Bhutan

Implementation period: 2024-2025 Funding amount: US$200,000 Window: Just-in-Time (JIT) support

Bhutan continues to lead on climate ambition, underpinned by its constitutional mandate to maintain at least 60 percent forest cover, and its pledge to remain carbon neutral, reaffirmed by its climate commitments, or Nationally Determined Contributions (NDC). Building on a history of participation in international carbon markets—such as the generation of emission reductions through the Clean Development Mechanism (CDM) from hydropower exports—Bhutan is now strengthening its domestic carbon market infrastructure and policy frameworks. In 2023, the country approved its Carbon Market Rules, a key policy reform supported by the World Bank’s Green and Resilient Growth Development Policy Credit.

Objectives & Activities

The PMI Program in Bhutan aims to support the country in establishing a robust governance and policy framework for domestic carbon markets, in line with its long-term climate commitments. Key areas of technical assistance include:

• Defining a governance framework for the Carbon Asset Registry and the Bhutan Climate Fund (BCF): Establish the organizational structure, institutional roles and responsibilities, and outline how the registry and BCF will interact operationally to ensure integrity, transparency, and alignment with Bhutan’s climate finance goals
• Support for policy development: PMI technical support contributed to the drafting of the Bhutan Carbon Market Policy Handbook, which has been submitted for cabinet approval. The handbook provides strategic direction for the operationalization of Bhutan’s participation in international carbon markets. It also outlines key processes and institutional arrangements to operationalize Bhutan Carbon Market Rules, supporting the expansion of institutional arrangements, national processes, and the infrastructure needed to enable participation in carbon markets
• Capacity building and institutional strengthening: Offer technical training for 30 officials across nine ministries of the Royal Government of Bhutan focusing on carbon asset registry operations. Additional training on carbon markets and readiness on Article 6 of the Paris Alignment is planned
• Regional knowledge exchange and leadership: Bhutan served as a mentor country during a South-South Knowledge Exchange with Nepal, Guyana, and Belize, sharing its experience in carbon market policy and institutional development

Additional Resources

• Bhutan Carbon Market Rules Summary
• Clean Development Mechanism – Dagachhu Hydroelectric Project Overview
• Bhutan - First Green and Resilient Growth Development Policy Credit
• Bhutan - Second Green and Resilient Growth Development Policy Credit