Bhutan Country Environmental Analysis [DRAFT]

Asian Development Bank

November 2004

Country Environmental Analysis

RSC No.C40700-BHU

Prepared for Asian Development Bank

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November 2004

104667121U

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Draft Country Environmental Analysis Revision 0 November 2004

Quality Information

Document Country Environmental Analysis

Ref 104667121U

Date November 2004

Prepared by Alan Sewell

Reviewed by Alistair Tait

Revision History

Authorised Revision Revision Date Details Name/Position Signature

Alistair Tait Technical O - Draft0 29/09/2004 Issued for review / comment Director – International Generation

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Table of Contents

Executive Summary i 1.0 Introduction 1 1.1 Background to Country Environmental Analysis 1 1.2 Bhutan – Brief Description 1 1.3 Structure of the Country Environmental Analysis 3 2.0 Role of Environment and Natural Resources in the Economy 4 2.1 Introduction 4 2.2 Renewable Natural Resources 4 2.2.1 Overview 4 2.2.2 Agro-ecological Zones 5 2.2.3 Food Security 6 2.2.4 Forestry 7 2.2.5 Opportunities for Sustainable Development 8 2.3 Biodiversity Conservation 9 2.3.1 Overview 9 2.3.2 Opportunities for Biodiversity Conservation 10 2.4 Water Resources and Hydropower 12 2.5 Mineral Resources 13 2.6 Culture, Environment and Tourism 13 3.0 Key Environmental Issues 15 3.1 Introduction 15 3.2 Preservation of Land and Agriculture Resources 15 3.2.1 Land Use Changes 15 3.2.2 Threats to Agricultural Production 17 3.2.3 Land Degradation 18 3.3 Preservation of Forests and Biodiversity 19 3.3.1 Forests and Flora 19 3.3.2 Fauna 20 3.3.3 Threats to Biodiversity 21 3.3.4 Trans-Boundary Issues 22 3.4 Preservation of Water Resources 23 3.4.1 Water Availability 23 3.4.2 Water Quality 23 3.4.3 Access to Safe Drinking Water 24 3.4.4 Sanitation Coverage 24 3.4.5 Threats to Water Resources 26 3.5 Industrial Development 26 3.6 Urbanisation 27 3.6.1 Introduction 27 3.6.2 Air Pollution 28

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3.6.3 Water Pollution 29 3.6.4 Solid Waste Management 30 3.6.5 Loss of Agricultural Land 32 3.6.6 Urban Poverty 32 4.0 Potential Contribution of Environmental Improvements 33 4.1 Introduction 33 4.2 Agriculture 33 4.3 Forestry 34 4.4 Water Resources 35 4.5 Energy 35 4.6 Transportation 36 4.7 Urban Development 37 5.0 Regulatory and Institutional Framework 39 5.1 Overview 39 5.2 Environmental Legislation 40 5.3 Institutional Setting 41 5.4 Multilateral Environmental Agreements 43 5.5 Assessment of Policies and Strategies 44 5.6 Performance of Environmental Regulatory Framework 46 5.7 Public Consultation in Decision-Making 47 5.8 Lessons Learned from Donors’ Activities 47 6.0 Past Environmental Record 50 7.0 Environmental Information Needs 52 8.0 Review of Country Strategy and Program 55 8.1 Introduction 55 8.2 Sectoral Strategies and Work Programs 55 8.3 Impact of Country Strategy and Program on Key Environmental Issues 57 9.0 Recommendations 60

References and Bibliography

Appendices

Appendix 1 Terms of Reference for the Assignment Appendix 2 List of Persons Met during the Assignment Appendix 3 Stakeholder Consultation Presentation Including List of Invitees and Attendees Appendix 4 Examples of Payment for Environmental Services Appendix 5 List of Protected Areas and Biological Corridors and Their Areas Appendix 6 Characteristic Flora and Fauna of Bhutan’s Ecological Sub-zones Appendix 7 List of Totally Protected Species in Bhutan

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Appendix 8 Drinking Water Quality of Sampled Water Supply Schemes in Bhutan Appendix 9 Summary Results of NEC Environmental Data Availability Survey 2003 Appendix 10 Preliminary List of Environmental Indicators Proposed for Inclusion in Environmental Information Management System

Abbreviations

AM Aide memoire asl above sea level BAP Biodiversity Action Plan BCCL Bhutan Carbide and Chemicals Ltd BOD Biological Oxygen Demand COD Chemical Oxygen Demand COS Country Operational Strategy Danida Danish Development Organisation DEC Dzongkhag Environment Committee DOR Department of Roads DYT Dzongkhag Yargey Tshogchungs Dzongkhag District EA Act Environmental Assessment Act EC Environmental Clearance EEA European Environment Agency EFRC Environmental Friendly Road Construction ECP Environmental Codes of Practice EIA Environmental Impact Assessment EIMS Environmental Information Management System for Bhutan EMP Environmental Management Plan EU Environmental Units GDP Gross Domestic Product GEF Global Environment Fund Geog Block (group of villages) GLOF Glacial Outburst Floods GYT Geog Yargey Tshogchung ICD Integrating conservation and development ICDP Integrated Conservation and Development Programmes km kilometre km2 square kilometres m metres m3 cubic metres MEA Multilateral Environmental Agreement

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mm millimetres MOA Ministry of Agriculture MW megawatt MWHS Ministry of Works and Human Settlements NBWQS National Baseline Water Quality Survey (1997) NEC National Environment Commission NECS National Environment Commission Secretariat NES National Environment Strategy NTFP Non-Timber Forest Products NFYP Ninth Five-Year Plan NSB National Statistical Bureau Nu Ngultrum OECD Organisation for Economic Co-operation and Development PCP Penden Cement Plant PES Payment for Environmental Services % percent RGOB Royal Government of Bhutan RNR Renewable Natural Resources RSTA Road Safety Transport Authority SME Small and Medium Enterprises SNV Netherlands Development Organisation TCC Thimphu City Corporation TOR Terms of Reference TSP Total Suspended Particulates TVET Technical Vocational, Education and Training UNCSD United Nations Commission on Sustainable Development UNDP United Nations Development Programme UNEP United Nations Environment Programme USPS Urban Sector Programme Support (Danida funded) US$ United States dollars WHO World Health Organisation WRMP Water Resources Management Plan WWF Worldwide Fund for Nature

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Executive Summary

Bhutan’s environment is characterised by rugged mountain terrain, extensive forest cover over a range of altitude zones and rich biodiversity. Within this environment the Bhutanese people have lived for centuries in widely dispersed isolated communities dependent on subsistence agriculture and pastoral farming and living in harmony with the natural environment.

Since modern development began 43 years ago, Bhutan has made remarkable human development and economic progress without compromising the country’s socio-cultural and biological diversity. Its development has been guided by its “Middle Path” approach to sustainable development which balances economic development with environmental protection and cultural preservation. Such a strategy is integral to the fostering of Gross National Happiness.

Bhutan’s economy is dependant on the environment and natural resources primarily through agricultural production and hydropower, both of which are also dependant upon forest and biodiversity conservation. Within this context, sustainable development requires management of the complex array of forces on the natural environment that have accompanied economic development in recent years. These forces include, population pressure, agricultural development, land use change, hydropower development, mineral development industrialisation, urbanisation, tourism, competition for available land, road construction and provision of other physical infrastructure associated with social and economic development. Such forces have given rise to a number of key environmental issues that Bhutan now faces.

The key environmental issues include: the need to reduce land degradation, preserve biodiversity, protect water resources and manage / mitigate the environmental effects of urbanisation and industrial development (air and water pollution, solid waste management, loss of agricultural land). Addressing these issues to achieve sustainable development is a major challenge to the country. On the one hand the challenge involves taking advantage of all opportunities to maximise economic development through strategic environmental planning and integration of cross-sectoral considerations. On the other hand it involves establishing and implementing environmental regulations and controls on all development activities. In regard to the former, the country is moving toward a more strategic and cross-sectoral approach in dealing with environmental issues with increasing inter-agency co-ordination of development activities. In regard to the latter the Royal Government of Bhutan (RGOB), with assistance from donor partners, has established a comprehensive environmental policy and regulatory framework to guide development.

Bhutan’s environmental regulatory framework is underpinned by the National Environment Strategy (1998) and consists of a number of policies and Acts, chief of which is the Environmental Assessment Act 2000 and its associated regulations, sectoral guidelines, codes of practice and environmental standards. Whilst the environmental regulatory framework is sound, and has been institutionalised within Government agencies, there are some policy weaknesses. One weakness involves the need to review the Land Act to remove inconsistencies with other laws and remove impediments to activities that would facilitate sustainable agricultural development. Another weakness is the sectoral focus of much legislation as opposed to a more suitable inter-sectoral approach which reflects the cross-sectoral nature of environmental issues. These issues are currently being addressed by the RGOB.

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The immediate challenge for the country is the lack of human and financial resources within the institutions (line ministries, district development committees) responsible for implementing and enforcing the environmental framework. This is exacerbated by the general lack of environmental data and monitoring services available in the country. The latter is currently being addressed through donor assistance in the development of an Environmental Information Management System. Additional human and financial resources and capacity building are urgently required for the implementing agencies along with strengthening of the legal sector to ensure implementation and enforcement of the environmental framework.

ADB’s current assistance to Bhutan emphasizes strengthening infrastructure, improving governance, generating employment and promoting private sector development within its overarching goal of poverty reduction. ADB’s strategy focuses on five key sectors; road transport, energy, finance, human resources and urban environment. Environmental considerations are integral to ADB’s current strategy although there are opportunities for these to be enhanced in light of Bhutan’s current needs in the environment sector.

The following environmental strategies are recommended for ADB operations in Bhutan:

Short-term Initiatives

· Provide TA to support NEC in strengthening environmental management capacity in the line ministries and within the Dzongkhag Environment Committees. The focus of the assistance should be on establishing standard procedures for environmental site supervision, monitoring, audit and reporting procedures, preparation of environmental checklists and action plans, establish procedures for dealing with non compliance and public complaints;

· Advisory technical assistance to provide a short-term solution to Thimphu’s waste management problem;

· Support for the establishment of a national laboratory with capability to undertake routine chemical analyses of environmental parameters for air quality, water quality and sediment quality to strengthen capability for environmental monitoring and enforcement;

· Provide capacity building support to the judiciary on environmental law with a view to strengthening enforcement of environmental regulations .

Medium-term Initiatives

· Continued support for the urban sector focusing particularly on: § the promotion of private sector involvement in urban service provision; § technical assistance to prepare a waste management strategy for Thimphu that explores viable options for private sector participation. This should be undertaken in co-ordination

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with Danida’s Environment and Urban Sector Program which is currently focused on the district towns. The thrust of the approach would be to develop a countrywide waste management strategy.

· Include a component focusing on the promotion of LPG stoves for rural households in the proposed integrated rural development project;

· It is recommended that the proposed small and medium enterprise (SME) promotion project supporting private sector development have a component that focuses on the development of environmental services enterprises (eg. drain and pipe maintenance, waste handling services). This should be linked to the basic skills promotion program.

