Bhutan

Bhutan is already compliant with its NDC target of staying carbon (and GHG) neutral. While the pandemic caused a temporary drop in its emissions, we project that these will resume increasing over the course of the decade, reaching around 2.9-3.0 MtCO₂e/year in 2030, but still well below the country’s net LULUCF sink of -7.8 MtCO₂e and thus within its carbon neutral target.

The CAT rates Bhutan’s current policy and action as “1.5°C compatible” when compared to its fair share contribution. The “1.5°C compatible” rating indicates that Bhutan’s climate policies and action are consistent with limiting warming to 1.5°C and do not require other countries to make comparably deeper reductions.

Bhutan has adopted four Low Emissions Development Strategies (LEDS), targeting the transport, industrial, human settlement, and food sectors, which include mitigation measures for 2030-2050 and for which support is needed to implement (Royal Government of Bhutan 2021; Ministry of Information and Communications 2021; Ministry of Works and Human Settlement 2021; Ministry of Economic Affairs 2021a; Ministry of Agriculture and Forests 2021).

Bhutan’s second NDC proposes several short, medium and long term priority mitigation actions across a number of sectors to remain carbon neutral. Bhutan has started to implement some of these measures, particularly in its transport and agriculture sectors.

In its Third National Communication, Bhutan projected that it would stop being carbon neutral in the 2040s if emissions from energy sector continues to rise in the current rate. While those estimates were based on a smaller land sink than the second NDC target level, and historic emissions to 2020 have been lower than projected, the fact remains that Bhutan is at risk of exceeding its carbon neutral target in the long-term if emissions are allowed to increase unchecked, especially in its industry and transport sectors.

Climate Change Policy
In 2020, Bhutan adopted a Climate Change Policy which restates the commitment it made at COP15 in 2009, to remain carbon neutral, which is now reiterated in its NDC (Royal Government of Bhutan 2020b). This policy has four main pillars: carbon neutrality, building resilience to climate change, means for implementation, and effective and coordinated actions. It aims to provide guidance to achieve a climate resilient and carbon neutral economy that contributes to gross national happiness. The policy was formulated in a participatory manner, and it wishes to ensure a continued participation of relevant stakeholders in climate change action.

Energy Efficiency & Conservation Roadmap
In November 2019, Bhutan launched its National Energy Efficiency and Conservation (EE&C) Policy covering the building, appliances and industry sectors (Ministry of Economic Affairs 2019). Along with the EE&C policy, the government released an energy efficiency roadmap which forms the basis for reviewing progress in implementing EE&C measures (Ministry of Economic Affairs 2019). The roadmap outlines the potential to reduce GHG emissions by 1.8 MtCO₂e with EE&C measures over the course of 15 years and achieve energy savings of 1.4 million tonnes of oil equivalent (Mtoe), over the same period. However, the measures the government intends to implement are on a much smaller scale.

Replacing biomass usage in the building sector is one of the main interventions of this policy, but that will help increase Bhutan’s sink capacity rather any cut emissions directly and also has wider health benefits by reducing indoor air pollution.

Additionally, as Bhutan’s grid is already emissions free, electricity saved by improving energy efficiency will not contribute to its own emission reductions, but will instead allow Bhutan to export more hydropower to India and displace emissions from the power sector there.

Low Emissions Development Strategies (LEDS)
Bhutan’s efforts to remain carbon neutral have been further elaborated and refined through low emission development strategies (LEDS). LEDS for four key sectors (food security, human settlement, industries and transport) provide detailed mitigation measures, their emissions reduction potentials, and the international investment required to achieve them. These LEDS will serve as the basis for the sectors to integrate low carbon measures into development priorities. See the individual sector sections below for more details.

In Glasgow, several sectoral initiatives were launched to accelerate climate action. At most, these initiatives may close the 2030 emissions gap by around 9% - or 2.2 GtCO₂e, though assessing what is new and what is already covered by existing NDC targets is challenging.

