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FEATURE STORYMarch 29, 2024

Harnessing Nature and Building Resilience: Bhutan's Path to Sustainable Development

Bhutan Country Environmental Analysis

The World Bank's Country Environmental Analysis highlights that Bhutan's natural capital, when sustainably harnessed, can support economic diversification and resilience.


Bhutan's natural environment is among the most pristine in South Asia. With a stellar performance on sustainability and carbon neutrality, Bhutan is a recognized global leader in forest and biodiversity conservation. The Bhutan Country Environmental Analysis (CEA) examines Bhutan's development trajectory and explores opportunities to ensure sustainable and green growth. Bhutan is the world's first carbon-negative country and is known as a global leader in forest and biodiversity conservation, with close to 70% of its area covered by forests.

While environmental policies and accomplishments have helped to build the country’s uniquely “green” image, in the long run, despite the government’s commitment to sustainable resource use and conservation, Bhutan is vulnerable to the impacts of climate change and is facing other emerging environmental challenges resulting from urbanization, pollution, and waste management.

Some of the most challenging climate risks which Bhutan faces are hydrological, making its most important economic sectors (hydropower and agriculture) highly vulnerable to climate impacts. While hydropower has kept Bhutan’s emissions and sustainability agenda on track, high dependence on this sector leaves Bhutan’s economy highly vulnerable. Overall, Bhutan has a lower resilience to climate change impacts when compared with other Lower middle-income (LMI) countries.

The Country Environmental Analysis (CEA) takes a new look at Bhutan's development path by incorporating its remarkable conservation and nature protection achievements into a broader conversation about emerging growth opportunities. The CEA delves into Bhutan's sustainability profile and explores socioeconomic indicators beyond GDP and growth rates. It uses several analytical tools to identify key development challenges, knowledge gaps, and opportunities for sustainable growth.

The Green, Resilient, and Inclusive Development (GRID) benchmarking highlights significantly elevated threats from natural disasters that threaten lives and livelihoods. Low access to social protection programs could further increase the country’s vulnerability to natural disasters, including earthquakes, floods, and landslides causing a significant amount of damage each year. Assets equivalent to approximately 2.3 percent of GDP are damaged each year due to natural disasters, which is more than twice the average for LMI countries.

“Bhutan has proved to the world that economic growth is possible without hampering the environment. Bhutan is among the countries with the largest share of renewable natural capital per capita in the world. To support its development needs, the country can mobilize additional resources by exploring opportunities to monetize emission offsets through voluntary carbon markets and enabling policies for private green investments.”
Abdoulaye Seck
Country Director for Bhutan and Bangladesh, The World Bank

The CEA highlights that Bhutan's natural capital, when sustainably harnessed, can support economic diversification and resilience. There are untapped opportunities in forest utilization and nature-based tourism that could add value to the economy while reducing GHG emissions. The analysis emphasizes the need for resilience to climate change and economic diversification to sustain growth and protect natural resources.

Key highlights of the CEA include linking conservation and protection with economic growth and local development by capitalizing on the natural resource base; preserving the uniqueness of Bhutan; strengthening Bhutan’s capacity for managing environmental risks; and creation of enabling conditions for private sector led green growth. A more resilient economy with a green and diverse production base could not only fast track Bhutan’s COVID-19 recovery but also its future development.


The report recommendations aim to the country stay climate neutral and reassert its position as a global leader on sustainability and climate neutrality.

  • Sustainably harness/capitalize on the natural resource base
  • Preserve the uniqueness of Bhutan and address emerging challenges threatening Brand Bhutan
  • Strengthen the capacity for managing environmental risks
  • Create enabling conditions for private sector-led green growth


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