Current Policy Projections
Current policies overview
Bhutan would still be compliant with its NDC target of staying carbon (or GHG) neutral with currently implemented policies. However, with emissions increasing, the gap to the limit of emissions to stay within carbon or GHG neutrality will close (assuming a constant forestry sink as in current level be -6 MtCO2e/a). Bhutan’s current policy trajectory in 2030 is around 4.5 to 4.8 MtCO2e/a, which is 100% to 117% increase from 2010 levels (excl. LULUCF).
Bhutan’s COVID-19 response does not specifically target a green recovery. The Bhutan Government responded to the COVID-19 pandemic with restricted travel and mandatory traveller quarantine, school and other building closures, and remote working for public servants (Ministry of Finance, 2020b). The pandemic has caused disruption to economic sectors. GDP growth is expected to change from a pre-pandemic projection of 8%, to growth ranging between 0.6% to 2.4% in 2020 (ADB, 2020; IEA/IMF, 2020; World Bank, 2020b, 2020a).
The National Resilience Fund was created in response to the pandemic. It has been designated BTN 30 billion (USD 407 million) to spur economic growth through “Druk Gyalpo’s Relief Kidu” supporting those that have lost their livelihoods related to the pandemic, and interest payment relief measures (Ministry of Finance, 2020b).
In addition, the financial budget for fiscal year 2020-21 has the theme “Economic Resilience and Transformation”, including fiscal and monetary measures for economic growth focusing on tourism, agriculture, and construction. In March 2020, the Ministry of Finance announced tax relief measures in response to COVID-19. Fiscal measures included tax filing extensions and deferrals (Ministry of Finance, 2020a). Monetary measures involved the provisions of Working Capital at 5% interest for wholesale distributors to ensure essential items are available (Ministry of Finance, 2020a).
In November 2019, Bhutan launched the National Energy Efficiency and Conservation (EE&C) Policy covering the building, industry and transport sectors (Ministry of Economic Affairs, 2019). The policy aims to lower the energy intensity of the economy. Along with the EE&C policy, the government released an energy efficiency roadmap which forms the basis of for reviewing progress in implementing EE&C measures (Dept. Renewable Energy, 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 millions of tonnes of oil equivalent (Mtoe), over the same period (Dept. Renewable Energy, 2019). The roadmap is included in the CAT current policy projections.
A number of measures adopted by the government may result in lower levels of emissions than the levels reported in the CAT’s current policy scenario, and could be quantified in future assessment with availability of data. These measures include the National Environment Protection Act, the National Strategy and Action Plan for Low Carbon Development, Bhutan Transport 2040, and the 2010 Economic Development Policy (ADB, 2013; National Environment Commission, 2012; Royal Government of Bhutan (RGoB), 2010; Royal Government of Bhutan, 2007). In addition, Bhutan published a National Waste Management Strategy in June 2019 with the goal of zero waste by 2030 (National Environment Commission, 2019).
The National Strategy on Low Carbon Development reconfirms the commitment to carbon neutrality (National Environment Commission, 2012). It offers a number of short and medium term (up to five years) recommendations, although it is unclear if these have been followed. Recommendations included further investigation into reducing emissions in energy-intensive industries, undertaking further studies and awareness campaigns on crop production, reducing livestock numbers and improving manure management, limiting waste, support for urban planning to reduce private transport demand, support for renewables and energy efficiency standards.
Bhutan is set to graduate from the Least Developed Country (LDC) category by 2023. The export of hydroelectricity to India accounts for 20% of Bhutan's GDP and has played a large role in this achievement (Gyelmo, 2018a). About 77% of Bhutan’s external debt is due to hydropower projects, which raises questions about the sustainability of these projects (World Bank Group, 2017). Project sustainability is crucial, given that Bhutan will lose its access to concessional financing when it graduates from its status as a Least Developed Country.
Bhutan has received Green Climate Fund grants supporting adaptation and mitigation (Green Climate Fund, 2017). One project focuses on enhancing the climate resilience of agricultural practices, while the other focuses on securing protected areas and preventing deforestation, as forests are at risk from illegal logging, landslides, fires and floods (Green Climate Fund, 2017).
Almost all the electricity generated in Bhutan currently comes from hydro power plants. Total electricity capacity is 1.628 GW, of which 1.614 GW is hydro, with medium and large hydro representing 98% of the capacity (IRENA, 2019). Beyond hydro power, diesel generations, wind power and small solar accounts for the remaining capacity (IRENA, 2019).