Longer–term Initiatives

· Expansion of ADB’s current support for human resources development to include specific training in environmental management. It is recommended that ADB considers funding for formal training institutions to establish environmental studies programs and curricula. This would also include providing short courses for people in relevant occupations (eg training for site inspectors, contractors, etc.);

· Continued support for the road sector as a means of facilitating economic development at the national level, improving rural livelihoods at the local level and taking advantage of opportunities to prevent land degradation and support agricultural development through incorporation of environmental considerations throughout the project cycle;

· Continued support for rural electrification expansion promoting appropriate off-grid and renewable energy technologies where grid connection is uneconomic. This supports the Government’s goal of 100 % electrification by 2020 and supports measures to reduce deforestation and improve rural livelihoods; and

· Support for the establishment of a bio-prospecting research programme in partnership with other donors or the private sector. This could be done as part of a wider initiative to establish a biotechnology education and research program within an appropriate tertiary educational institution.

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1.0 Introduction

1.1 Background to Country Environmental Analysis

This report presents a Country Environmental Analysis for Bhutan as a key input to the development of the ADB Country Strategy and Program for 2005 – 2009. The background, rationale, objectives and scope of the study are described in the Terms of Reference (TOR) for the study and included as Appendix 1.

The objectives of the CEA as stated in the TOR are to: · Identify and analyse the key environmental problems and opportunities that Bhutan is encountering and their underlying causes; · Review Government’s priority programs and investments in natural resources and environmental management; and · Recommend a strategy to integrate environmental considerations in Bhutan.

Preparation of the CEA involved the following activities. · Review of ADB’s environmental policy and guidelines; · Field visit to Bhutan to gather relevant information through discussion with major Government stakeholders, non-governmental organisations, multilateral and bilateral donors in the environmental sector. The field visit was primarily limited to Thimphu with a short field trip to the districts of Punakha and Wangdue for a first hand look at some key environmental issues outside the capital; · Review of available information/documents concerning the state of the environment and natural resources; · Stakeholder consultation in Thimphu held as a wrap up to the field work; and · Preparation of the report at the home office.

A list of persons met during the assignment is provided in Appendix 2 and a list of invitees and attendees to the stakeholder consultation is provided in Appendix 3. A Bibliography of all documents consulted during the preparation of this report is also provided.

1.2 Bhutan – Brief Description

Bhutan is situated on the southern slopes of the eastern Himalayas, locked between China to the north and India to the south and comprising a land area of 38,394 km2.1 Bhutan has one of the most rugged mountain terrains in the world with elevations ranging from160 m along its southern border to its highest peak of Kulha Gangri at 7,554 m above sea level (asl) along its northern border with Tibet. Topographically, Bhutan comprises three main regions that correspond to three distinct climatic zones affected by the monsoons. These include; a northern high altitude arctic region with peaks over 7,000 m asl, a central mid altitude cool temperate region with peaks between 1,500 and 2,700 m asl separated by steep sided narrow valleys and fast flowing rivers and a southern foothill and sub-tropical plain area with peaks up to 1,500 m.

1 National Statistical Bureau, Royal Government of Bhutan 2004. Statistical Yearbook of Bhutan 2003

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Annual precipitation ranges widely across the country. In the northern region about 40 mm a year falls as snow, in the central region about 1,000 mm is common and in the south up to 7,800 mm per year has been recorded. Rain falls predominantly from late spring (mid-April) to late September corresponding with the onset of the summer monsoon. Autumn (early October – late November) is generally dry and cool and winter (December to March) is characterised by frequent snowfall above 3,000 m associated with the winter northeast monsoon.

The vegetation pattern roughly corresponds to the three topographic / climatic zones. The northern tundra type climate allows growth of coniferous trees and other alpine vegetation. The central region allows a wide variety of plants, flowers and trees to flourish including birch, pine, chestnut, oak etc. Dense deciduous forests cover most of the southern foothills.

Bhutan has four major river systems fed by glacial snowmelt that provides an abundant renewable source of water for Bhutan. Glaciers in northern Bhutan cover about 10% of the total surface area of the country. The four main river systems include the Drangme Chhu, the Puna Tsang Chhu, the Wang Chhu and the Amo Chuu. All the rivers flow south and join the Brahmaputra River in India

With a current population of 734,340 2 Bhutan is one of the least densely populated countries in the world however this belies the fact that for much of the last decade its population has been growing at an annual rate of around 3.1 %, although the growth rate has reportedly dropped since 2000 to around 2.5 % 3 . The population is primarily rural and relies on subsistence agriculture for their livelihood.

Bhutan has a very rich biodiversity with diverse ecosystems including many endemic and rare species. It is a region recognised as one of the ten global biodiversity hotspots. The national environmental policy is to maintain 60% forest cover for all time to come to ensure preservation of its rich biodiversity.

Bhutan is a unique country in Asia in that throughout its history it has not been subject to western colonisation. As such a distinctive Bhutanese identity incorporating its indigenous culture, belief system and associated traditions of governance has been able to develop, imbuing national dignity and a common sense of purpose. Moreover, the country has benefited from the lessons learned from its regional neighbours.

In its 43 years of modern development experience Bhutan has made remarkable progress. In 1961 Bhutan had no roads, motor vehicles, electricity, telephones or postal services and its people lived in a small world centred upon community kinship, family relationships and living in harmony with the natural environment. Since that time Bhutan has undergone a major transformation. In the past decade the economy has grown at an annual rate of nearly 7 %, a rate matched by few other least-developed countries. Key to this growth has been the harnessing of one of its main natural resources, hydropower which generates significant export revenues while facilitating the establishment of a small modern industrial sector producing for the export and domestic market.

2 NSB (2004) Statistical Yearbook of Bhutan 2003: Royal Government of Bhutan, p6. and; Planning Commission Secretariat (1999) Bhutan 2020 A Vision for Peace, Prosperity and Happiness: Royal Government of Bhutan, p27. 3 NSB (2004) p6.

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1.3 Structure of the Country Environmental Analysis

The structure of this report is a follows:

· Section 1.0 – Introduction (this section) provides the background to the CEA in terms of its objectives and describes the activities undertaken in preparation of the report. This is followed by a brief description of Bhutan in terms of its physical, biological and socioeconomic context.

· Section 2.0 – Role of Environment and Natural Resources in the Economy describes the main areas where the environment contributes to the economy. In so doing it sets the context for understanding the potential economic impacts of the current environmental problems confronting the country .

· Section 3.0 – Key Environmental Issues discusses the main environmental problems facing the country including their underlying causes and resultant impacts.

· Section 4.0 - Potential Contribution of Environmental Improvements provides a discussion of opportunities for economic growth afforded by environmental improvements in key sectors in the light of the key environmental problems.

· Section 5.0 – Regulatory and Institutional Framework describes and analyses Bhutan’s environmental strategies, policies and regulatory framework and its overall performance in addressing the key environmental problems

· Section 6.0 – Past Environmental Record provides a brief assessment of Bhutan’s record in dealing with difficult environmental issues and complying with environmental conditions in donor-funded projects based on available information.

· Section 7.0 – Environmental Information Needs identifies data gaps that need to be filled for a better understanding of the country’s environmental issues and identifies additional indicators to be monitored so that trends in the main environmental problems can be assessed.

· Section 8.0 – Review of Country Strategy and Program provides a review and assessment of ADB’s current sectoral strategies and work programs in Bhutan including its impact on the key envi ronmental issues. It also highlights areas where linkages between ADB’s sectoral objectives and environmental benefits can be optimised.

· Section 9.0 – Recommendations for ADB’s overall environmental strategies in the short, medium and long term

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2.0 Role of Environment and Natural Resources in the Economy

2.1 Introduction

The environment and natural resources are critically important in the economy of Bhutan. This section provides an overview of that role and describes the relative contribution of the four main areas where the environment and natural resources directly contribute to the economy. These include: renewable natural resources, biodiversity conservation, water resources and hydropower, and mineral resources. Tourism also contributes significantly to the economy and is based on Bhutan’s unique physical and cultural environment. In view of this, the special relationship between environment and cultural factors and their interaction with tourism is also discussed. Opportunities for sustainable development through integration of environmental considerations in the natural resources sector are identified. This section sets the context for understanding the potential economic impacts of the current environmental problems confronting Bhutan.

2.2 Renewable Natural Resources

2.2.1 Overview

The economy of Bhutan is one of the smallest and least developed in the world. It is largely based on agriculture and forestry, collectively referred to in Bhutan as the Renewable Natural Resources (RNR). RNR are the sources of livelihood for 79 % of the population4 and it remains the single most important sector accounting for 36 % of GDP in 2001 (Table 2.1). The amount of land currently cultivated amounts to 7.8 % of the country’s land area (3,146 km2) and comprises mainly small and often isolated pockets along the main river valleys or perched on flattened spurs and remnants of river terraces. Agricultural land is divided into the following types: 5 · 21 % wetland – terraced area with or without artificial irrigation; · 43 % dryland. – un-irrigated generally sloping agricultural land that has not been formed into paddy terraces; · 27 % tseri / pangshing – shifting cultivation; · 8 % orchards; and · 1 % kitchen gardens.

In addition, the farming communities have user rights over 72.7 km2 of sokshing (government owned forest land used to collect leaf litter for cattle bedding and ultimately compost) and 1,734 km2 of tsadrok (grazing land).

4 Planning Commission Secretariat (2002) Ninth Five Year Plan: RGOB p118. 5 From MOA (2002) Renewable Natural Resources Statistics 2000 (Volume 1): Royal Government of Bhutan p4.

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Table 2.1 RNR Contribution to GDP for 2001

Sectors Amount (million Ngultrum (Nu)) % of Total GDP Agriculture 4,213.5 17.60 Livestock 1,770.3 7.39 Forestry and Logging 2,478.0 10.39 Total 8461.8 35.39 Source: MOA (2003)

The majority of farm households in Bhutan are owner operated. Typically, Bhutanese farmers own a farm of about 2 acres in the north and 8 acres in the south. A breakdown of landholding size of farm households is given in Table 2.2. Absolute landless among rural households is estimated to be about 2.6 % of rural households who make their livelihoods by tenanting on others farmland or working as agricultural labourers. 6

Table 2.2 Landholding Size of Farm Households

Landholding size (acres) % of Farm Households <1.0 13.7 1.0-4.99 55.7 50-9.99 21.9 10.0 - 25 8.0 Source MOA (2002) RNR Statistics 2000

2.2.2 Agro-ecological Zones

Agriculture in Bhutan is largely subsistence with the production system determined by agro-ecological conditions and topographic features.

In the alpine zone a pastoral production system dominates with yak rearing as the main source of livelihood to the semi-nomadic people living in the zone. Crop production is limited to high-altitude barley, buckwheat, mustard and a few vegetables. Herders either barter or sell their yak products (butter, cheese, meat) to people in lower areas.

