Successful climate change mitigation requires the commitment of rapidly developing low-income countries. Although most of them have strategies to tackle a fair share of the burden, implementation is low despite large amounts of international aid. We aimed to identify the dynamics underpinning their low implementation, using Nepal as a case study. Aid-dependent Nepal is vulnerable to climate change and committed to its mitigation while pursuing democracy and development. We applied an institutional analysis and development framework as well as an institutional grammar tool to analyze national climate policy. We found that the current national institutions did not enable effective climate change mitigation. Despite relevant political decisions being made, the arrangements were enacted slowly. Contrary to development issues, climate issues were not tackled across all of the relevant sectors, such as waste management, traffic, and agriculture, nor across governance levels, while there was little coherence between development and climate policies. Instead, community forestry was set in the main charge of climate actions, as explained by the history of development collaboration. Additionally, climate education was mainly addressed to local communities rather than to decision-makers. We conclude that building local institutions and funding addressed effectively, even to local actors, are key options to improve the implementation of the national climate strategies of Nepal and low-income countries.