar path, taking on sovereign debt as a consequence of an "event that was not of their making".
Singh describes the pattern as "a double injustice", in which countries least responsible for climate change and least prepared for its impacts are forced into debt to recover from disasters linked to it.
Scientists broadly agree that rising temperatures have destabilised glaciers across the Himalayan region for years, although the precise mechanism behind the August collapse – whether the initial failure began in glacial ice or in permafrost and rock – remains under investigation.
Nepal's president, Ramchandra Paudel, has separately made a formal international appeal for "climate justice", while the prime minister, Balendra Shah, is due to raise the matter at the UN general assembly later this month.