Bhutan Transport and Climate Profile 2026

Outline

BHUTAN

TRANSPORT AND CLIMATE PROFILE

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Background

Bhutan, a low and lower-middle-income country in South Asia with a population of 792,000, stands out in the global climate arena through its ongoing dedication to achieving carbon neutrality. By 2024, its transport sector emitted 257,000 tonnes of greenhouse gases (GHG), making up about 9% of the nation's total economy-wide emissions. Notably, the pattern of these emissions has shifted significantly: before the adoption of the Paris Agreement and the Sustainable Development Goals (SDGs), transport-related CO2 emissions grew at an annual rate of 9.6%, but since 2015, this rate has dropped to 1.0%. Despite this moderation, road transport overwhelmingly dominates the sector, accounting for 86% of transport emissions and 8% of the country's total GHG emissions. The contributions from domestic navigation and aviation are each 7%, while the rail sector is non-existent. Bhutan's transport sector's carbon intensity relative to its GDP—valued at $12.8 billion USD (PPP) with a per capita GDP of $16,148—shows a positive decoupling trend. In 2024, this intensity was 20.1 grams of CO2e per USD, a significant decline from 30.9 in 2015 and 31.9 in 2000. This figure compares favorably with the Asia-Pacific average of 29.0 gCO2e per USD and aligns closely with the South Asian subregional average of 20.9. Nonetheless, the sector's environmental footprint extends beyond tailpipe emissions; around 1.3 million tonnes of materials are used annually for infrastructure development and maintenance, resulting in an additional 46,000 tonnes of CO2-equivalent embodied emissions.

Energy consumption within the sector remains a critical challenge, characterized by a total demand of 2,477 terajoules in 2023 and an absolute reliance on oil products. Growth in energy consumption increased from 8% annually (2000–2010) to 9% (since 2010), with the fuel mix remaining 100% fossil-based, with biofuels and electricity recording <1% shares as of 2023. Despite this total dependency on petroleum, Bhutan's energy intensity of 0.19 megajoules per USD of GDP is significantly lower than the Asia-Pacific average (0.37) and the low-income economy average (0.24). Furthermore, the social costs of fossil fuel reliance are high; petroleum subsidies incur substantial externalities, primarily driven by road crashes (94%) and congestion (6%). As the country moves toward electrification, it faces a potential fiscal transition risk, as fuel tax revenues—which currently comprise 5% of total government revenue—face a structural decline.

Bhutan's motorization rate has climbed to 171 vehicles per 1,000 population in 2024, up from 119 in 2000, though it remains well below the regional average of 317. The vehicle fleet is dominated by light delivery vehicles (59%) and trucks (22%), with two-wheelers representing only 10%. To address this, the government has accelerated the adoption of electric mobility.1 Between 2017 and 2024, EV imports reached 16 million USD, constituting 12% of total road vehicle imports by 2024. These imports are primarily LDVs (86%), followed by goods vehicles and buses (12%). This transition is supported by a rising investment in public transport infrastructure; bus imports increased from 5.6 million USD (2010–2015) to 18.6 million USD (2015–2024), with 2.2% of the bus trade being electric. Consequently, Bhutan scores 65 out of 100 on UNEP's E-mobility Readiness Index, showing particular strength in energy (24) but requiring further development in technology, markets, and policy frameworks.

The nation's transport infrastructure faces acute climate vulnerability. Bhutan ranks 202nd out of 208 countries in National Road Vulnerability, indicating a high risk of systemic failure if key segments are lost to natural hazards. With 43% of recorded disasters since 2000 being floods and 43% earthquakes, the transport network faces potential average annual losses of 4 million USD—roughly 0.031% of GDP—entirely concentrated in the road sector. Under a 4.5-degree warming scenario, over 36% of road and rail assets would be exposed to extreme precipitation. Despite these risks, only 30% of current transport policy measures incorporate climate adaptation or resilience components, whereas 81% focus on mitigation.

Financial support has grown substantially, with Official Development Assistance (ODA) rising from 73.6 million USD (2002–2010) to 161.8 million USD (2011–2023), primarily allocated to road infrastructure (94%). Nonetheless, public-private partnerships (PPPs) are still largely unexplored.

Strategically, Bhutan's policy framework is robust, comprising several documents, including the provisional Third Nationally Determined Contribution (NDC) published in 2025. While the NDC lacks an economy-wide GHG target, it reaffirms a commitment to carbon neutrality and considers a transport-specific mitigation potential of 5,283 Gg CO2e. Achieving these targets requires an estimated investment of 3.233 billion USD by 2030. Moving forward, Bhutan's priority policies—including vehicle efficiency standards, EV integration, and intelligent transport systems—must bridge the gap between high-level NDC commitments and integrated long-term strategies to ensure a resilient, low-carbon transport future.

Avoid Measures - Bhutan's "Avoid" strategies focus on reducing the need for motorized travel through rigorous land-use planning and demand-side management. The National Transport Policy 2017 emphasizes the integration of geospatial tools like GIS and Remote Sensing to align transport infrastructure with urban development. A cornerstone of this pillar is the Low Emission Development Strategy (LEDS) - Surface Transport, which outlines "parking de-growth" plans and the establishment of "neighborhood nodes" to provide basic amenities within walking distance, thereby curbing unnecessary vehicle trips. Furthermore, the National Energy Efficiency & Conservation Policy (2019) promotes shortening travel distances and implementing demand management programs to mitigate urban congestion. The Alternative Renewable Energy Policy 2013 and the LEDS mandate the introduction of dedicated bike lanes and public bicycle systems (PBS) to incentivize cycling and walking for short-distance commutes.

Shift Measures - The "Shift" paradigm in Bhutan prioritizes a transition from private internal combustion engine (ICE) vehicles to mass transit and non-motorized transport (NMT). Mass Transit and Rail: The Second Nationally Determined Contribution (NDC) and the Low Emission Development Strategy (LEDS) envision a transformative shift toward mass transit, including the introduction of Bus Rapid Transit (BRT) in Thimphu and the long-term development of Light Rail Transit (LRT) connecting Thimphu to Paro.

Shared Mobility: To further optimize vehicle occupancy, the Second NDC promotes shared mobility and carpooling as central components of its private vehicle demand management strategy.

Improve Measures - The "Improve" strategy focuses on enhancing the energy efficiency of the existing fleet and accelerating the uptake of Zero-Emission Vehicles (ZEVs).

Electrification: The Bhutan Electric Vehicle Initiative and the EV Roadmap (2020-2025) set ambitious targets, including the goal of having ZEVs comprise a significant portion of the taxi and government fleets. To support this, the 12th Five Year Plan prioritized the installation of a nationwide quick-charging infrastructure.

Standards and Regulation: Bhutan is progressively tightening its regulatory environment. The National Environment Strategy (2020) mandates annual emission tests for all vehicles, while the LEDS - Surface Transport aims to implement Euro VII/BS-VII standards by 2026.

Fiscal Incentives: To catalyze market transition, the Economic Development Policy (2016) and the National Transport Policy offer a suite of fiscal measures, including tax waivers and subsidies for the purchase of hybrid and electric vehicles. Green Hydrogen: Looking toward emerging technologies, the Third Nationally Determined Contribution (Provisional) and the Sustainable Hydropower Development Policy (SHDP) 2021 have identified green hydrogen as a critical pathway for decarbonizing heavy-duty transport and diversifying the energy mix.