In the cool temperate areas livestock rearing remains dominant with farmers rearing both cattle and yaks and lesser numbers of sheep and horses. Much more agriculture is practiced in this zone with buckwheat, barley and wheat the traditional crops and potatoes becoming an increasingly important cash crop. Barley, wheat and

6 Ibid p5.

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potatoes are cultivated yearly on dry land (Kamzhing) whilst buckwheat and mustard are grown in (Pangzhing) land which is cultivated after fallow periods of between two and ten years.

The warm temperate zone (fertile valleys of the central region) is the most productive part of the country. A wide range of crops is grown from paddy in irrigated areas to barley and potatoes on dry land. Fruit production including apples, pears, and peaches has developed recently as well as cultivation of vegetables such as cabbage, cauliflower, chilli, broccoli, tomatoes, etc, for local markets. Livestock remain the main source of draught power and manure although farmers are increasingly using farm machinery and chemical fertilisers.

In the southern dry subtropical zone maize is the most common cereal followed by millet and pulses. Traditionally Tseri, a form of shifting cultivation, was practiced widely in this zone, however, it is understood that this practice has now been almost phased out. 7 Harvesting of lemon grass, a common wild herb, has become an important source of income to farmers in this zone and cultivation of fruits and vegetables is increasing. Cattle rearing is common, with free ranching in the forest as the predominant form of herding. Pigs and poultry are reared on a larger scale than in higher zones.

The humid and wet sub-tropical zones are important wetland paddy production areas. Mustard, wheat, pulses and vegetables are grown in rotation with rice on some of the more fertile and warmer areas that also have easy access to markets. Some tropical fruits (mandarin, mango, pineapple, banana, guava, etc. are grown in this belt.

The main source of farm nutrients in all the agro-ecological zones is from farmyard manure and leaf litter from forests. Overall very little quantities of chemical fertilisers or pesticides are used.

2.2.3 Food Security

Bhutan has been a net importer of food since the early 1960s. The current level of food self-sufficiency is around 65 %.8 Bhutan has adopt ed a policy of food self reliance whereby export earnings generated from the sale of cash crops should pay for total food grains. According to the Ninth Five Year Plan (NFYP) (2002) export earnings for the sale of cash crops (2000) exceeded the cost of import of basic food commodities such as cereals and livestock. The RNR Sector NFYP (2002) notes that food security has improved significantly in recent years as a result of increase in production due to new crop varieties and improved farming practices. Starvation is reported to have been eradicated and seasonal food shortages in some pockets of the country are offset by purchasing from markets from income earned from the sale of cash crops and livestock products.

Chronic malnutrition is rare, but vulnerability to food shortages through environmental factors is still a pressing issue in Bhutan. The environmental factors include landslides, flood, drought and other forms of natural disaster. These can result in temporal reduction in food production and food supply. Livestock are an integral

7 MOA pers com 2004 8 UNEP (2001) State of the Environment Bhutan 2001: United Nations Environment Programme p28.

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component of most Bhutanese farms and play a key role in elevating people out of poverty and increasing nutritional intake. A survey in 1998 reported that 22% of farmers’ incomes come from livestock products.9 Today over 77.5 % of rural households keep cattle.

Stringent conservation policies also contribute to vulnerability to food shortages. These include increasing forest cover at the expense of agricultural land and widespread crop degradation by wildlife. Bhutan is also susceptible to fluctuations in market prices in northeast India. India accounts for 90 % of Bhutan’s overall export and around 70 % of its imports. 10 According to the RNR Sector NFYP the major challenges confronting the country’s food sector are:

· Loss of agricultural land to other forms of land use; · Shortage of farm labour; · Depredation of crops by wildlife; · Poor rural access and market infrastructure; and · Poor utilisation of food.

2.2.4 Forestry

Bhutan’s forests (29,045 km2, 72.5% of land area) play an important role in the economy through welfare of the rural population, productivity of agricultural lands and conservation of the environment. Forests are vital for sustaining the lives of Bhutan’s rural community. During lean seasons a variety of wild fruits, edible tubers, fern shoots, bamboo shoots, mushrooms, seeds for extraction of oil and orchid flowers supplement the daily nutritional intake. Many rural communities are actively involved in harvesting these and other non-timber forest products such as essential oils and medicinal plants, etc, for generating income and increasing household security. A study in west-central Bhutan in 1996 found that forest plants contributed an average of 21 % to total

9 MOA (2002) Renewable Natural Resources Sub-Sector Plan, Ninth Five Year Plan p14. 10 ibid p22.

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household diet and 19 % to the household income. 11 Forest areas also provide the main source of forage and shelter for cattle and cattle rearing is an essential component of rural production in many areas. Forests also provide leaf litter for fertiliser, firewood for cooking and heating and timber for housing.

Forestry is of strategic economic importance to the country as a whole. Forestry and logging contributed to 10.39 % of national GDP in 2001 (Table 2.1). In 2003 wood based industries accounted for 46 % of the country’s manufacturing industries and is one of the main sources of employment. 12 In 2002 wood based industries comprised 55 % of total manufacturing industries. It should be noted that the decrease in percentage of wood based industries reflects a significant increase in small scale or cottage industries, whereas the actual number of wood based industries increased by 12 between 2002 and 2003.

2.2.5 Opportunities for Sustainable Development

Increasing self-sufficiency in food production is one of the three avenues for achieving sustainable development in Bhutan. The key environmental constraints in this regard are the limited availability of arable land and the nature of the terrain that makes enhancing agricultural productivity of the land difficult.

As described above, the sustainability of Bhutan’s farming is dependent on an integrated system of crops livestock and small-scale forest management. However, lack of clarity and misunderstanding of conservation and land ownership legislation, namely the Forest and Nature Conservation Act and Land Act has given rise to conflicts between farmers and Government agencies. These include conflicts over forest ownership and management, grazing rights and stringent enforcement of forest rules and regulations.

Recognising the need to solve these conflicts and ensure environmental sustainability the Government has prioritised the need to clearly demarcate forests and agricultural land and clarify the rules pertaining to each. Proposed measures include review of the Land Act, creation of awareness on policies and acts, swapping of marginal and distant agricultural land with suitable forest lands, prescribed and controlled burning of pastures to maintain livestock fodder, prescribed culling of pests like wild boars and promotion of eco and agro-tourism as a means of providing alternative income to farmers. Such measures will facilitate the need to balance conservation and socio-economic development.

Integrating conservation and development (ICD) in a mutually reinforcing manner is essential for sustainable development of the RNR sector. The concept of ICD recognises that the development needs of local communities and bio-diversity conservation draw upon the same resources for their sustainability. Thus, the development needs of local communities are integral to conservation efforts. Integrated Conservation and Development Programmes (ICDPs) are currently being implemented in five of Bhutan’s nine protected areas. Typical ICDP activities include development of management plans for forest grazing, livestock intensification, agriculture, ecotourism, harvesting of medicinal plants, cane and bamboo management, service centres,

11 MOA (2002) Biodiversity Action Plan for Bhutan 2002.: Royal Government of Bhutan p209 12 NSB (2004) p90.

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awareness raising and monitoring. Scaling-up and mainstreaming of ICDPs into forest management in Bhutan represents a significant opportunity for sustainable development of agriculture through integrating environmental considerations.

Other opportunities include: · The development of improved livestock and fodder management. Reducing the surplus livestock population would decrease grazing pressure resulting in better regeneration and lesser soil erosion in otherwise vulnerable areas. 13 Improved fodder management would increase forage reproductive capacity, conserve soil and reduce grazing pressure on forests. · Promotion of sustainable wood consumption through reduction of timber and fuel wood consumption to a level that is within the annual allowable cut; This could include promotion of liquefied petroleum gas (LPG) (sold in pressurised cylinders / bottles) as a cooking / heating fuel as is being pursued in India and also widely used in Indonesia. · Promotion of horticulture development in Bhutan recognizing the regional and seasonal comparative advantages in cultivation of temperate and sub-temperate fruits and vegetables. This is a means of raising farmers’ incomes, generating export revenues and improvement in nutritional status of the rural population; and · Promotion of “environmentally clean” products such as spring water, organically produced agricultural products, vegetable dyes, aromatic substances, essential oils, herbal pesticides, homeopathic and herbal medicines and handicrafts to be marketed in industrial countries. This area has great potential, since Bhutanese products are attributed with cleaner methods of production and therefore enjoy a higher quality rating in the regional market.

2.3 Biodiversity Conservation

2.3.1 Overview

Bhutan’s extensive forest and associated rich biodiversity play a pivotal role in conservation of the environment, which has significance from both a national and global perspective. Bhutan ranks in the top 10 % of countries with the highest species density and it has the highest fraction of land in protected areas as well as the highest proportion of forest cover of any country in Asia. It follows that Bhutan is one of very few countries that has the opportunity to maintain its biodiversity in the longer term. 14 A detailed description of Bhutan’s biodiversity resources is provided in Section 3.3.

13 As in other Asian countries ownership of livestock in Bhutan could be perceived as an indication of an individual’s wealth and standing in society thus leading to a livestock population that is surplus to food requirements. If this is true in Bhutan a reduction in livestock ownership could require a shift in attitudes / perceptions. 14 National Environment Commission (2002) Bhutan The Road From Rio National Assessment of Agenda 21 in Bhutan: Royal Government of Bhutan, p32.

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Forest cover, particularly on steep slopes, provides important ecological services such as erosion protection and maintenance of water discharge patterns that serve to protect agriculture and hydropower assets. Healthy and extensive forests also provide indirect ecological benefits such as acting as carbon sinks that not only mitigate the potential effects of global and micro-level climate change but also offset local industrial pollution.

Bhutan’s reputation as one of the world’s ten global biodiversity hotspots provides a basis for high-value tourism, which is recognised in the NFYP as a high-growth revenue earner and employer.

2.3.2 Opportunities for Biodiversity Conservation

The RGOB’s sustainable development policy supports integration of conservation and economic development. The value of Bhutan’s biodiversity will increase with time especially in light of the region’s overall decline in biodiversity, expanding populations, expanding agriculture and unsustainable timber harvesting. However, the maintenance of Bhutan’s rich biodiversity and its economic value is dependent on the effective implementation of ecologically sensitive approaches to forest management that ensure sustainability of the goods and services it produces.

Bhutan’s forests are rich in non-timber forest products (NTFPs) that are regularly collected by the local rural population both for food and for generating income to purchase basic necessities. Many of these products, including lemon grass oil, lichen species, mushrooms, caterpillars, medicinal products, bamboos, constitute a growing market with increasingly good prices as worldwide scarcity increases. There is also a growing demand for ecological nature based products (e.g. essential oils or resins), which realise attractive prices in industrialised countries. Income from these products could be used to support conservation efforts through integrated conservation and development programmes.

Ecotourism is becoming increasingly popular particularly within industrialised countries. Bhutan’s relatively intact natural environment and international recognition as one of the ten global biodiversity hotspots provides Bhutan with a major potential to benefit from this growing market particularly through its policy of high income / low volume tourism. Income from ecotourism can directly benefit rural communities living within protected areas through incorporation of ecotourism activities into ICDPs. At the national level incomes from ecotourism can be partly used to support overall conservation efforts. However, developing a more substantial ecotourism industry would require market research, biodiversity information gathering, training infrastructure development and policy reforms.