The Bhutan Power Corp. (BPC) plans for Bhutan’s first ground mounted PV solar project of 180 kW (Bellini, 2020). Although a small project, it is expected to show the feasibility of solar projects in Bhutan (Bellini, 2020).
A study by the International Renewable Energy Agency (IRENA) finds there is a strong rationale for energy diversification in Bhutan to support economic growth, industrial development and employment (IRENA, 2019). Renewable energy beyond hydropower can complement Bhutan’s hydro, by allowing access to electricity in rural areas, and utilising technologies with different generation profiles, creating a diversified power system less reliant on seasonal weather (IRENA, 2019).
Bhutan continues to focus on hydro power. The 2020-21 budget allocates BTN 372.062 million for energy, with the major activities include a hydro project (Kuri- Gongri Hydroelectric Project 2.6 GW) 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, 2020b).
A significant share of Bhutan’s electricity capacity—1.5 GW—is exported to India (IndiaTimes, 2016). According to the NDC, by 2025, the exported clean electricity is expected to avoid 22 MtCO2e emissions per year in India.
The Alternative Renewable Energy Policy (AREP) 2013 supports the development of renewables in Bhutan. The AREP includes a Renewable Energy Development Fund to finance new renewable projects supported by royalties and hydro plant contributions, however this has not yet occurred (IRENA, 2019). The AREP has targets for renewable generation capacity for 20 MW by 2025 excluding hydro, with specific technology targets of 5 MW solar, 5 MW wind and 5 MW biomass (IRENA, 2019).
The Bhutan Power Corp released a tender for supposedly Bhutan’s first ground mounted solar project in September 2020 for 180 kW in the Rubessa, Wangduephodrang district (Bellini, 2020). Other small solar PV systems have been implemented with 2,400 systems contributing 143 MWh of electricity in 2014 (IRENA, 2019). Total renewable energy in Bhutan amounts to 9 GW (excluding large hydro) (IRENA, 2019). Wind energy accounts for 0.6 MW of electricity generation capacity (IRENA, 2019).
The industry sector represented 37% of total energy consumption in 2013 (Dept. Renewable Energy, 2019). The 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).
Industrial processes and product use emissions accounted for about a quarter of total emissions (excluding LULUCF) in 2013, with the largest share coming from cement production and metal production. The cement industry is an important driver of GHG emissions, and its sectoral emissions could reach 1.4 MtCO2 in 2020, if no additional policies are put in place in this sector (Royal Government of Bhutan, 2011).
In 2014, the transport sector represented 19% of Bhutan’s total energy consumption (Dept. Renewable Energy, 2019). The EE&C policy encourages the promotion of energy efficiency transport such as mass transport, electric (EV) and hybrid vehicles, walking and cycling (Ministry of Economic Affairs, 2019). It outlines that technical studies will be conducted for the use of EVs and hybrid vehicles. The EE&C policy supports the consideration of urban planning to enable non-motorised transport, shortening travel distances, and avoiding traffic.
Rising demand for vehicles has driven an increase in Bhutan's demand for diesel and petrol. Bhutan is estimated to have 125 cars per 1000 inhabitants and this is set to grow given Bhutan’s increasingly lenient outlook towards vehicle imports (Gyelmo, 2018b).To tackle this, and associated pollution concerns, the UNDP has identified a few priority interventions (UNDP, 2016). These include expansion of mass transit options, promotion of electric and hybrid vehicles and development and enforcement of fuel efficiency standards.
The Global Environment Fund Trust (contributing USD 1.82m) along with United Nations Development Programme (UNDP) (USD 75.87k) and Bhutan Government (USD 65.97k) are collaborating on a sustainable low-emissions urban transport systems project (UNDP, 2018b). The project promotes the uptake of EVs as part of the larger task to reduce emissions and reduce the reliance in fossil fuel imports. The project aims to increase EV taxis from 99 in 2018 to 399 in 2021 (UNDP, 2018b).
The government has offered a 20% subsidy for electric taxis and is considering a host of other financial incentives to promote green vehicles (not included in CATs current policy projections as there is not quantifiable emissions data) (Kuensel, 2018). Strong international support for these initiatives is evident. For instance, the Global Environment Facility has earmarked over USD 18 million to assist the development of sustainable, low-emission urban transport systems in Bhutan (Global Environment Facility, 2017). The aims of this programme include policy support for the promotion of low emission transport systems, raising awareness about electric vehicles, and institutional capacity and infrastructure development.
