Bhutan Generates USD 7.77 Million from Carbon Emission Reduction Credits

Bhutan Generates USD 7.77 Million from Carbon Emission Reduction Credits

Amid global debates on how best to tackle climate change, Bhutan’s entry into the carbon market marks a significant achievement for the nation. Leveraging carbon markets presents one of the most cost-effective ways to reduce emissions while meeting Bhutanese development goals.
Bhutan has registered three hydropower projects under the Clean Development Mechanism (CDM): the Dagachhu Hydropower Project, the Mangdechhu Hydropower Project, and the Punatsangchhu I Hydropower Project. However, thus far, only the Dagachhu project has participated in carbon trading.
According to Minister Gem Tshering of the Ministry of Energy and Natural Resources (MoENR), the Dagachhu Hydropower Project has traded 781,653 Carbon Emission Reduction credits (CERs), generating USD 7.77 million between 2015 and 2023. “The Dagachhu hydropower project is the only project in the country that has traded carbon. However, we will expand once the Punatsangchhu project is ready,” the Minister stated.
Additionally, the Minister highlighted that Druk Holding and Investments (DHI) is exploring carbon trading opportunities and is currently collaborating with Singapore to facilitate Bhutan’s entry into the carbon market. Carbon trading is expected to make more projects viable in the country, particularly in developing non-hydro energy sources. Although investment costs for such projects are high, they are crucial for reducing reliance on fossil fuels. By positioning itself as a source of high-quality carbon credits, Bhutan aims to attract more investments and contribute to its economic transformation.
Since the adoption of the Paris Agreement in 2015, Bhutan has actively participated in Article 6 negotiations concerning carbon markets. Under the Paris Agreement, all countries are obligated to reduce emissions, with Bhutan committed to remaining carbon neutral. An official from the Department of Environment and Climate Change (DoECC) under the MoENR stated, “We have no projects under Article 6 yet but have applied for the transition of our registered CDM projects, namely Dagachhu, Mangdechhu, and Punatsangchhu I hydropower projects.”
Meanwhile, earlier this month, Indian businessman Gautam Adani had an audience with His Majesty the King. The Adani Group has signed an agreement with the Bhutanese government to construct a new hydropower plant in Chhukha. Adani expressed his honor and excitement on social media, stating, “Honored to meet His Majesty the King of Bhutan. I am inspired by His Majesty’s vision for Bhutan and the ambitious eco-friendly masterplan for Gelephu Mindfulness City, including large computing centers and data facilities.” Adani also shared that he was excited to collaborate on these transformative initiatives and on green energy management for a carbon-negative nation.
The Minister of MoENR indicated that the Adani Group’s signing of a 570 MW to 900 MW hydropower project in Chhukha, expected to begin in three months, will bolster the nation’s efforts in green energy and carbon trading.
During the 56th National Environment Commission Meeting held on 27th March 2023, Bhutan adopted the “Carbon Market Rules for the Kingdom of Bhutan, 2023” as a foundation for robust, transparent, and effective participation in the carbon market mechanisms that contribute to achievement of our climate goals of pursuing a carbon neutral and climate resilient development while promoting sustainable development to achieve environmental, social and economic benefits.
Bhutan adopted the Kyoto Protocol in 1997 and the Paris Agreement later, both international treaties committing to the reduction of greenhouse gases to combat climate change. Bhutan is a Party to the United Nations Framework Convention on Climate Change (UNFCCC) and ratified the Paris Agreement on 19 September 2017. Bhutan submitted its Intended Nationally Determined Contribution (NDC) on 30 September 2015, in which it committed to remain carbon neutral. In its second NDC, submitted on 5 June 2021, Bhutan reaffirmed this commitment.
In December 2023, Bhutan achieved a significant milestone by becoming the first national registry to fully integrate with the Climate Action Data Trust (CAD Trust) Metadata Layer. This groundbreaking development, announced at COP28, positions Bhutan as a regional leader in climate action and aligns with the goals of Article 6 of the Paris Agreement.
CAD Trust, initiated by the World Bank, the International Emissions Trading Association (IETA), and the Government of Singapore, is a decentralized, blockchain-based platform designed to ensure transparent accounting in carbon markets. This platform aligns with Article 6 of the Paris Agreement, which emphasizes international cooperation in achieving climate goals through market-based mechanisms.
Bhutan, renowned for its vast forests covering over 72% of its territory, plays a crucial role as a ‘carbon bank’ by contributing significantly to global biodiversity and carbon sequestration. As the world’s first carbon-negative country, Bhutan’s integration with CAD Trust underscores its commitment to climate mitigation and action.
By integrating with CAD Trust, Bhutan has enhanced the efficiency and transparency of its climate mitigation efforts in accordance with Article 6 implementation. This integration leverages advanced digital infrastructure, including blockchain technology, to maintain the integrity of carbon credit data and prevent double counting—an essential aspect of Article 6.
“We are proud to be the world’s first carbon-neutral country. By entering the CAD Trust, we are leading by example in protecting the global ecosystem, buttressing Bhutan’s unique status. The Ministry of Energy and Natural Resources has taken the lead for the development of the carbon markets in Bhutan and has selected Druk Holding and Investments to pave the way for Bhutan to join the CAD Trust. We look forward to working closely with the World Bank and other global stakeholders on such a worthy project,” said Karma Tshering, Secretary, Ministry of Energy and Natural Resources,” had said.
Bhutan’s connection with CAD Trust enhances its national climate action while also setting an exemplary model for international cooperation under Article 6. The move is instrumental in advancing global efforts to reduce greenhouse gas emissions and fulfil Nationally Determined Contributions (NDCs).
Yuvaraj Dinesh Babu, Executive Director, CAD Trust, had then commented, “Bhutan has today taken a position of leadership in integrating its national registry with CAD Trust. By doing this, Bhutan is demonstrating its ambition to contribution significantly to global climate change mitigation efforts, and has applied maximum transparency and efficiency to the way its domestic market operates and how carbon market participants interact with it. We expect many others to follow its example in the coming months as Article 6 markets become engrained in the fabric of global emission reduction and removal priorities.”

By Sherab Dorji, Thimphu