The experience of ICDPs in Bhutan to date seems to show that conservation can be strengthened by promoting development for local communities (through services or cash income). 15 ICDPs have also contributed to establishing participatory planning approaches in Bhutan that can be applied elsewhere.

15 MOA (2002) Biodiversity Action Plan (BAP) p68.

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Bio-prospecting involves research, collection and utilisation of biological material and other related resources, for purposes of applying the knowledge derived from them for scientific and / or commercial applications. Bio- prospecting can be promoted in Bhutan as a sustainable environmental activity. If carefully undertaken it offers an opportunity for considerable economic benefits and at the same time provides ethical incentives for biodiversity conservation. Bhutan’s rich biodiversity provides comparative advantage in the development of new pharmaceutical products and genetic engineering. Its biodiversity also provides a potentially unique role at the global level in maintaining genetic material to guarantee food supplies for growing world population. Such industries could put Bhutan at the forefront of scientific advances. Bio-prospecting presents economic opportunities that are not resource extraction intensive and helps attach a precise value to preserving biodiversity which is otherwise difficult to quantify. Through the search for new genes or chemicals of value, bio-prospecting provides benefits to local communities in establishing a value to traditional cultural practices and knowledge of the environment. The potential can only be realised following a full inventory of the country’s biodiversity resource base.

Carbon trading may generate revenues for forests that remain intact. Clean Development Mechanism (CDM) funds could be used to pay for hydropower developments that would lessen pressure on fuel-wood supplies in areas facing fuel wood shortages. CDM funds could also be used to pay for reforestation in areas where the forest has been degraded. However, such revenues will not be substantial given the small size of the country.

Ecosystem services have the potential to be one of the most important sources of economic revenue associated with maintenance of natural ecosystems in Bhutan. Ecosystem services provided by a well conserved watershed with multi-layered forests includes the following: · Regulation of run-off from a given precipitation. During wet periods forests retain precipitation better, lessening peak discharge, which in turn reduces peak discharge and risk of downstream floods; · Forest cover releases water during the dry season to sustain base flow especially for hydropower; · Acting as a filter, maintaining good water quality; · Controlling erosion; · Reducing sediment load in rivers; · Producing biomass, other goods and services; and · Promoting the aesthetic beauty of the environment.

These services have economic implications for Bhutan both nationally and regionally. On a national level protection of watersheds is critical for the sustainable development of hydropower and protection of communities and agricultural land from flood risk. It is also important for maintaining clean water supplies for the population. On a regional level maintenance of Bhutan’s watersheds, which discharge flows into the Brahmaputra River, diminishes flood threats in India and Bangladesh.

The concept of payment for environmental services (PES) has emerged as a mechanism in which watershed conservation is financed by those who benefit from the environmental services it provides. The central principle of PES is “those who provide environmental services should be compensated for doing so and those who

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receive environmental services should pay for the provision”16. Thus PES is a sound principle to share the benefits and costs of conservation on an equitable basis among the different beneficiaries to sustain the ecosystem. The condition for success is mutual consent to buy services by one partner and to provide quality services by the other. In Bhutan there is potential for PES application in hydropower, logging, tourism, urban water supplies. However, implementing PES as a development strategy is difficult in that it will involve transforming intangible environmental services into tangible commodities and costing them. Internationally, environmental services markets are developing. A few existing schemes are running successfully in diverse cultural settings (See Appendix 4).

2.4 Water Resources and Hydropower

Water is a precious natural resource and a basic need for survival. In Bhutan water resources are abundant and provided primarily by four major rivers and a dense network of small rain-fed streams. Ground water resources are also significant and many farmers depend on springs for their domestic use.

Water is essential for human survival and health and a healthy population is an important component for soci- economic development. Adequate water to the agriculture sector is also critical to its sustainability and the achievement of national food security. Traditionally these were the most important uses of water in Bhutan, however, since the mid 1980’s, hydropower has become the dominant sector with urban domestic uses and industrial use becoming increasingly significant.

Bhutan’s mountainous topography, with altitudes ranging from 100m to over 7500 m above sea level, and its river tributaries have provided the country with a hydroelectric potential estimated to be over 30,000 MW. By 2002 only 426 MW (1.42%) of that potential had been realised although a further 1,058 MW will be added over the next few years with the development of the Tala (1,020 MW) and Lower Basochhu (38.6 MW) hydropower schemes 17. Hydropower development has been identified as one of the three main avenues essential for sustainable development in Bhutan.18 The importance of hydropower to the economy is underscored by the fact that in 2001 the electricity sector’s share of total GDP was 9.9 % and export revenues from the sale of electricity amounted to 48 % of Bhutan’s total export revenue.19. Realisation of Bhutan’s sustainable hydropower potential will depend primarily on protection and management of its river catchments. The availability of hydropower has and will continue to provide a major impetus to the development of power intensive industries in Bhutan.

16 Jamtsho,K (2004) Payment for Environmental Services, A Concept Paper: Ministry of Agriculture Bhutan 17 Planning Commission Secretariat (2002) p100 18 National Environment Commission (1998) The Middle Path National Environment Strategy for Bhutan: Royal Government of Bhutan 19 NSB (2004) p135.

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2.5 Mineral Resources

Whilst Bhutan has considerable occurrences of both metallic and non-metallic mineral resources the mining industry is relatively undeveloped and little exploration has been undertaken. Existing mining activities are limited to small operations mainly involved in the mining of dolomite, gypsum, limestone, slate, coal marble, quartzite and talc. Mining and quarrying accounted for 1.6 % of GDP in 2001 and estimated at 1.9 % for 2003. In 200320 there were 40 mining license holders and the NFYP reported 23 operational mines in 2002. The nationwide mining industry employed about 500 people in 1989 of which 30% were Bhutanese nationals.21 Future development of mineral resources in Bhutan is focused on the development of guidelines and standards for mineral exploration and development, generating baseline data for monitoring environmental impacts and formulating restoration plans for abandoned mines.22 Mining has a relatively insignificant role in the current and future economy of Bhutan.

2.6 Culture, Environment and Tourism

The preservation of the natural environment is central to the Buddhist religion, which plays a central role in the Bhutanese people’s lives and culture. The majority of Bhutanese practice a form of Mahayana Buddhism that is a mix of the historical teachings of Buddha and Bon animistic beliefs. Both traditions emphasize a strong reverence for nature and have enabled Bhutan’s environment to remain largely intact.

A unique characteristic of Bhutanese culture and society is the equality of importance accorded to spiritual, emotional and cultural needs on the one hand, and material well-being on the other. This is encapsulated in the concept of “Gross National Happiness”. Central to the conc ept are the spiritual and cultural traditions of the Bhutanese which are deeply rooted in reverence for nature and agriculture practices linked to the agricultural calendar. Religious ceremonies, festivities and artistic expressions revolve around nature and agriculture and these, along with economic growth, are all essential to the maximisation of Gross National Happiness. Through this concept the RGOB recognises the need to keep alive traditional values which maintains a clear link between economic development, environmental conservation and conservation of cultural heritage.

Bhutan is a unique tourist destination being the last Buddhist Kingdom in the world. Tourism provides the opportunity for Bhutan to earn significant foreign revenue. However, ever since the country opened up to tourists in 1974 Bhutan has taken a cautious approach to tourism and it is carefully regulated. Bhutan has focused on quality tourism with a “high-value low-volume” approach to strike a balance between economic gains and protection and preservation of its cultural, religious and natural heritage.

20 NSB (2004) p90. 21 Ibid p97. 22 Planning Commission Secretariat (2002) p116

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Over recent years tourist arrivals have ranged between 5,000 and 7,000 annually.23 Typically about 90 % of these visitors visit the country for cultural tours with the rest involved in trekking. In 2000, RGOB revenue from tourism accounted for 15 – 20 % of the total value of exports. Tourism has provided considerable impetus to the development of the service sector in Bhutan and promoted indigenous cottage industries. Nevertheless, the RGOB recognises that tourism if not carefully managed can cause erosion of cultural integrity due to outside influences and also be a threat to Bhutan’s fragile mountain ecosystem. In addition to instituting a regulated tariff regime to guide sustainable tourism development, the RGOB has taken other initiatives such as providing guidelines to tourists on etiquette and dress and limiting tourism to selected areas. Tourism offers significant potential to provide direct revenues for management of protected areas and economically fragile communities.

23 Hummel, John & Nadik, Thuji (2004) Sustainable Tourism Development in Bhutan An overview of tourism development initiatives in the last ten years: Department of Tourism p1.

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3.0 Key Environmental Issues

3.1 Introduction

This section presents a review of key environmental issues and opportunities in Bhutan. The review is based on a review of key documents in the environment sector, discussions with various RGOB ministries and departments with specific interests in environmental issues, and the results of discussions at the stakeholders’ consultation. For each key issue, available environmental indicators are presented and key environmental problems including trans -border issues are identified. The underlying causes of the problems including the resultant impacts are discussed in relation to the local, national regional and international context. The section concludes with an analysis outlining the opportunities for economic growth afforded by environmental improvements in key sectors.

3.2 Preservation of Land and Agriculture Resources

According to the latest land use survey conducted by the Land Use Statistical Section of the MOA based on the analysis of 1994 satellite data, the total area under forests is 29,045 km2 or 72.5 % of the country while the cultivated area accounts for only 7.8 %.24 Table 3.1 presents a summary of land use distribution for Bhutan.

Table 3.1 Bhutan Land Use Distribution Land Use Percentage of Land Area Forest Cover 72.5 · Parks and wildlife sanctuary 26 · Biological Corridors 9 Pasture 3.9 Horticulture 0.1 Agriculture Land 7.8 Settlement 0.1 Others (snow, rock, water spread) 15.6 Source: MOA (2003)

3.2.1 Land Use Changes

Land use changes, both natural and man-made, are an important environmental issue in Bhutan. Land use patterns are changing due to impacts of population growth, development activities and urbanisation. Such changes are generally considered negative from an environmental perspective. The main negative impacts include removal of forest cover leading to land degradation and disturbance to watersheds, and conversion of prime agricultural land for infrastructural development. The extent of land use changes due to various development activities is presented in Table 3.2 and discussed below. Total land use changes that have taken place to date cover 25,292.5 acres.

24 National Environment Commission Secretariat (2004) Brief Report on the State of the Environment: RGOB. p16

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Table 3.2 Land Use Change as of April 2004

Activity Area (acres) Land allotted from RGOB Reserved Forest Land 786.5 Mines and Quarries 1,599.4 Roads 7,901.2 Transmission Lines 12,454.0 Tala Hydropower Scheme roads and dam 962.5 Tala Hydropower Scheme land for civil infrastructure 1,588.9 Total 25,292.5 Source NECS (2004)

Land allotted from RGOB reserved forestland has been designated to different government institutions and comprises mostly land classified as “barren” or “degraded forest”. Only 2.9 acres was allotted from high forests.

