Bhutan, a Major Beneficiary of Climate Fund

Bhutan, a Major Beneficiary of Climate Fund

Though Bhutan has no nationally drawn map of how much the country would require as a climate fund, it has been successful to garner funds from various agencies on different themes. It includes funds obtained for Bhutan Sustainable Low Emission Urban Transport, Mainstreaming Biodiversity Conservation into the Tourism Sector, Climate Resilience and Transformation Change in the agriculture sector, Readiness and Preparatory Support Programme and others. This was managed by the department of Macro-fiscal and Development, Ministry of Finance (MoF). 

As a member of the Least Developed Countries’ (LDCs) in Asia share similar socioeconomic circumstances and demographics and, importantly, face a high degree of climate change challenges, there has been a shared purpose of accessing and mobilizing scaled-up climate finance. 

In the climate finance portfolio, Bhutan received about USD 12.14mn from System for Transparent Allocation of Resources (STAR) VI and VII. The STAR determines the amount of Global Environment Facility (GEF) resources that a given country can access in a replenishment period. It replaces the Resource Allocation Framework (RAF) that was used during the fourth replenishment period of the GEF (GEF-4). Bhutan had access to USD 6.14mn from STAR VI and USD 6mn from STAR VII.

Under the Least Developed Countries Fund (LDCF), Bhutan had access to USD 21.96mn which included USD 8.96mn from GEF VII and USD 20mn from GEF VIII. The LDCF, hosted by GEF, is the only dedicated source of climate resilience funds for the 46 Least Developed Countries, which have contributed the least to carbon emissions and face some of the highest risks from the effects of climate change.

USD 3mn was for Bhutan Sustainable Low Emission Urban Transport and USD 5.4mn for Mainstreaming Biodiversity Conservation into the Tourism Sector. USD 1.1mn was from GEF Small Grant Programme.

Meanwhile, USD 2.64mn was for Biodiversity and Land Degradation from the GEF and USD 13.9mn for enhancing sustainability and climate resilience of forest and agriculture landscape and community livelihood while USD 8mn for Advancing Climate Resilience in Water Sector in Bhutan.

From the Green Climate Fund (GCF), the approved budget was USD 57.8mn and the accession rate is 0.48% which is USD 12 bn. Accession ability for the project is 0.91%.  

For supporting Climate Resilience and Transformation Change in agriculture sector USD 25.345mn was availed.  USD 26mn will be for Bhutan for Life and USD 0.526mn will be for Bhutan Green Transport Program. USD 1.775 is for Readiness and Preparatory Support Programme while USD 3mn is for preparation of the National Adaptation Plan (NAP) for Bhutan, with a focus on implementation of comprehensive risk management in the water sector. USD 0.595mn is for strengthening REDD+ and water management in Bhutan.

The Green Climate Fund (GCF) is a fund established within the framework of the United Nations Framework Convention on Climate Change as an operating entity of the Financial Mechanism to assist developing countries in adaptation and mitigation practices to counter climate change based in Incheon, South Korea with 24 board members.

The country’s adaptation fund allocation is USD 20mn and the resources accessed is 49.5% which is USD 9.9mn. Adaptation to Climate-induced Water Stresses through integrated Landscape Management in Bhutan is USD 9.9mn. The Adaptation Fund was established under the Kyoto Protocol of UNFCCC in 2007 and managed by the Adaptation Fund Board of 16 members and 16 alternates.

The total climate fund from the Government of Japan is 6.52mn of which USD 1.9 is from Japanese Supplementary Budget I. USD 1.1mn, USD 2.02mn and USD 1.5mn respectively are from Japanese Supplementary Budget II, III and IV.

Under the umbrella of GEF, Bhutan will have 13.9mn for National Adaptation Programme of Action (NAPA) III and USD 8.9 for Advancing Climate Resilience of Water Sector in Bhutan (ACREWAS) under GEF VI. Under the GEF VIII, USD 8mn is for the food system.

The official from the department of Macro-fiscal and Development said that there is no set limit for the climate fund and it will depend on the concept note of the country. The official said that Bhutan’s climate finance trajectory is “in the right direction.”

The department is also looking for innovative financing. It would look for domestic financing, green bonds and sovereign bonds for the climate fund.

However, Bhutan faces challenges to mobilize climate funds due to lack of data and packaging. For instance, the country does not have proper data on water and rainfall of the last 30 years.

Meanwhile, Bhutan has opportunities of climate finance in policy intervention and strategic guidance, adaptation funds in water and agriculture, narrowing the resources gap, technical capacity development, supporting the plans and policies and digitization and technologies.

The country has also untapped resource baskets such as private sector investment through concessional instruments, low-interest and long-tenor project loans, lines of credit to banks and other financial institutions and equity investments and risk mitigators, such as guarantees, first-loss protection and grant-based capacity-building programs. It can be financed by mainstreaming climate change considerations in the financial system of financial institutions, and project by tailoring life cycle concessional finance to de-risk infrastructure projects for climate. Other resources are structuring anchor investments in climate equity/debt funds and developing capital/carbon markets that require bespoke structuring solutions among others. 

Sangay Rabten from Thimphu