Blockchain and Nepal's Hydropower Boom: Trading Carbon Credits and Energy Certificates

Nepal generates almost all of its electricity from hydropower, sitting on an estimated 83,000 megawatts of technical potential — enough, in theory, to power tens of millions of homes — with barely 4 percent of that potential actually developed so far. As new plants come online and Nepal begins exporting surplus power to India and, for the first time in 2024, to Bangladesh, a parallel market has quietly opened alongside the physical electricity trade: the market for proving that power is genuinely green, and getting paid for that proof separately from the power itself.

This is the world of Renewable Energy Certificates and carbon credits, and Nepal has only just entered it. This article looks at how that market actually works, why Nepal was approved to join it in 2024, and where blockchain-based verification could make it work better as the country's hydropower sector scales up.

What a Renewable Energy Certificate Actually Is

A Renewable Energy Certificate, or REC, represents the environmental benefit of generating one megawatt-hour of electricity from a renewable source, separately from the physical electrons themselves. A hydropower plant generates electricity and feeds it into the grid as normal — but it can also register that same generation with an accredited body, which issues one certificate per megawatt-hour produced. Crucially, that certificate can then be sold independently of the electricity: a company anywhere in the world wanting to claim it uses "green power" can purchase and "retire" that certificate, even though the physical electrons it actually draws from its local grid may come from a coal plant thousands of kilometres away.

This might sound like an accounting trick, but it serves a real purpose: it lets renewable generators monetise the environmental value of their output as a separate revenue stream, and it gives companies with sustainability commitments — under frameworks like the Greenhouse Gas Protocol, RE100, or the Science Based Targets initiative — a credible, internationally standardised way to report reduced emissions.

Nepal's Entry Into This Market

Until late 2024, Nepal had no REC system in place at all, despite already generating nearly all of its electricity from renewable hydropower. That changed when the International Tracking Standard Foundation's board approved Nepal for I-REC(E) issuance — the international standard used in dozens of countries to track and certify renewable electricity. The Green Certificate Company was designated as Nepal's default issuer until a suitable local organisation is identified to take over that role. Since then, private suppliers such as Monsoon Carbon have begun offering verified I-RECs sourced from accredited Nepali power plants to companies looking to reduce their reported Scope 2 emissions.

The timing matters. Nepal has committed to net-zero emissions by 2045 and pledged at COP26 to meet 15 percent of its total energy demand from clean sources by 2030. Beyond hydropower, the government is also pushing diversification — the Nepal Electricity Authority has launched a 2.2 gigawatt competitive-bidding programme for utility-scale solar, specifically because relying on a single river-based resource leaves the grid exposed to seasonal drought. Every megawatt-hour that earns a certificate and finds a buyer creates a direct financial incentive to bring non-hydro renewable technology onto the Nepali grid, reinforcing that diversification goal.

The Trust Problem RECs Have Always Had

Renewable energy certificate markets worldwide share a structural vulnerability: because a REC is a claim about environmental attributes rather than a physical, trackable object, the entire system depends on nobody selling — or claiming — the same certificate twice. If a hydropower plant's generation gets counted once toward a domestic renewable energy target and separately sold as a certificate to a foreign buyer, both parties end up claiming credit for the same megawatt-hour of clean power, undermining the credibility of the entire system. Centralised registries like the I-REC Standard's exist specifically to prevent this "double counting" problem, but they still depend on a single trusted institution correctly tracking issuance and retirement across every participating country.

Where Blockchain Genuinely Strengthens This System

A blockchain-based registry addresses the double-counting problem in a fundamentally more robust way than a single centralised database. Instead of trusting one issuing body's internal records to correctly track every certificate's status, a blockchain ledger lets every participant — the generating plant, the issuing body, the buyer, and any auditor — independently verify that a specific certificate has been issued exactly once and retired exactly once, with the full history permanently visible and impossible to quietly alter. For an international market spanning multiple countries and multiple national registries — exactly the situation Nepal now finds itself in as it exports both physical electricity and environmental certificates to India and Bangladesh — this kind of cross-border verifiable ledger closes gaps that occur when clean energy claims move across jurisdictions that don't share a single database.

This also matters for cross-border physical electricity trade specifically. Nepal now exports over 1,000 megawatts of capacity to India and has begun exporting to Bangladesh via India's transmission grid, with India's own electricity integrated through the Indian Energy Exchange. As this trilateral trading relationship deepens — India has set a goal of importing 5,000 megawatts from Nepal by 2030 — a blockchain-based settlement layer could let Nepal Electricity Authority, Indian counterparties, and Bangladeshi buyers verify exactly how much power was generated, transmitted, and consumed at each stage, reducing reconciliation disputes across three separate national grid operators and regulatory systems.

Domestic Open Access: Where Blockchain Could Matter Even More

A significant shift is also underway inside Nepal's domestic market. The Nepal Electricity Authority has historically been the sole authorised electricity trader, purchasing all power from private producers through Power Purchase Agreements and reselling it. Nepal's Electricity Regulatory Commission introduced open-access regulations in January 2026 that would allow licensed traders to use the grid without needing a PPA with NEA — a structural change that private hydropower developers have been seeking for years, since more electricity is now generated by private companies than by NEA's own plants.

If open access matures into a genuine multi-buyer, multi-seller domestic electricity market, a blockchain-based settlement and certification layer becomes considerably more valuable than it is today. Rather than a single buyer (NEA) settling with many sellers, a functioning open-access market would involve many buyers and many sellers needing to verify, in real time, who generated what, who consumed what, and who holds valid certificates for which megawatt-hours — precisely the multi-party trust problem blockchain-based ledgers are best suited to solve, as opposed to NEA's current simpler role as sole intermediary.

Carbon Credits: A Related but Distinct Opportunity

Separate from RECs, Nepal's hydropower sector has real, though currently underdeveloped, potential in carbon credit markets. Where a REC certifies the environmental attribute of electricity generation, a carbon credit certifies an actual reduction or avoidance of greenhouse gas emissions — for instance, hydropower displacing what would otherwise have been fossil-fuel generation. Nepal has seen limited carbon credit issuance in its renewable energy sector to date, representing a substantial untapped opportunity given the scale of clean generation already happening. The same blockchain-based verification principles that strengthen REC markets apply equally here: transparent, auditable tracking of exactly which emissions reductions have been claimed, by whom, and whether they've already been sold elsewhere.

Why This Isn't a Simple Technology Swap

It's worth being clear that Nepal's REC market challenges today are primarily institutional, not technological. Nepal currently relies on the Green Certificate Company as a default international issuer specifically because no local organisation has yet been established to take over that role — building local institutional capacity is the more immediate gap, and no ledger technology substitutes for having a credible domestic body to administer the system. Blockchain also cannot resolve disputes about a hydropower plant's actual generation data if that data itself is unreliable at the metering stage; smart metering infrastructure and accurate generation reporting have to exist before any ledger technology can add tamper-evidence on top of them.

The Realistic Path Forward

Nepal's hydropower sector is scaling rapidly — installed capacity has grown from roughly 1,069 megawatts to well over 3,400 megawatts in less than a decade, with thousands more under construction. As that capacity grows, and as Nepal's role as a cross-border electricity exporter to India and Bangladesh deepens, the volume and complexity of certificate issuance, cross-border settlement, and emissions accounting will grow with it. A blockchain-based registry layered on top of Nepal's existing I-REC framework — and eventually its emerging open-access electricity market — is a realistic, incremental upgrade path: not a replacement for the institutions Nepal is still building, but a way to make the records those institutions produce more transparent and harder to dispute, exactly as the stakes involved keep rising.