As of April 2003 there were 47 mines and quarries operating on a total area of 644.309 ha (1,599 acres). Most of the mines are in Samtse Dzongkhag, which has more area under lease for mines than all other dzongkhags (districts) combined. This is due to the location of mineral deposits and proximity to major mineral processing industries in Bhutan located in Gomtu and Pasakha dzongkhags.

There are currently 4,007 km of roads including (national highway, district roads, feeder roads and urban roads) in Bhutan. Using an average cleared width of 8 metres this covers more than 32 km2 of land area. A steady annual increase in land allocation for new roads has been evident since 1999 as recorded by the number of environmental clearances issued by the National Environment Commission (NEC). Whilst there is little documented information on the type of land systems affected by new roads it is likely that the majority of the roads were constructed through forested areas.

Roads are vital for economic growth in Bhutan, but they have the largest impact on the environment. The impacts include loss of forest, land degradation in the form of landslides and indirect impacts such as opening access to previously inaccessible areas for logging, firewood, quarrying, poaching, etc.

There is no information available on the actual area of forest cleared for construction of transmission lines. It is also not known what amount of area falls in non-forest areas, nor has it been estimated how much area will or will not be cleared up to the usual right of way when towers fall on adjacent hilltops. The area of land use change for transmission lines (12,454 acres) is an approximation of the total area for right of way for 2,017 km of power transmission lines in Bhutan based on an average corridor width of 0.025 km. (50.425 km2 = 12,454 acres).25

25 ibid p21.

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3.2.2 Threats to Agricultural Production

Key environmental constraints facing agriculture development in Bhutan include limited land availability and land degradation.

Agriculture land is limited to 7.8 % of the total land area. Wetland26, suitable for irrigated cultivation, is only 54,300 acres or 1 % of the Bhutan’s total land area.27 Owing to the country’s steep terrain and high priority given for maintaining forest cover, the scope for expanding agricultural land is very limited.

Added to this, agricultural land is being progressively lost through urbanisation and land conversion particularly along the base of fertile valleys. This is illustrated most acutely in the development of new towns of Bajo (Wangdue District) and Khuruthang (Punakha District). There are already approved plans to establish municipal areas at Bumthang and Trshiyangtse on prime agricultural lands. MOA reports that between 1996 and 2001, 629.91 acres of wetland were converted to other forms of land use.

Rapid fragmentation of land holdings is occurring throughout country as families divide farmland among siblings. This has been exacerbated with high population growth rate. As the size of farm holdings are reduced they become uneconomic and can lead to farmers moving off the land to urban areas in search of employment. This results in both loss of food production and an increase in urban migration, further exacerbating land conversions around urban areas.

Policy restrictions which limit the size of farm holdings to a maximum of 25 ac res also restrict the economic viability of some farm enterprises such as dairying. This means that the productive potential of available land is limited.

26 The use of the term “wetland” in this document always refers to land suitable for irrigated cultivation. 27 MOA (2002) RNR Sector NFY Sub-sector Plan p23

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3.2.3 Land Degradation

Land degradation in Bhutan is widespread and is a major environmental issue for the country, apart from its affects on agriculture. Land degradation is manifested in two main ways: through the physical displacement of soil through erosion and through internal biophysical deterioration of soil cover.

Soil erosion whilst a natural phenomenon, is triggered and exacerbated by human activities. Given the steep terrain of most of the country coupled with a monsoon climate, Bhutan is particularly vulnerable to land degradation through soil erosion and landslides. Soil erosion and landslides are induced through removal of vegetation. In Bhutan the main human activities responsible for triggering soil erosion and landslides in the mountainous terrain are agriculture and forestry activities, and infrastructure development including roads, hydropower projects, transmission lines, and mining operations.

Other than information on land use changes as discussed above there is little available quantitative information on the extent of land degradation in Bhutan. However, it has been estimated that about 40,000 ha of land, comprising 10% of the total agricultural land has been affected by erosion to some degree. 28 Agricultural and forestry activities contribute to physical land degradation through cultivation of steep terrain, poor soil conservation practices, overgrazing of livestock, agricultural encroachment into forest land, unsustainable fuel wood extraction, unsustainable logging practices, and forest fires.

Livestock rearing, especially cattle, is an important rural activity in Bhutan where at least 78 % of households own cattle. The latest figures (2002) show an estimated cattle population of the country of 340,000 and this is expected to increase further.29 . This number is considered large for a small country characterised by a fragile mountain ecosystem. Such high livestock population has led to over grazing, leading to reduced land productivity and soil erosion.

Denudation and erosion result in loss of the productive base. On site impacts of soil loss includes reduced yield and disruption of important soil functions in the ecosystem such as filtering, storage and transformation of nutrients and water. Off site impacts include landslides, sediment movement, silt deposition, floods and gully formation.

In-situ land degradation through biophysical deterioration of soil is also a major problem associated with agriculture. Excessive or inappropriate use of fertilisers in an effort to boost production from limited land resources is common in Bhutan.30. This results in nutrient depletion and chemical degradation of the soil. The inappropriate use of fertilisers is fundamentally a result of the limited technical knowledge of farmers.

28 UNEP (2001) p66. 29 NSB (2004) p83. 30 Chencho Norbu et al (2003) Types of Land Degradation in Bhutan: Journal of Bhutan Studies Vol 8. The Centre for Bhutan Studies, Thimphu p92.

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The increasing demand for timber, fuel wood and NTFPs places severe pressures on the country’s forest cover leading to deforestation and subsequent land degradation. These issues are discussed in Section 3.3.2.

3.3 Preservation of Forests and Biodiversity

3.3.1 Forests and Flora

Bhutan’s rich biodiversity, extensive forest coverage and overall healthy ecosystems are internationally renowned. Its biodiversity has global and regional significance due to the large proportion of endemic species and the fact that it ranks as among the top 10 percent of countries with highest species density in world.

Bhutan’s forests and biodiversity are well protected and the country has the highest fraction of land under some form of protected management. Forest covers 72.5% (29,045 sq km) of the country (Table 3.1), and 26.23 % of Bhutan is under the Protected Management System. A further 9 % of the country has been declared as biological corridors connecting all protected areas. Thus 35 % of the country is under some form of conservation management. Added to this it is the RGOB’s stated policy that 60 % of the country’s land is to remain in forest for perpetuity. A List of protected areas and biological corridors and their areas is provided in Appendix 5. Table 3.3 Forest Types and Area in Bhutan Forest type Area km2 % of total area Conifer Forest 10,616 26.5 Broadleaf and Conifer 1,358 3.4 Broadleaf Forest 13,749 34.3 Conifer Plantation 20 0.1 Broadleaf Plantation 44 0.1 Forest Plantation 64 0.2 Scrub Forest 3,258 8.1 Total 29,045 72.5 Source: MOA, Department of Forestry Services (2002)

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Bhutan’s diversity of ecosystems include the southern subtropical zone (150 m – 2,000 m elevation) containing tropical and sub-tropical vegetation, a mid-elevation temperate zone ( 2,000 – 4,000m elevation) containing major temperate conifer and broadleaf forests, and the northern alpine zone (above 4,000m) that contains no forest cover. A list of characteristic flora and fauna of Bhutan corresponding to various ecological sub-zones is provided in Appendix 6.

Bhutan’s flora contains at least 5,446 species of vascular plants including 750 species endemic to eastern Himalayas and 50 species endemic to Bhutan alone. Bhutanese flora is considered to be of great scientific value not only because of its biodiversity but also its good state of preservation compared to adjacent Himalaya areas. Many taxa are considered to be nationally threatened. Seven plant species are totally protected in Bhutan (Appendix 7). The flora contains 8 families of Gymnosperms, 180 families of Dycotyledons, 66 families of Monocotyledons, 46 species of rhododendrons and numerous species of economic value including timber trees, 300 species of medicinal plants, aromatic, horticultural and ornamental plants and many species that provide NTFPs to rural users.

3.3.2 Fauna

Relative to Bhutan’s flora its fauna is less well known. Bhutan’s fauna comprises 178 mammal species including 24 internationally threatened species and 64 nationally endangered species.31 Bhutan is home to more than 60 % of mammal species that are endemic to the eastern Himalayan region. Seventeen of Bhutan’s mammal species are totally protected under the Forest and Nature Conservation Act 1995 (Appendix 7) Bhutan’s avifauna includes more than 770 bird species, of which 12 species are globally threatened and 11 species have worldwide breeding ranges less than 50,000 km2 putting them at risk of any significant loss.32 At least 73 % of Bhutan’s bird species are resident in Bhutan and most bird species are altitude migrants which move to higher and lower altitudes during summer and winter months respectively. Around 119 species have breeding ranges restricted to the Himalayas. Temperate and sub tropical broadleaf forests are particularly important for bird conservation as a high proportion of the area of these forest types remaining on the Indian south subcontinent lies in Bhutan. Five bird species are totally protected (Appendix 7).

Bhutan is home to at least 15 reptile species and 3 amphibian species. These include several threatened species including Gharial, Indian Python and the Yellow Monitor Lizard.

A number of fish species have been recognised in Bhutan that have developed special adaptations to the diverse aquatic habitats represented in the country. Such habitats encompass high altitude freezing lakes, torrential cold-water mountain streams and slow moving stagnant eutrophic warm waters of the lowlands. One species fish species is totally protected in Bhutan (Appendix 7).

31 MOA (2002) BAP p44. 32 Ibid p45.

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In regard to invertebrates Bhutan has at least 50 species of butterflies of which 28 species are endemic to the eastern Himalayas and at least 4 species are internationally threatened.33 Other butterfly species are rare or uncommon. Four species of wild honeybee have been recorded.

3.3.3 Threats to Biodiversity

Human – wildlife conflicts are a major problem in rural Bhutan, manifested through damage to agricultural crops by wild animals (wild boars, deer monkeys, bears, elephants) and livestock depredation by tigers, leopards and wild dogs. Each year hundreds of tonnes of crops are lost and significant numbers of livestock.34 Crop damage by wildlife is a severe constraint affecting farm households. At least 42 % of farm households nationally have reported wild animal damage. 35 Whilst people are environmentally conscious and generally tolerant to wildlife, retributive killing of predator species is not uncommon and there is evidence that there is growing resentment by farmers toward wildlife and the stringent conservation law. This could have a backlash on conservation efforts and exacerbate wildlife poaching.

Over grazing leads to loss of plant species, reduction of land productivity and soil erosion as described in Section 3.2.3. Change in vegetation is also induced through loss of reproduction of plant species. Overgrazing by domestic animals also affects the availability of forage to wild ungulates. This can lead to increased raiding of field crops by wild ungulates when forest forage becomes scarce. Moreover, any reduction in wild prey from an area due to shortage of forage will cause predators to take livestock. Thus, the human-wildlife conflict perpetuates.

