Geographically, Bhutan forms the part of the Eastern Himalayan Biodiversity Hotspot. Forests is the dominant ecosystem in Bhutan, with 70.46 per cent of the country under forest cover and an additional 10.43 percent under shrubs. The total protected forest areas in the form of national parks, wildlife sanctuaries and biological corridors corresponds to 51.44. Further, as a result of variance in the altitudinal range, with corresponding variation in climatic conditions, the country can broadly be divided into three distinct eco-floristic zones with different forest types. Agro-ecologically, Bhutan has six zones with different altitudinal ranges and climatic conditions, with zone relevant agricultural practices. The aquatic ecosystems of Bhutan consist mainly of rivers, lakes, marshlands and hot springs. Bhutan records more than 5,600 species of vascular plants out of which approximately 94 percent are native species and about 144 species are endemic to Bhutan. More than 200 species of mammals are identified with 27 of them are globally threatened. Further, Bhutan has recorded 728 species of bird till date, of which, 18 are globally threatened. Surveys of other lesser-known species such as fungal diversity, herpetofauna, invertebrates are ongoing.
Bhutan revised its National Biodiversity Strategies and Action Plan (NBSAP) in 2014 ensuring full alignment with the Global Aichi Biodiversity Targets under the UNCBD. Bhutan also revised its National Action Programme in 2013 drawing on the national objectives of environmental sustainability and the UNCCD objectives. The government is also implementing climate change adaptation and biodiversity conservation projects through various financing windows such as Global Environment Facility (GEF) to combat climate change issues in the country.
An Integrated Approach to BIOFIN
The Royal Government of Bhutan prioritized three Sustainable Development Goals (SDGs): SDG 1 (End poverty), SDG 13 (Combat Climate Change.) and SDG 15 (Protect Ecosystems and Biodiversity) to demonstrate medium-term results. At the same time, it is preparing the nation’s 12th Five Year Development Plan. Given the priority of the Bhutan to understand how to finance the implementation of the 12th Plan while delivering SDG results, BIOFIN was invited to pioneer an integrated approach to development financing. Following BIOFIN steps and other related initiatives, the combined Policy and Institutional Reviews confirmed the case, as biodiversity and climate related policies and regulatory frameworks are mostly overlapping for Bhutan. This was followed by an integrated Biodiversity and Climate Change Expenditure Review that provided biodiversity and/or climate related expenditures including a breakdown of poverty-related expenditure as it relates to climate change and biodiversity expenditures. The Finance Needs Assessment for Biodiversity attempts to relate to country’s Nationally Determined Contribution where feasible. The proposed financing solutions would help amplify the impacts of isolated interventions on biodiversity, climate change and poverty reduction. For example, climate-smart conservation of biodiversity and ecosystems can help people to escape from poverty as well as adapt to climate change. It enhances the ambition and scope of Bhutan’s resource mobilization horizon and reinforce Bhutan’s political and technical leadership in sustainable development.
Two separate Policy and Institutional Reviews for biodiversity and climate change were conducted to confirm the convergence of policies and institutions. Having confirmed the convergence to inform an integrated approach, the combined PIR follows BIOFIN and CPEIR methodologies and reviewed how biodiversity and climate change aspects, including NBSAP and INDC implementations support national Five-Year development goals and visions. Having reviewd more than 40 policies, legal instruments and strategies, the PIR indicated a good range of policies and legislations in place for biodiversity/climate financing, but challenges related to institutional synergies, implementation gaps, diverse financing options but often fragmented, capacity gaps etc.
An Environmental Expenditure Review was carried out to include biodiversity and climate change including their contribution to poverty reduction. Results indicate that government spends about 5% of national budget annually for biodiversity (2.6%) and climate change (2.4%). Biodiversity expenditures contributed 43% to poverty reduction results. In addition the Expenditure Review has following key findings;
- Bhutan has a successful track record in mobilizing and implementing green sources of finance
- The Royal Government of Bhutan funds about half of its total climate and biodiversity public expenditures
- Delivery on biodiversity and climate change expenditure is quite high
- Ministry of Agriculture and Forests accounts for half of the total biodiversity and climate change
- Both biodiversity and climate expenditures have significant contribution to poverty reduction
The current budget allocation is not limited by the lack of commitment by the RGoB, but rather due to numerous competing demands for the limited resources not only from other Government sectors but also within the Ministry of Agriculture itself. For the 12th FYP there’s an estimated Nu. 5,046 million or $75 million financing gap for meeting the Plan’s biodiversity and climate related targets.
