Bhutan

Bhutan’s pandemic response is not targeted at green interventions or sectors. The 2020/21 budget focuses on hydro projects, but diversifying its electricity mix to other forms of renewables offers an opportunity to boost economic growth, industrial development, and job creation at this crucial time.

Positive policy updates include the National Energy Efficiency and Conservation Policy and a National Waste Management Strategy released in 2019. Bhutan is at present - and aims to remain - carbon neutral, building upon a commitment already made in 2009. However, there is no target for the increasing emissions from energy and industry. Bhutan will need to implement additional climate policies to limit and peak emissions growth. The CAT rates Bhutan as “2°C compatible”.

We expect 2020 emissions to be 1-3% lower than 2019 due to a projected lower GDP growth. In response to the pandemic, the Bhutan Government imposed travel restrictions and some institutional closures, disrupting economic sectors. GDP growth is projected to be lower than pre-pandemic estimates of 8% in 2020, with new estimates between 0.6% and 2.4% GDP growth for 2020.

The government’s pandemic response measures have no direct impact on emissions. The measures have not been fossil fuel intensive either. Funds have not been directed to either the fossil fuel industry, or green initiatives such as renewables, low emissions transport, energy efficiency, or landscape restoration. Bhutan has focused its efforts on fiscal and monetary measures for distinct economic sectors. The stimulus funds offer opportunities to spur economic growth and employment, by focusing on renewable energy options beyond hydro power, and other green initiatives, if directed appropriately.

Recent positive developments show progress in climate mitigation in the country. They include the National Energy Efficiency and Conservation Policy released in November 2019, that aims to lower the energy intensity of the economy, focusing on buildings, appliances and industry. The recently adopted National Waste Management Strategy is another example. It sets a target of zero waste by 2030.

However, Bhutan’s transport sector poses a risk to its carbon neutrality pledge. The sector is projected to become a major source of emissions. Some developments to promote electric vehicles and sustainable transport exist. These measures need to be rapidly implemented and scaled up if Bhutan aims to keep its emissions and sinks balanced.

Without assessing the LULUCF sector, the CAT rating of Bhutan’s NDC would be “Insufficient.” But, as it has already reached a target that the Paris Agreement requires (globally) only for the second half of the century, we decided to upgrade Bhutan to “2°C compatible,” despite its NDC technically falling into the “Insufficient” rating. Bhutan will need to do more to retain this rating in future. While Bhutan is still carbon neutral, as the sequestration capacity of its forests currently exceeds emissions from other sectors, annual emissions are rising. Bhutan is at risk of breaking its carbon neutral pledge within the next decade. Bhutan needs to set a target for greenhouse gas emissions outside the land use sector and develop additional policies to curb emissions growth.

In its Nationally Determined Contribution (NDC), Bhutan aims to remain carbon neutral, building upon a commitment already made in 2009 (Royal Government of Bhutan, 2010). This means that Bhutan aims to maintain GHG emissions below the country’s total carbon sink from land use, land use change and forestry (LULUCF). See pledge section.

The government called for international support for remaining carbon neutral without specifying actual needs, but has not made its target conditional on it. This is a departure from the approach adopted by many other developing countries. International support will become increasingly crucial as Bhutan graduates from its status as an LDC and loses access to concessional financing.

Bhutan’s carbon neutral commitment means it would need to keep emissions below its LULUCF sink level. If the current LULUCF sink stays at the current level of around -6 MtCO₂e/a, it means emissions outside LULUCF are limited to around 6 MtCO₂e/a. This level falls within the ‘insufficient’ category. A more ambitious NDC target would need to rely less on keeping this sink and instead aim for slowing growth and peaking emissions from industry, transport, and agriculture to eventually achieve reduced emissions levels.

But, as it has already reached a target that the Paris Agreement requires (globally) only for the second half of the century, we decided to upgrade Bhutan to “2°C compatible,” despite its NDC technically falling into the “Insufficient” rating. Domestic emissions need to peak and start reducing, with international support, to be consistent with the Paris Agreement.

Bhutan’s pandemic economic recovery has not yet not targeted a green recovery. Government restrictions and the impact of the global economy caused disruptions to the national economy. Pre-pandemic projections estimated GDP growth for 2020 at a rate of 8%. After the pandemic struck, estimates for Bhutan’s GDP growth were revised to between 0.6% and 3% growth. Recovery efforts have focused on, for example, tax extensions, tourism, agriculture and construction without mention of ‘green’ recovery efforts such as support for renewable energy, incentives for low emissions transport or energy efficiency, or support for large-scale landscape restoration.

In late 2019, Bhutan released its National Energy Efficiency and Conservation (EE&C) Policy supported by an Energy Efficiency Roadmap which has the potential to reduce emissions by up to 0.3 MtCO₂e per annum between 2020 and 2034. The policy targets the industry, building and appliance sectors.

In June 2019, Bhutan published a National Waste Management Strategy with a target of zero waste by 2030. This policy will likely reduce waste sector emissions. However, it is not included in the CAT current policy projections as there are no quantifiable targets for emissions deductions.

About 77% of Bhutan’s external debt is due to hydropower projects, which raises questions about the sustainability of these projects. This is crucial, given that Bhutan will lose its access to concessional financing when it graduates from its status as a Least Developed Country.

Bhutan’s 2020-21 budget allocated for energy focuses on hydro. Bhutan’s current electricity generation capacity is 98% medium and large hydro projects. However, diversifying Bhutan’s renewable electricity capacity presents several potential benefits including economic growth, industrial development, job creation, rural electrification, and moving the electricity system away from its reliance on seasonal weather patterns. The Bhutan Power Corp has plans for a 180 kW ground mounted PV solar project, which may prove to be a catalyst for further development of solar.

Bhutan has a few projects that will reduce emissions in the transport sector, but rising demand for vehicles has driven an increase in the nation’s demand for diesel and petrol. Bhutan is estimated to have 125 cars per 1000 inhabitants and this is set to grow with combustion vehicle imports. The EE&C policy calls for technical studies on the use of electric and hybrid vehicles. United Nations Development Programme and the Bhutan Government are conducting a low-emissions urban transport project to promotes the uptake of EVs to reduce emissions and reduce the reliance in fossil fuel imports. The government has offered a 20% subsidy for electric taxis and is considering a host of other financial incentives to promote green vehicles. Transport policies are not included in the CAT current policy projections as there is no quantifiable data.

FOR FULL DETAILS SEE CURRENT POLICY PROJECTIONS SECTION