For methane, signatories agreed to cut emissions in all sectors by 30% globally over the next decade. The coal exitinitiative seeks to transition away from unabated coal power by the 2030s or 2040s and to cease building new coal plants. Signatories of the 100% EVs declaration agreed that 100% of new car and van sales in 2040 should be electric vehicles, 2035 for leading markets. On forests, leaders agreed “to halt and reverse forest loss and land degradation by 2030”. The Beyond Oil & Gas Alliance (BOGA) seeks to facilitate a managed phase out of oil and gas production.

NDCs should be updated to include these sectoral initiatives, if they're not already covered by existing NDC targets. As with all targets, implementation of the necessary policies and measures is critical to ensuring that these sectoral objectives are actually achieved.

• Methane pledge: Bhutan’s methane emissions are predominately from its largely subsistence agriculture.
• Coal exit: Bhutan does not have grid-connected coal capacity, though 5% of its primary energy mix in 2019 was from coal. Coal is mainly used in industry and standby power plants.
• 100% EVs: Bhutan aims to have 70% of its passenger vehicle sales be EVs by 2035. It is working with the taxi industry to accelerate the update of EVs in that sector.
• Forestry: Bhutan is a signatory of the declaration on forest and land use during COP26. In 2020, it had a net sink capacity of 8.9 MtCO₂e. Forests currently cover 70% of Bhutan’s land, and it has a constitutional mandate to maintain this share above 60%.
• Beyond oil and gas: This alliance was created with the aim to restrict any kind of fossil fuel expansion by ending licensing of new projects and phasing out existing oil and gas projects. Bhutan has not joined of this alliance. Bhutan has no oil and gas reserves.

Hydro power
Bhutan has a considerable share of renewable energy both in its primary energy mix (82%) and electricity generation (100%) owing to its significant hydro capacity (IRENA 2021). Over the years, Bhutan has successfully developed its hydropower resources. In 2021, its total electricity capacity was 2.34 GW, of which 2.33 GW is hydro (IRENA 2021). However, this current hydro capacity is only 10% of its potential (CEA 2021).

In 2021, the Bhutanese government launched the Sustainable Hydropower Development Policy (SHDP) to enhance its previous hydropower policy by integrating climate resilience and mitigation options (Ministry of Economic Affairs 2021b). To reduce vulnerability to decreasing water flows in the dry season, the SHDP focuses on adaptation measures, such as pumped storage schemes.

The Bhutanese government allocated BTN 372.062m (USD 5m) for energy in its 2020-21 budget. Key activities include a hydro project (the 2.6 GW Kuri-Gongri Hydroelectric Project) and a hydro feasibility study, on-grid electrification of off-grid rural households, and support for renewable and energy efficient technology in buildings (Ministry of Finance 2020).

Exporting hydropower contributes significantly to Bhutan’s economy, accounting for 63% of its total exports in 2019 (Royal Bhutanese Embassy 2020). It also plays an important role in reducing fossil fuels outside of Bhutan’s geographical boundary as the power displaces more emissions intensive sources of electricity in India. In its continued focus on hydro power, the government has revised its Power System Master Plan 2040 to explore its full hydro potential (MOEA-DHPS 2019).

Geological uncertainties and pandemic restrictions caused a number of delays in the further development of hydro power (Dolkar 2022). These delays have increased project costs and further exerted pressure on the already mounting national budget deficit as well as Bhutan’s external debt.

By the end of 2022, hydropower debt stood at 69% of Bhutan’s total external debt, out of which hydro debt to India is around 75% (ORF 2022; Kuensel Online 2023a). These higher costs will necessitate a higher tariff rate, which, in turn, may jeopardise the viability of exporting hydro power to India as that country’s tariff for renewable energy is falling (Kuensel Online 2022a).