Significant costing frameworks already exist in the country. For example, Bhutan for Life (1) Initiative involved detailed costing for various biodiversity and climate-related activities in the protected areas that can be extrapolated. The main data projections were done, and recently validated with Bhutan's 12th Five-year Development Plan. The FNA exercise explores synergies with several initiatives, including work lead by the Ministry of Agriculture and Forests on the Valuation of Ecosystem Services and REDD+ are informed of and have expressed interests in learning from BIOFIN process. However, for an integrated approach, costing climate change was complicated. Nevertheless, through biodiversity costing through BIOFIN FNA, it is assumed that over 50% of climate costing would have been covered given the convergence of biodiversity and climate change and also the fact that much of Bhutan’s Nationally Determined Contribution overlaps with the NBSAP. The approach to FNA was through – first prioritisation of national biodiversity targets, costing individual targets and then validating with the planned activities and budgeting for the 12th Five-Year Plan.
The final product of BIOFIN Bhutan, the Biodiversity Finance Plan (in its draft stages), is going to be a Green Investment Plan which includes a detailed approach to using green financing and a comprehensive scan of financing solutions which relates to domestic sources of finances. As an integrated approach, the Plan will seek to amplify the impacts of isolated interventions on biodiversity, climate change and poverty reduction. For example, climate-smart conservation of biodiversity and ecosystems can help people to escape from poverty as well as adapt to climate change. It would enhance the ambition and scope of Bhutan’s resource mobilization horizon, leveraging common assets to attract new investors while reducing transaction costs by integrating the initiatives; and it would help ensure better linkages between Gross National Happiness and SDG indicators, resulting in an integrated approach to delivering local, national and global-level development results. Overall, this initiative would reinforce Bhutan’s political and technical leadership in the area of sustainable development.
Finance solutions under discussions;
- Mainstreaming: BIOFIN Bhutan will support to strengthen the existing Environment Mainstreaming Reference Group, by integrating NBSAPs and NDCs with clear linkages to SDG implementation. The entry point is Bhutan’s 12th Five-Year Development Plan including its fiscal decentralisation where BIOFIN results will help inform central and local government plans.
- ODA, International Sources of Green Finance: The available public resources for addressing Bhutan’s pressing environmental challenges are not commensurate to the government’s political will and conservation milestones. BIOFIN will capitalize on different characteristics and funding priorities of green financing solutions to suit national commitments and priorities.
- Synergies of biodiversity funds: Bhutan has multiple initiatives aimed at innovative financing of biodiversity conservation . In addition, substantive revenues can be obtained through other proposed financing solutions. Given the availability of multiple funding sources, attention will be paid with other partners to ensuring that funds are adequately channeled into appropriate intervention areas and spaces.
- Ecotourism: Bhutan’s verdant thriving bio-cultural landscapes act as a storehouse of inexhaustible natural and social capital. Ecotourism is a key financing solution for BIOFIN Bhutan with a potential to generate additional USD 108 million annually in revenues and create 1400 new jobs through nature-based tourists, community-owned businesses and PPP enterprises that attract CSRs.
- Localization of BIOFIN solutions: As part of BIOFIN implementation and institutionalization, the sequential methodology used by BIOFIN at the national level will be adapted and localized to consider options for mobilizing new and innovative financing for biodiversity conservation in few selected districts. This will include implementing finance solutions and capacity development of local government.
- Energy and other Royalties: BIOFIN will partner with other partners such as the Bhutan for Life, Bhutan Trust Fund, Bhutan REDD+, Bhutan TEEB and PES to demystify and unlock the 1% hydropower royalty as plough-back PES for biodiversity conservation and climate change actions. In addition, synergies will be explored with other existing and new funds and royalties based on PIR
- Domestic sources of finances: Bhutan’s Constitution mandates that all recurrent costs in the government’s plans will be met from the domestic revenues. BIOFIN will inform clear requirement in terms of recurrent costs for biodiversity conservation with business case for increasing recurrent costs and options to raise domestic financing sources through tax reforms, subsidies and royalties on natural resources.