Excessive wood consumption is a significant threat to forest biodiversity. It has been reported that the annual consumption of timber at 190,000 m3 in recent years exceeded the total annual allowable cut (AAC) of about 149,000 m3 from all Forest Management Units. The excess demand was met from adhoc sources, which raises questions regarding sustainable forest management planning and suggests the occurrence of illegal exploitation of timber. Fuel wood consumption is estimated at 1.2 million m3 with the bulk of this met from natural forests.

The increasing domestic and international demand for NTFPs gives rise to unsustainable harvesting practices if not properly managed. With the continued high population growth rate, the pressure on NTFPs is likely to be exacerbated.

Easy money and high prices offered for endangered plant and animal species with high commercial value on the international market (musk deer, tiger, leopard, Chinese caterpillar fungus) has induced people to take up poaching particularly in the border areas. A porous international border both in the north and south, inadequate law enforcement personnel, and lack of knowledge of the legal consequences of poaching has made control a

33 Ibid p46. 34 MOA, Nature Conservation Division (2004) Bhutan Biological Conservation Complex: Living in Harmony with Nature: p23. 35 MOA (2002) RNR Statistics p114.

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difficult job. In addition, the schedule of penalties for poaching is lenient and therefore not much of a deterrent in contrast to the high commercial value of wildlife products and parts on the international market. For example, at the border with China poachers can sell a kg of Cordecyps (Chinese caterpillar fungus) for up to 50,000 Nu. The fine for selling wildlife products is 350 Nu per piece.

Forest fires in Bhutan are recurrent and widespread and mostly caused by humans. They are either set deliberately to invigorate pasture growth, or occur due to public carelessness. In the last 5 years more than 486 km2 of forest was destroyed by forest fires.36 This is in spite of the fact that the Forest and Nature Conservation Act 1995 prohibits lighting of forest fires and imposes stringent fines and penalties including imprisonment. Loss of forest cover from fires is a significant cause of land degradation from erosion particularly in steep areas and in areas where forests have been exposed to repeated fires.

Rural poverty places significant pressure on biodiversity resources. Some of the country’s poorest communities live in protected areas and biological corridors. For these communities long term conservation benefits mean little when their daily subsistence is at stake. Thus, they will be less prepared to participate in conservation and even resentful when conservation adversely impacts their subsistence (eg crop and livestock depredation by wildlife). Poverty in protected areas can be associated with lack of development opportunities in the form of education, access to markets, access to resources, rural infrastructure etc.

Bhutan has limited institutional capacity for biodiversity conservation. This includes limited numbers of trained personnel, limited information on species distribution, limited data on demographic patterns in protected areas and biological corridors and rudimentary conservation infrastructure. NCD (2004) notes that a World Bank Rapid Appraisal of protected areas reported that four protected areas were short of personnel by 60 – 80 % against the requirements projected in their management plans. In addition, communication between NCD as the central agency and the protected areas as implementation bodies in the field have been weak. These issues are further exacerbated by inadequate communication and lack of transparency between the various sectors involved in conservation.37 As a result an integrated approach to conservation, as is needed, is difficult to establish.

3.3.4 Trans-Boundary Issues

The porous nature of Bhutan’s borders facilitates the free movement in and out of the country of those involved in poaching, wildlife trade and illegal exploitation of forest resources. This is of particular significance since seven of nine protected areas of the country have boundaries with other countries and two of Bhutan’s protected areas share borders with protected areas in India. The problem is most acute along the southern border and involves mainly poaching of mammals and exploitation of medicinal plants.38 Along the northern border yak herders crossing the border contribut e to over grazing and intensive exploitation of medicinal plants.

36 Ibid p28. 37 MOA, Department of Forestry Services (2003) Vision and Strategy for the Nature Conservation Division 2003: p12. 38 Ibid. p10.

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To date trans-boundary co-operation between protected area personnel of Bhutan and India’s adjacent protected areas has been limited to occasional adhoc meetings and there has been virtually no communication between Chinese and Bhutanese authorities. Thus, efforts to stem illegal wildlife trading activities are un- coordinated and weak.

3.4 Preservation of Water Resources

3.4.1 Water Availability

The importance of maintaining the integrity of Bhutan’s watersheds and the need to protect the existing unpolluted water resources comprising major river systems, ground water aquifers and springs, is essential for Bhutan’s sustainable development. Bhutan is endowed with rich water resources, the result of its mountainous topography, good vegetative cover and fair spatial distribution of precipitation. The average flow draining the country’s area of around 40,000 km2 is estimated at1,600 m3 /s39 which gives rise to an annual per capita availability of water at around 75,000 m3. This is the highest in the region. Ground water resources are also abundant with springs emerging from basement rocks, old landslides and fluvial deposits. Groundwater in landslide and alluvial deposits has been estimated at an exploitable rate of 3 litres/second/km2. 40 Currently about 12.5 % of arable land is irrigated. Whilst overall, water sources are abundant, localised seasonal and water shortages for drinking and agricultural purposes do occur. It has also been noted that fluctuations between dry season and wet season flows is on the rise.

3.4.2 Water Quality

There is limited information available on the quality of freshwater resources in Bhutan. However, monitoring of the country’s water bodies has been undertaken by several agencies. A National Baseline Water Quality Survey 1997 (NBWQS) was undertaken by the NEC to initiate development of a national water quality database for major watersheds in Bhutan. The ADB assisted pilot study provided the first dataset for establishing national water quality standards. Parameters measured included dissolved oxygen, dissolved oxygen in % saturation, salinity, temperature, pH and conductivity. NEC continued to collect baseline water quality data and information between 2001 and 2003 on the main river basins and currently similar data is being collected twice a year (wet and dry seasons). Monitoring is also conducted at wastewater treatment facilities and in industries and includes Biological Oxygen Demand (BOD) and Chemical Oxygen Demand (COD).41 The Public Health Engineering Section (PHES) under the Department of Health has monitored 83 samples of water from water supply sources throughout the country. The Water Resources Management Plan (WRMP) 42 collected samples from around the country targeting areas as high up and as far down the main

39 Department of Energy (DOE) (2004) Water Resources Management Plan and Update of the Power System Master Plan, Bhutan – Final PSMP Update: Ministry of Energy, Royal Government of Bhutan 40 UNICEF (2002) Bhutan Water Supply and Sanitation Assessment: p9. 41 NECS (2004) Brief Report on the State of the Environment: . p13 42 DOE (2004)

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stem rivers as possible. Parameters measured for the WRMP included pH, conductivity, phosphorous, ammonia calcium, magnesium, potassium, zinc and manganese.

All available data confirm that Bhutan’s water resources are very healthy on a macro-scale. Bhutan’s rivers are highly oxygenated, slightly alkaline with low conductivity and no recorded salinity. Except for BOD/COD testing being carried out in sewage treatment plants of Thimphu and Phuentsholing, there is no information regarding the state of toxic pollution of water by heavy metals, pesticides, herbicides, or industrial waste products.43 Testing of wells in the south of the country has confirmed the non-existence of arsenic.44

3.4.3 Access to Safe Drinking Water

The Bhutan Water Policy (2003) reports that 78 % of households in the country have access to safe drinking water. The urban coverage of 80 % is slightly higher than the rural coverage 78 %.45 Variations exist in the coverage of rural water supply among the 20 dzongk hags ranging from a low of 65 % to a high of 98 % for the year 2000. Low coverage occurs in some of the populous districts such as Trashigang, Samdrup, Jongkhar and Sarpang dzongkhags and also in some of the sparsely populated remote dzongkhags such as Gasa, Zhemgang and Dagana.

The study conducted by PHES to assess the chemical and bacteriological drinking water quality in Bhutan suggested that the chemical composition of drinking water to be well within the guideline values recommended by World Health Organisation (WHO). The test results for sampled schemes are shown in Appendix 8. The indicator used in the study for bacteriological quality of samples was faecal coliform and the risk classification done in accordance to WHO standards. The results show that 86 % of the drinking water supplies from springs were in accordance with the WHO guideline of 0 or fell within the low risk group, whereas only 38 % of the sampled stream schemes fell within or below the low risk group.

3.4.4 Sanitation Coverage

Country wide rural household sanitation coverage in terms of latrines constructed was estimated to be 87 % in 2000. UNICEF (2002) provides a tentative rural sanitation coverage classification for 20 Dzongkhags, which includes low (80 % coverage), medium (80 – 90 % coverage) and high (>90 % coverage). Figure 3.1 shows the 2000 rural sanitation cover by districts.

43 UNICEF (2002) p9. 44 Department of Health, Public Health Engineering Section / UNICEF (2001) Report of Arsenic Detection Test, Phase 1 & 2 45 UNICEF (2002) pp17-19

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Figure 3.1

District-wise Rural Sanitation Coverage (2000)

95

90

85

80

75 Hao Paro Gasa Samtac Tairang Mongar Dogana Thimphu Trongao Yangtae Sarpang Punakha Chhukha Lhuentec Wangdue Bumthang Zhemgang Trashigang s / Jongkhar Pemagatshel

Source: UNICEF (2002)

Urban sanitation consists mainly of pit latrines, pour-flush latrines with septic tanks or long-drop latrines. Thimphu and Phuentsholing are partially sewered in core areas and have oxidation ponds for sewage treatment. For other towns sewerage systems or low cost technologies are currently being investigated. Available data shows that urban sanitation coverage dropped significantly between 1990 (80 % coverage) and 1999 (65 %). The drop in sanitation coverage has been attributed to rapid urbanisation and an associated construction boom during the period. Sanitation statistics reflecting only the registered urban residents shows urban sanitation coverage to be up to 90% in 1994 and 88% in 2000. UNICEF provides mean values of the reported urban sanitation coverage. A comparison of urban-rural sanitation coverage is shown in Figure 3.2

Figure 3.2

Sanitation Coverage: Rural & Urban (in terms of latrines constructed)

2000 87% 77%

1994 70% 78%

1990 50% 80%

0 Rural Urban

Source: UNICEF (2002)

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3.4.5 Threats to Water Resources

Threats to Bhutan’s water resources comprise physical threats and human threats. Physical threats are associated with Bhutan’s geographic setting of steep terrain and monsoon climate coupled with global warming. They include floods (especially glacial outburst floods (GLOF)), landslides and increasing fluctuations between lean and monsoon flows.

Along with physical threats, competing demands of different users is putting pressure on water resources. Domestic water demand is increasing due to changing lifestyles caused by socio-economic development. Water use for agriculture is expected to increase due to its intensification to keep pace with food demand for a population growing at 2.5 % per annum. Hydropower and industrial development are also placing new demands on water resources, and urbanisation has become a significant issue on both water demand and quality.

Watershed conservation is critical for sustainable utilisation and recent socio-economic development has placed added pressure on watersheds. The increasing demand for timber, firewood and NTFPs is starting to have a negative impact on watersheds.46 Added to this, forestland encroachment, the impacts of road and transmission line infrastructure, and forest fires continue to be challenges for watershed conservation.