As Bhutan will be graduating from the Least Developed Country group by the end of 2023, it is important for Bhutan to ensure macroeconomic stability and this high amount of fiscal deficit and external debt could be a bottleneck for that.

Non-hydro renewable energy
A study by the International Renewable Energy Agency (IRENA) found a strong case for energy diversification in Bhutan to support economic growth, industrial development and employment (IRENA 2019). Non-hydro renewable energy can complement Bhutan’s hydro power, by increasing electricity access in rural areas, and utilising technologies with different generation profiles, creating a diversified power system with less reliance on seasonal weather (IRENA 2019). Moreover, hydro project construction is not without risks as it requires blasting and can cause building cracks (Gyelmo 2020).

The 2016 Renewable Energy Master Plan estimated that the country could produce 12 GW of solar and 760 MW of wind energy (DRE–MOEA 2016). Notwithstanding this enormous potential, Bhutan set a modest 2025 target of 20 MW. Currently, it has about 9 MW of non-hydro capacity, which means it still needs 11 MW to fulfil the Alternative Renewable Energy Policy target within three years (IRENA 2021).

Bhutan is part of the International Solar Alliance launched during COP21 in 2015. The Bhutan Power Corporation (BPC) has begun Bhutan’s first ground-mounted PV solar project of 180 kW in September 2021 (Kuensel Online 2021). Although a small project, it is expected to show the feasibility of solar projects in Bhutan.

The Bhutanese government is also planning to add 300 MW of solar capacity by 2026, exceeding its current target of 20 MW, and primary site selection is currently underway (Gyeltshen 2022; Kuensel Online 2023b). ADB will be providing financing and technical assistance to achieve this target and has approved a USD 10m for Bhutan’s first utility scale solar plant, with peak capacity of 17.38 MW (Asian Development Bank 2022; Gyeltshen 2022).

India’s ‘One Sun One World One Grid’ initiative of achieving cross-border solar resource connectivity in West and South East Asia could help Bhutan to diversify its energy mix (Financial Express 2020). Bhutan already has electricity trade with India and draft procedural guidelines are in place for firms to participate in electricity trade, which will be helpful in future cross-border non-hydro renewable trade.

Bhutan is considering the viability of hydrogen fuel in the country and the government has initiated preparation of a Green Hydrogen Roadmap and pilot projects (Zangpo 2022).

Industrial processes and product use (IPPU) emissions accounted for 38% of total emissions (excluding LULUCF) in 2020 (Royal Government of Bhutan 2022). Since 2010, industry emissions have increased by around 60%. The largest share of industrial emissions are from metal and cement production (Royal Government of Bhutan 2022). Bhutan has recently embarked on a strategy to develop industrial parks to diversify its economy, thus the sector’s emissions are expected to increase further (Business Bhutan 2022a; Royal Government of Bhutan 2022).

The 2021 Low Emission Development Strategy (LEDS) for Industries identified mitigation opportunities through technical measures, and diversification of the sector away from heavy industries with cross cutting benefits to other sectors. Bhutan estimated that the cost of implementing its industrial LEDS would be USD 3.52m (Royal Government of Bhutan 2021). We could not find any evidence that Bhutan has begun to implement this strategy.

The 2019 Energy Efficiency and Conservation (EE&C) policy estimates 10% of energy consumption in industry can be avoided (Ministry of Economic Affairs 2019). The EE&C policy includes the development of energy efficiency codes, guidelines and (unspecified) energy efficiency upgrade measures through retrofits, refurbishments, technology transfer and process modification. The energy efficiency roadmap outlines interventions in the industry sector to achieve emissions reductions of up to 7% per year compared to a baseline scenario by 2030 (Dept. Renewable Energy 2019).

In 2019, the transport sector contributed around 64% of energy related emissions and 18% of the total GHG emissions, which dropped to 56% and 14% respectively in 2020 due to the pandemic (Royal Government of Bhutan 2022).

Bhutan has several policies, plans, strategies and other initiatives to reduce emissions from land transport.

