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Climate change may significantly impact the large number of households in developing countries depending on agricultural production, not least through changes in the frequency and/or magnitude of climatic hazards resulting in household income shocks. This paper analyses rural households' responses to past experiences of and future expectations to substantial and unexpected negative and positive agricultural income shocks. Empirical data is derived from an environmentally-augmented structured household (n = 112) survey in the high mountains of central Nepal. Multinomial logit regression, using data on rural household demographics, assets (agricultural land, livestock), value of other assets such as furniture, bicycles, and agricultural implements, and income sources showed that household coping choices are determined by opportunities to generate cash. We argue that public policies should enhance the ability of rural household to generate cash income, including through environmental products.