This paper analyzes the sectoral energy consumption pattern and emissions of CO2 and local air pollutants in the Kathmandu Valley, Nepal. It also discusses the evolution of energy service demands, structure of energy supply system and emissions from various sectors under the base case scenario during 2005-2050. A long term energy system planning model of the Kathmandu Valley based on the MARKet ALlocation (MARKAL) framework is used for the analyses. Furthermore, the paper analyzes the least cost options to achieve CO2 emission reduction targets of 10%, 20% and 30% below the cumulative emission level in the base case and also discusses their implications for total cost, technology-mix, energy-mix and local pollutant emissions. The paper shows that a major switch in energy use pattern from oil and gas to electricity would be needed in the Valley to achieve the cumulative CO2 emission reduction target of 30% (ER30). Further, the share of electricity in the cumulative energy consumption of the transport sector would increase from 12% in the base case to 24% in the ER30 case. (C) 2009 Elsevier Ltd. All rights reserved.