In 2021, the Bhutanese government, along with UNDP, revised its 2016 Low Emissions Development Strategy (LEDS) for Surface Transport through a series of consultation workshops and focus group discussions with stakeholders. High private vehicle ownership is the main concern of government, as light vehicles (including taxis), and two wheelers currently account for approximately 80% of the total registered vehicle (Ministry of Information and Communication 2021a).

The 2021 Surface Transport LEDS contains a number of options to reduce emissions from passenger transport, such as shared mobility, electric vehicles, the promotion of active transport, car imports and sale limits, and rapid mass transit. One of the interventions, adopting the Euro VI emissions standard, was implemented in 2022 (Kuensel Online 2022b). Its mitigation potential is 0.01 MtCO₂e/yr and has been included in our current policy projections.

The Bhutanese government is also advancing in measures to electrify its transport sector. The Bhutan Electric Vehicle (EV) Roadmap (2020-2025) contains short, medium and long-term targets for EV uptake.

Bhutan aims for electric vehicles to make up 70% of passenger vehicle sales in the next 13 years, by 2035 (Kuensel Online 2022c). The government has begun setting up EV charging stations and is working on shifting to EVs in the taxi industry (Ministry of Information and Communication 2021b; South Asia Monitor 2021; Ministry of Economic Affairs 2019; Norbu 2022; UNDP 2018) . The government has offered a 20% subsidy and access to 70% loans for electric taxis and is considering a host of other financial incentives to promote green vehicles (Kuensel Online 2020).

The cost of LEDS interventions ranges from relatively inexpensive measures to large infrastructure investments, with an overall total investment of USD 3.2bn needed by 2030. Bhutan has received some assistance to begin to implement these measures (Ministry of Information and Communication 2021a). For instance, the Global Environment Facility has earmarked over USD 18m to assist in the development of sustainable, low-emission urban transport systems (Global Environment Facility 2017). The Clean Technology Fund, Asian Development Bank, World Bank Group and the Japan Fast Start Fund Initiative are also providing support.

Bhutan continues to experience rapid urbanisation, with a corresponding increase in GHG emissions and energy consumption in the buildings sector (Ministry of Works and Human Settlement 2021). Buildings account for the highest energy consumption in Bhutan, from the burning of biomass for heating and cooking (Ministry of Economic Affairs 2019).

The 2021 Low Emission Development Strategy (LEDS) for Human Settlement identified a number of mitigation measures for the sector, including solar PV on buildings, which has the co-benefit of reducing electricity import needs in the dry winter months, and replacing LPG and firewood for heating and cooking by electricity. This will also bring health co-benefits. Enhanced energy efficient and green building design to reduce energy consumption for space heating and cooling are also included in the strategy.

The 2019 Energy Efficiency Policy (EE&C policy) includes the development and implementation of efficiency building codes for new buildings and for retrofits of established buildings (Ministry of Economic Affairs 2019). The building code will include Energy Audit and Reporting Guidelines for energy audits of buildings energy performance. The government will support hotels to adopt EE&C measures and publicly recognise good performers, in addition to developing stakeholder capacity for implementing building codes.

Agriculture accounted for 20% of Bhutan’s total emissions in 2019, which increased marginally to 24% in 2020 due to a fall in emissions from other sector (excluding LULUCF) (Royal Government of Bhutan 2022). Bhutan considers these to be ‘survival’ emissions as they are derived from subsistence farming with little chemical input. Enteric fermentation and manure management accounts for 76% of the sector’s emissions (Royal Government of Bhutan 2022).

In its third national communication, the government projected a sharp increasing trend in agriculture-related emissions under BAU between 2015 and 2025, then stabilising until 2030 (Royal Government of Bhutan 2020b). However, this did not materialise as agricultural emissions have broadly remained constant between 2015-2020 with a drop in 2019-2020.

