With the International Climate Change negotiations coming to a close yesterday in Doha, I can’t help but think about the relevance of those discussions to Bhutan. Unlike my native Canada, which is failing badly, Bhutan is in many ways a model student when it comes to climate change performance. It is fueled by clean hydropower electricity and some 72% of the country is blanketed with forests that act to capture the little carbon that is emitted. Taking into account this “carbon sink” effect, Bhutan actually has negative CO₂ emissions per capita.

But is being a model climate change performer enough, or should Bhutan take further steps to shield its economy and people from the present, and potential future impacts of climate change?

Some 99% of Bhutan’s domestic electricity needs are met by hydropower originating from glacial sources. The unpredictable impacts of climate change on the Himalayan ice fields put Bhutan’s waterways at risk. In addition, Bhutan is a net importer of electricity in winter months, at which time river-flows are low and electricity demand is high to meet heating requirements. This dependence on a single electricity supply source is arguably a risky strategy.

Bhutan has also increasingly tied the country’s development to its glacier-fed rivers, with a focus on tapping its hydropower potential as its core economic development strategy. During the summer months, Bhutan produces much more electricity than it can consume, and it sells all of the excess, up to 70% of what it generates, to India through long-term power purchase agreements. Already in 2010, hydropower sales eclipsed the agricultural and tourism sectors as the largest contributor to GDP, representing some 22%. With a current installed capacity of just under 1,500MW and construction of an additional 10,000MW in the works, hydroelectricity’s proportion of GDP will increase significantly. This will certainly yield positive economic impacts, but may also lead to challenges due to large capital inflows. This effect is well described in an article in the most recent edition of The Raven magazine entitled ‘Is Bhutan Suffering Symptoms of the Dutch Disease?’

Beyond the electricity sector, Bhutan relies completely on imports of fossil fuel to meet its broader energy needs, which are rapidly rising. Between 2001 and 2011, the value of fossil fuel imports to Bhutan increased 14 fold, amounting to 200 million USD in 2011. Fossil fuel imports are projected to increase by a further 50% over the next five years. Not only does this place the economy at risk of rising fuel costs, but security of supply is also a challenge given that India is the sole supplier. We already see the real impacts of this dependence, with long line-ups forming at the gas stations when the LPG truck arrives in Thimphu, and limitations of one LPG bottle per person being imposed.

Perhaps the most ironic point, is that an important share of income from hydropower sales to India is going right back across the border to pay for Bhutan’s rising demand for fossil fuels.

Many of these challenges are indeed well recognised in Bhutan. The Tenth Five Year Plan identifies reliance on energy imports as a threat and notes the potential negative impacts of climate change. The key next step, however, is devising strategies and policies that effectively address these issues. Three things can help significantly: diversifying energy supply, enhancing energy efficiency, and focusing on building long-term domestic economies that leverage hydropower resources at home. These measures can not only help buffer the potential impacts of climate change, but they can also help enhance national competitiveness.

Positive steps are being taken in this direction and I feel quite fortunate to be involved in some of this work – which I’ll write more about in my next post…