Whilst the overall water quality of rivers is good in Bhutan, on a localised scale, water pollution problems do exist especially along the banks of streams and rivers in both urban and rural locations. This problem is exacerbated at urban locations where surface drainage, oil and grease spills from workshops, grey water discharge from domestic households and uncontrolled seepage or overflow from septic tanks and piping, flow directly into rivers.

3.5 Industrial Development

Industrial activities in Bhutan have grown rapidly in recent years and the environmental effects of industrial development are becoming an increasing concern for Bhutan. The impacts include pollution of air, water and land, occupational health and safety, conflict with traditional land-use practices and unsustainable migration of rural populations to urban centres.

Air pollution around industrial and mining sites is an increasing problem in the light of an industrial sector that has grown by 216 % over a period of 5 years. Between 1997 and 2002 the number of industries has increased from 4,394 to 13,908.47 Most of the industries are small-scale or cottage industries and 99 % of the industrial establishments are operated by the private sector. The manufacturing industry is however, dominated by a small number of major operators such as the Penden Cement Plant (PCP), the Bhutan Board Products Ltd, Bhutan Carbide, and Chemicals Ltd (BCCL), Bhutan Ferro Alloys Ltd and Bhutan Agro Industries Ltd.

46 Bhutan Water Partnership (2003) Bhutan Water Policy: 47 NECS (2004). Brief Report on SOE p7.

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The main pollutants from industries are CO2, CO, SO2, NOx and particulates. Causes of localised air pollution from industries arises from low emission stack heights which limit dispersion, and lack of proper storage space for raw materials such as limestone, coal and charcoal.

There is limited air quality monitoring data available from within and around industrial plants. However, TSP (Total Suspended Particulates) levels of 1200 µg/m3 and 800 µg/m3 have been recorded at the BCCL plant furnace stoking floor and canteen respectively.48 Such levels are significantly higher than the recently revised Bhutan Emission Standard for Industry at Stack of 300-400 µg/m3 49

Key causes of poor air quality from industrial activities include inadequate or absent pollution control equipment and lack of environmental awareness. NEC (2002) notes that three of the four cement plants in Bhutan do not have pollution control systems whereas the largest plant (PCP) has installed pollution control devices such as electrostatic precipitators. Occupational health and safety standards are also low or non-existent. Among the chemical industries in Bhutan which produce calcium carbide, ferro-silica, plaster of paris, rosin and activated carbon, ambient work zone emissions are the biggest problems with workers often exposed to unacceptably high levels of pollutants. Whilst pollution control equipment is installed in some of these facilities it is often not operated continuously because of high operating costs.

The major minerals mined in Bhutan include limestone, gypsum, coal quartzite and dolomite. The major environmental problems in mining industries are management of overburden, drilling waste, restoration and runoff from mined areas, which cause soil erosion and air pollution and occupational health and safety issues (dust). Currently, there are no data available to assess the quality of ambient air in and around mines.

There is little information available on effluent discharges and water pollution from existing industries in Bhutan. However, the NEC has recently updated and formulated industry specific water discharge standards for the food industry, textile and carpet industry, fibreboard industry, mining industry as well as a general set of standards applicable to all industries. With the EIA process now institutionalised in Bhutan these discharge standards will provide the legal basis to enforce environmental regulations.

3.6 Urbanisation

3.6.1 Introduction

The urban environment in Bhutan today encompasses 21 % of the population in 54 settlements of varied size. Thimphu and Phuentsholing are considered the only “true” urban areas in Bhutan. Thimphu is the largest centre with a population of around 50,000 that is increasing at an annual rate of around 7-10 %.

48 Ibid p12. 49 NEC (2004) Environmental Discharge Standard: RGOB p3.

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Phuentsholing’s population is growing at an annual rate of around 7 %. Rural to urban migration over the last decade, fuelled by a national population growth rate of around 3.1 % per annum, has led to a rapid increase in urban population. Available statistics claim “business” or “education” as the main reasons for urban migration in terms of the movement of families. However, at an individual level, migrants are attracted away from their villages by the attractions of urban life such as commercial or job opportunities, consumerism and popular entertainment. One key factor appears to be the harsh living conditions in rural areas such as long working hours, unproductive land, lack of access to markets, education and health facilities, etc. Another key factor related to population growth, is the fragmentation of farming units into unsustainable holdings, which pushes would-be farmers off the land and into urban areas in search of employment.

Urbanisation has put pressure on urban infrastructure, land and housing which in turn affects the environment. The pace of urbanization is likely to increase rapidly over the coming decade with the growing tide of migrants from rural areas. By 2020 it is estimated that 50 % of the population will be urban.50 Clearly, the pressures on the urban environment of Bhutan are immense. Key environmental issues related to urbanisation include air and water pollution, waste management, limited land availability including loss of agricultural land and urban poverty.

3.6.2 Air Pollution

Air pollution has emerged as a significant issue in urban centres. Major factors responsible for deteriorating urban air quality include vehicular emissions from rapid growth in vehicle numbers, fugitive dust arising from new construction sites and unpaved roads, domestic burning of fuel wood, heating of bitumen along road construction sites (involves emissions from bitumen and wood burning) and burning of rubbish in satellite towns due to the absence of waste disposal systems.

50 Department of Urban Development and Housing (DUDH) (2002) Human Settlements Sector Plan Ninth Five Year Plan: RGOB p3.

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Table 3.4 shows the increase in vehicle numbers in Bhutan between 1997 and 2003. Vehicle numbers have increased by 11.5 % between 2001 and 2003 and by more than 100 % since 1997. Table 3.4 Increase in Vehicle Numbers in Bhutan

Year of Registration Number of Vehicles 2003 25,003 2002 24,460 2001 22,492 2000 19,260 1999 17,335 1998 14,206 1997 11,798 Source Road Safety Transport Authority (RSTA), Thimphu 2004

Vehicle emission testing carried out by the RSTA in Thimphu in 2003 has shown that 16 % of 1,385 diesel vehicles tested failed the recently established Bhutan Motor Vehicle Emission Standards for diesel vehicles and 5 % of 1,342 petrol vehicles failed the Emission Standards for petrol. It has been recognised that vehicle emissions are aggravated by the poor quality of imported fuel and that most vehicles are not fitted with high altitude compensators.

NEC (2004) notes that in Thimphu alone during winter months more than 10,180 cubic feet (42 truckloads) of firewood are burnt each day. Very little ambient air quality data is available in Bhutan. However, the NEC has been monitoring ambient air quality in Thimphu and Phuentsholing periodically since 2002. Insitu measurements in Thimphu show an observed maximum NOx concentration of 10.49 µg/m3 and CO concentration of 7.14 mg/m3. These are well below WHO Air Quality Guidelines. However, TSP readings of 150 -250 µg/m3 (WHO Guidelines are 150-230 µg/m3 (24hr average)) recorded during January and February 2004 show somewhat degraded air quality. This was attributed to a combination of prevailing (winter monsoon) atmospheric conditions and emission from point sources. 51

3.6.3 Water Pollution

Water pollution problems associated with urbanisation do exist and include grey water discharge into adjacent water courses from domestic households and commercial premises, oil and grease spills from workshops discharging to the ground or adjacent water courses and uncontrolled seepage or overflow from septic tanks and piping, flowing directly into rivers. There is little quantitative water quality information available to indicate the current extent of urban related water pollution in Bhutan. NEC (2004) conducted water monitoring along the Thimphu River at various locations from upstream of the city to downstream of the city. Preliminary results

51 NECS (2004) Brief Report on SOE p9

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showed a substantial increase in coliform count in the immediate vicinity of Thimphu City, which was attributed to unsanitary habits of people at the Sunday Market.

Conventional sewerage systems have been installed in the core areas of the two major cities Thimphu and Phuentsholing since 1996 and this is reported to have had a positive impact on public health.52 Thimphu and Phuentsholing city corporations have formal environmental management procedures with rules concerning the mandatory connection to the sewerage system. This system takes wastewater from about 60 % and 80 % of the households in Thimphu and Phuentsholing respectively. The remaining households, which do not have sewerage connections, use individual septic tanks. It is mandatory for these households to connect wastewater disposal to their septic tanks. The remaining towns in the country continue to rely on septic tanks and pit latrines. The provision of adequate sanitation facilities to cope with the expected increases in urban population in Bhutan presents a challenge to urban authorities

Recently the urban sector in collaboration with NEC has initiated specific measures to protect the urban environment through formulation of urban policies, rules and regulations to provide urban authorities the means to control and regulate pollution sources. These include interalia, environmental codes of practice (ECP) for sewerage and sanitation in urban areas (2004), ECP for Stormwater Drainage Systems (2004), ECP for Urban Roads and Traffic (2004), Environmental Discharge Standards (2004), Environmental Clearance Guideline for Urban Development (2004) etc.

3.6.4 Solid Waste Management

Solid waste disposal is a major problem in the urban towns fuelled by population growth, rural to urban migration and changing consumption patterns. In terms of total volume of waste generated, domestic waste constitutes the largest percentage at approximately 70 – 80 % countrywide. Per capita waste generation in 2001 was assumed to be 0.3 kg/day53, however, current information indicates that this may have increased significantly. National level data do not exist for municipal solid waste generation, collection and disposal due to a lack of a nationwide inventory.

According to Thimphu City Corporation (TCC) records, solid waste generation in Thimphu City has increased from 8 tonnes/day in 1999 to 24 tonnes per day in 2004.54 This three-fold increase of daily waste generation in 5 years illustrates the critical nature of the problem in respect of the main centres. Thimphu has a municipal landfill managed and operated by the TCC. The TCC also provides daily solid waste collection services. Preparation of a new landfill site has just been completed for Phuentsholing and it is scheduled to open for operation by the end of this year.

52 DUDH (2002) p6. 53 UNEP (2001)p92 54 Information provided to the Consultant by Thimphu City Corporation October 2004

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Thimphu’s landfill (located 12km from the city in steep terrain) was designed for a waste volume of 8 tonnes per day for 10 years. It has been operating since 1992 and has been extended twice. The landfill is currently full, previous waste separation activities at the land fill have lapsed and collection vehicles have recently resorted to dumping rubbish on the roadside close to the landfill which is arousing much public concern. 55 There appears to be little site management of the landfill with no evidence of the use of daily cover. Whilst the Thimphu City Corporation (TCC) intends to extend the landfill size as an interim short-term measure, a new landfill site has not yet been identified and there appears to be no long-term waste management strategy for the city. A draft waste management plan was prepared for the TCC under the Danida funded Urban Sector Programme Support (USPS) but the plan was deemed unsuitable for local conditions and has not been adopted.

There is also a plan for a composting plant that could absorb a significant amount of Thimphu city’s daily waste generation. However, it is understood that the plan for the composting plant was conceived by the Ministry of Trade and Industry and NEC, in association with Ministry of Agriculture (MOA), then handed over to the TCC to implement. The plan involved utilising MOA land for the plant site such that MOA would be compensated through receiving 20 % of the generated compost. The remainder of the compost would be sold to cover costs. The TCC had no input into the preparation of the composting plant plan, has no budget to implement the plan and following a preliminary financial analysis, has deemed the plan to be unviable.56 Thus, the problem of solid waste management remains a critical issue for Thimphu.