The 2021 Low Emission Development Strategy (LEDS) for Food Security laid out mitigation options in the agriculture sector, consisting of organic farming, reducing the use of synthetic nitrogen containing fertilisers, and crop selection (Ministry of Agriculture and Forests 2021). It also includes improving productivity in the livestock sector through improved grazing and a variety of high yield animals and improved manure management by promoting biogas generation from animal manure. Overall, the mitigation potential of these measures is 0.5 MtCO₂e/year by 2030, which will require an estimated investment of USD 61.65m.

In 2002, Bhutan started to move towards organic farming and, in 2007, adopted a National Framework for Organic Farming (Agroecology Info Pool 2019). In 2012, during the Rio summit, Bhutan announced its intention to adopt fully organic agricultural practices by 2020. As of 2022, only 5.6% of Bhutan’s agricultural land has been certified as organic, but around 80% of the Bhutanese farms are traditionally organic as they do not use synthetic agro-chemicals (Heinrich Böll Stiftung Hong Kong 2022; Business Bhutan 2022b).

Bhutan is still importing synthetic fertiliser from India (The Bhutanese 2022). Even with a high share of organic land, Bhutan was not able to achieve this target due to lack of government support to promote organic fertiliser adoption and use of new technology. Organic fertiliser shortages also contributed to this(Feuerbacher et al. 2018).

Bhutan is promoting domestic biogas production using food and animal waste, an important mitigation action in agriculture and food waste management (Royal Government of Bhutan 2022). Increasing use of biogas would enable Bhutan to improve crop yields by using the organic by-products of biogas plants.

Bhutan has a total of 70.77 % forest cover (2,717,162 ha) of the total geographical area of the country which serves as the cornerstone of its commitment to remain carbon neutral. The land use change and forestry sector was a net sink of about 8.9 MtCO₂e in 2020, through managed forests and forest plantations as well as abandonment of managed land (Royal Government of Bhutan 2022). The Constitution of the Kingdom of Bhutan and the NDC mandate that 60% of the country remain under forest cover indefinitely. Bhutan is one of the signatories of the Glasgow pledge on forestry and land use and committed to halting and reversing forest loss and land degradation by 2030.

Bhutan does not have a high forest degradation rate, but has still established a national REDD+ framework and produced a National REDD+ Strategy (NRS) and implementation framework (Royal Government of Bhutan 2021). The NRS seeks to strengthen forest management practices, integrate land use planning, and improve rural livelihoods. Specific targets such as improved forest management and conservation and maintaining at least 50% of land under area, are to maintain 436 MtCO₂ of forest carbon stock outside protected areas by 2030 (Royal Government of Bhutan 2021).

In 2020, waste sector emissions are about 5% of Bhutan’s total GHG emissions (excl. LULUCF) (Royal Government of Bhutan 2022). Emissions have been rising slowly, doubling between 2000 and 2019. Emissions from waste water treatment and discharge accounted for over 85% of total waste related GHG emissions, and are mostly methane.

In June 2019, Bhutan released its National Waste Management Strategy to achieve “zero waste Bhutan by 2030” (National Environment Commission 2019).

The Royal Government of Bhutan adopted a waste management programme in 2020 which is aligned with the National Waste Management Strategy. This strategy has introduced waste segregation, together with an adequate number of waste collection facilities and drop-off centres at convenient locations (Ministry of Works and Human Settlement 2021).

In 2021, Bhutan published its LEDS for Human Settlement which contains measures for wastewater management and to increase composting and recycling (Ministry of Works and Human Settlement 2021).

Bhutan is prioritising small and medium scale biogas production through food waste which is also one of the mitigation strategy laid out in LEDS of Human Settlement (Ministry of Works and Human Settlement 2021; WWF 2023). Bhutan Ecological Society (BES) is investing about Nu 60m (USD 0.7m) to construct a biogas plant in the upcoming new landfill at Memeylakha, Thimphu (Kuensel Online 2022d).