The Japan Special Fund, financed by the Government of Japan and administered by ADB, is providing a $700,000 grant for building up the capacity of Bhutan’s National Environment Commission (NEC). The grant will boost the ability of NEC to adequately assess and promote hydro power and other renewable energy projects suitable for availing of the Clean Development Mechanism (CDM) under the Kyoto Protocol, and for potential carbon trading. There is considerable scope for tapping the CDM as Bhutan and India – the main purchaser of Bhutan’s electricity exports – are planning more hydro power projects with combined output of about 10,000MW.

The NEC is the designated national authority for climate change issues and handles projects that are eligible to avail of carbon credits under the Kyoto Protocol. However, it currently lacks the staff and other capacity for developing mitigation and adaptation measures that can counter climate change.

Bhutan’s rivers are the backbone of the economy, with exports of hydro power-generated electricity accounting for more than 40% of national revenue, while 70% of the population lives in rural areas and depends heavily on irrigated agriculture. Climate change threatens to have a serious impact on river flows as a result of changing patterns of rain and snowfall, flash floods exacerbated by melting glaciers, and acute droughts in the dry season.

“The technical assistance will help create functioning and sustainable climate change mitigation and adaptation systems for combined energy and water resources in the country,” said Kaoru Ogino, Senior Energy Specialist in ADB’s South Asia Department.

In spite of vital water resources for Bhutan, no single ministry or government agency is currently in charge of overseeing integrated resource management. The project will help NEC coordinate the differing ministries and agencies involved in the process, ahead of the eventual establishment of a single body.

It will also boost NEC’s ability to expand Bhutan’s access to financing for climate change mitigation and adaptation projects. The assistance will be coordinated with the work of other civil society groups and donors, including Danish International Development Assistance, Japan International Cooperation Agency, and United Nations Development Programme.

The Government of Bhutan will provide $50,000 equivalent for the project, which has a total cost of $750,000. NEC is the executing agency, with the work to be carried out over 18 months, with an expected completion date of September 2011.