In light of the growing demand from the citizens, and looser restrictions by the government, these measures will need to be implemented rapidly and the policies need to be scaled up, to keep transport emissions in check.
Buildings account for the highest energy consumption in Bhutan. In 2014, the buildings sector represented 42% of energy consumption (Ministry of Economic Affairs, 2019). Energy consumption in the building sector relates to the burning of biomass for heating and cooking (Ministry of Economic Affairs, 2019).
The 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.
The EE&C policy aims to improve the energy performance of appliances through developing technical specifications for some appliances and develop a Standards and Certification scheme. The energy efficiency roadmap outlines interventions in the buildings sector to achieve energy savings of 17,034 ToE and emissions reductions of 87,384 tCO2e (Dept. Renewable Energy, 2019). The appliance sector has the potential to achieve energy savings of 148,299 ToE (with low emissions reductions as electricity generation is primarily hydro with no emissions) (Dept. Renewable Energy, 2019).
The government also released voluntary guidelines for sustainable buildings in 2013 (Department of Engineering Services., 2013). The International Finance Corporation (IFC) estimates an investment opportunity of 390 million USD to achieve a 15% penetration in residential buildings and a 20% penetration in commercial buildings by 2030 (IFC, 2018).
Agriculture accounted for 30% of Bhutan’s total 2013 emissions (excluding LULUCF), with a large part of the population relying on subsistence agriculture. Emissions are heavily influenced by livestock used in subsistence farming (Royal Government of Bhutan, 2011). Bhutan has implemented a few programmes that may reduce emissions in the sector.
No specific mitigation effort in the agriculture sector was considered in the CAT current policy projections as there is no quantifiable emissions data of the policy impact. The NDC refers to the promotion of climate smart livestock farming practices, and the promotion of organic agriculture, and the Second National Communication refers to a Sustainable Land Management Programme (SLMP) (Royal Government of Bhutan, 2011).
The National Strategy on Low Carbon Development outlines short and medium term recommendations to 2017, which would still be effective for emissions reductions at present (National Environment Commission, 2012). The strategy discusses how strong traditions and lack of information are barriers to mitigating emissions in the agriculture sector. Recommendations include awareness campaigns and training on new rice farming systems and improving breeding and manure management (National Environment Commission, 2012).
The land use change and forestry sector is a sink of 6 MtCO2e annually, through managed forests and forest plantations as well as abandonment of managed land (Royal Government of Bhutan, 2011). The Constitution of the Kingdom of Bhutan and the NDC mandate that 60% of the country remain under forest cover indefinitely. In 2011, the government estimates a share of 74% of land forested (Royal Government of Bhutan, 2011).
The government is promoting a “Zero Grazing Policy” to make the best use of animal waste (Royal Government of Bhutan, 2011). According to the Second National Communication, Bhutan has one of the highest proportions of land under protection: more than 40% (Royal Government of Bhutan, 2011). The NDC refers to promotion of sustainable forest management. The Second National Communication refers to a forest policy that mandates timber production is for domestic demand only and commercial logging is limited to forest management units and very small concession areas (Royal Government of Bhutan, 2011).
In 2013, waste accounted for 8% of emissions in 2013 (excluding LULUCF). In June 2019, Bhutan released a National Waste Management Strategy (National Environment Commission, 2019). The strategy demonstrates how GHG emissions from waste are projected to grow from around 2014 to 2050, with a large increase in emissions projected between 2045 and 2050, assumingly if no waste strategies are in place. The strategy goal is “zero waste Bhutan by 2030”. The strategy has an emissions-related medium to long term (2023-2030) target to “mandate the inventory of all waste diversion data to calculate GHG reduction for claiming Carbon Credits”.
Bhutan's growth in the recent past will see it graduate from Least Developed Country (LDC) status. The government of Bhutan recognises that rapid urbanisation, increasing affluence, and population growth will increase the amount of waste generated (National Environment Commission, 2016).
Bhutan is currently receiving support to develop sustainable public-private partnership models, in an attempt to de-risk private sector investment in municipal waste (UNDP, 2018a). However, some municipalities report relatively poor experiences with private companies (Gyelmo, 2018b).