The following secondary towns have operational landfills: Trongsa, Zhemgang, Tingtibi, Lhuentse, Trashi Yangtse, Duksum and Rangjung and landfills are currently being prepared in Wangdue, Paro and Bumthang. Where there is no landfill, waste is disposed of in an adhoc manner in rivers/streams valleys and low-lying areas.57 The Wangdue landfill site is not ideal and typifies the waste management problems faced by urban areas in Bhutan. The site is about 8 km from Wangdue/Bajo and is located on very steep terrain that requires

55 Personal observations, discussions with TCC and local newspaper articles during October 2004 56 Information received form the Mayor of Thimphu during discussions with Thimphu City Corporation, October 2004. 57 UNEP (2001) p95.

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significant site engineering to ensure proper containment and leachate management. A critical issue for waste disposal in Bhutan is the steep terrain and lack of suitable land available for sanitary landfills.

3.6.5 Loss of Agricultural Land

The allocation of land to cope with increasing urban population and expansion of urban areas is a dilemma facing Bhutan in light of the shortage of agricultural land. This is illustrated most keenly in Thimphu where expansion of the city either up or down the valley is over agricultural land and vertical expansion up the slopes of the valley is over forestland. NEC (2002) noted that between 1998 and 2002, a total of 583.33 acres of wetland (paddy) were lost in six districts undergoing urbanisation.58

3.6.6 Urban Poverty

Poverty in Bhutan is predominantly a rural phenomenon related to remoteness, harsh living conditions and poor access to services and low-income subsistence farming. Urban poverty is reportedly limited to 2.9 % of the total incidence of poverty.59 However, it is significant that the majority of the poor and low-income groups in urban areas are migrants from rural areas who also suffer social as well as economic deprivation.60 The emergence of squatter populations within and around Thimphu and Phuentsholing including its environmental consequences (poor sanitation, etc), testify to increasing incidence of urban poverty. Thus, the incidence of urban poverty is likely to increase along with rural to urban migration.

58 NECS (2002) Bhutan the Road From Rio: RGOB p15. 59 National Statistical Bureau, RGOB (2004), Poverty Analysis Report (Draft): 60 NEC (2002) Bhutan the Road From Rio: RGOB p15.

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4.0 Potential Contribution of Environmental Improvements

4.1 Introduction

In light of the main environmental problems identified in Section 3, this section describes the potential contribution that environmental improvements could make to economic growth in the key sectors of agriculture, forestry, water resources, energy, transportation and urban development.

4.2 Agriculture

Given the limited availability of agricultural land in Bhutan the identification of any additional land that could feasibly be brought into agricultural production is an important activity. Based on a preliminary assessment undertaken in 1998, MOA considers that there is potential to increase agricultural land by a further 193,727 acres or 2.3% of the total land area “if forested and other areas with slopes less than 50% and altitude below 3200 m asl is considered”.61 Bringing such land into production would however, require a revision of the Land Act (1998).

The diversion of urban development schemes to unproductive lands along the slopes of valleys rather than on valley flats would reduce the loss of prime agricultural land to urban areas thereby ensuring ongoing agricultural production. Whilst the initial costs of such development may be higher it is possible that the maintenance cost of services could be cheaper on sloping land. Moreover, aesthetic values of settlements would be enhanced. There are numerous examples of this type of development across the Himalayas.

At the policy level the need for a review of the Land Act 1989 is seen as essential to ensure sustainable agricultural development. For example, it has been suggested by MOA that review of the Land Act should incorporate:

· A total ban on conversion of prime wetland to uses other than agricultural use; · Allow conversion of marginal wetlands outside of designated protected areas based on comparative advantages of optional land uses; · Increase the land ceiling of individual landholders to more than 25 acres to facilitate commercialisation and mechanisation; and · Provisions to deal with land inheritance to halt the fragmentation of land holding.

There is considerable scope for the promotion and implementation of measures to reduce land degradation that will at the same time result in sustainable agricultural development and improvements to rural incomes. This involves the development of an integrated systems approach, aimed at conserving natural and cultural heritage and protection of Bhutan’s fragile mountain environment. Key to this approach is the establishment of effective land management through land use planning. Effective land use planning will facilitate the optimal uses of all of Bhutan’s land resources in accordance with Bhutan’s sustainable development policies.

61 MOA (2002) RNR Sector NFYP p23.

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Land use planning depends on the establishment of a database of land resources. Such a database will require soil mapping, land stability studies and resource inventories. In respect of agriculture the establishment of such a database will facilitate the identification of appropriate agricultural land for specific uses. From this information MOA will be able to promote the cultivation of specific crops/fruits and vegetables in areas with appropriate soil, slope and climate characteristics to maximise economic returns while ensuring environmental sustainability.

Effective land use management would be supported by agricultural extension programmes aimed at raising farmers’ awareness on new soil management technologies, appropriate crops for particular land classes, promotion of high yielding seed varieties and proper use of fertilisers .

Continued efforts to reduce the cattle population through introduction of improved breeds will help reduce the effects of over grazing and resultant land degradation.

4.3 Forestry

There is an urgent need to reduce human-wildlife conflict to a level that is manageable and not detrimental to both biodiversity conservation and rural livelihoods. The following activities have been proposed/implemented which should go some way to mitigate the socio-economic impacts while promoting conservation:

· Controlled culling of prolific species such as wild boars; · Compensation payments for loss of livestock to predators (tiger conservation fund); · Swapping of marginal and distant agricultural lands with suitable forest lands ; and · Promotion of eco and agro tourism

Encroachment into forest land for construction, industrial development and settlements needs to be carefully monitored and regulated. Wherever possible land for such purposes should be clearly demarcated and allocated in areas not covered by forests with commercial value, watershed areas and erosion prone areas.

Reduction in the effects of overgrazing can be achieved through the use of improved livestock breeds which reduce the need for larger numbers of cattle. Decreasing the grazing pressure will result in better forest regeneration and less soil erosion in vulnerable areas.

Reduction in the consumption of timber could be achieved through promotion of alternative house construction materials such as corrugated iron sheets for roofing. Fuel wood consumption can be reduced through promotion of the use of electrical appliances for cooking and heating in all areas covered by electricity. The expansion of rural electrification offers significant opportunities for environmental improvements in this regard. Other opportunities include promotion of liquefied petroleum gas (LPG) as a cooking / heating fuel for rural communities .

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Non-timber forest products such as mushrooms, medicinal plants, essential oils, canes and rattans constitute a growing market with increasingly good prices worldwide. However, there is an urgent need to develop policies, guidelines and implement mechanisms for the sustainable collection of NTFPs.

Tighter controls and stricter penalties are required to reduce poaching and the wildlife trade particularly in border areas. Other measures include augmenting anti poaching activities including strengthening of anti poaching teams and local informers’ network and upgrading of surveillance equipment.

Other opportunities for economic gains through environmental improvements are discussed in Section 2 and include eco-tourism, bio-prospecting, carbon trading, payment for environmental services and Integrated Conservation and Development Projects.

4.4 Water Resources

Balancing competing demands of settlements, agriculture, timber, NTFPs, firewood, hydropower and industries requires an integrated planning approach between all water users. Recognising the urgent need for such an approach in the light of Bhutan’s recent rapid development, the NEC has recently formulated a Water Policy, Water Vision and draft Water Act which sets out an integrated approach for guiding the management of water resources involving all stakeholders. These documents identify water user interests and priorities namely water for drinking and sanitation (priority 1) water for food production, water for hydropower development and water for industrial use. The documents recognise and address conflicting water users’ interests and establish principles and rules for water resources development, management, protection, and flood control management. The documents also define the institutional set up for water resources management. Finalisation, approval and implementation of these documents (expected within the next year) takes hold of the opportunity to integrate cross-sectoral environmental considerations for the sustainable development of water resources.

4.5 Energy

Through hydropower development Bhutan has taken advantage of the country’s natural environment characteristics (abundant water resources, mountainous terrain, extensive forest cover), which provide the opportunity to produce clean energy cheaply, and high demand for power in neighbouring countries, to drive its economic development. At the national level the availability of cheap power gives major impetus to the industrial sector especially power intensive industries. Fuel wood accounts for 70 % of the national energy consumption and 100 % of the non commercial energy consumption at rural level.

Bhutan is pursuing a policy of 100 % rural electrification coverage by 2020.62. Owing to the highly scattered nature of the rural population, rural electrification will depend to a large extent on more cost effective off-grid technologies such as low-cost distribution systems (such as single phase and single-wire-earth-return systems), solar systems and micro hydro. Promotion of LPG among rural households. for cooking and heating

62 Planning Commission (2002) NFYP p102.

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provides an opportunity in the near term to significantly reduce fuel wood consumption. There is increasing use of LPG for in urban areas for cooking and heating.63 Thus, through the gradual replacement of fuel wood for lighting, cooking and heating the impact on deforestation will be reduced.

Reduction in wood burning will reduce the health hazards associated with smoke inhalation and reduce the pressure on health services.

The need to protect watersheds to ensure sustainability of hydropower generation will give further impetus to maintenance of forest resources and protection of Bhutan’s rich biodiversity. This in turn has global benefits in that forests act as carbon sinks that mitigate the potential effects of climate change.

4.6 Transportation

An efficient and cost effective road network is key to economic development in Bhutan. Since the country is landlocked and almost entirely located in Himalayas it is highly dependent on road transport for trade and internal domestic transport links. Bhutan’s mountainous terrain, sparsely distributed population and limited agricultural land makes construction and maintenance of roads and delivery of health and other services difficult and costly. The NFYP places strong emphasis on the need to expand the road network in Bhutan.

With around 4000km roads constructed many rural communities remain cut off from the road network and either walk or depend on animals for transport. Almost one third of all geogs (block of villages) are not connected to any roads and farmers remain dependent on subsistence agriculture with no direct access to markets, education or health services. Expansion of the road network is necessary to improve quality of life. Road expansion in Bhutan also provides potential indirect environmental benefits such as:

· facilitation of natural resource management programmes; · provides access to markets and credit to rural households which in turn lessens their need to exploit ecologically sensitive areas.

63 Ibid p100.

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In spite of the benefits, road construction has the potential for significant negative impacts on the environment through removal of forest cover, land degradation due to landslides and accelerated erosion and siltation of streams and rivers. The problem is exacerbated if the road is poorly constructed. Roads can also lead to indirect environmental impacts such as opening up access to ecologically sensitive areas and facilitating illegal exploitation of forest resources.

Recognising that roads are essential to the sustainable development of Bhutan, the potential environmental impacts of road infrastructure must be minimised as much as possible. Moreover, the opportunities for environmental benefits must be identified and vigorously pursued. Environmental impacts can be reduced significantly through good planning and appropriate road alignment as well as the design and implementation of environmentally friendly road construction methods. A manual describing the key components of Environmental Friendly Road Construction for Bhutan has recently been completed by the Department of Roads under World Bank and SNV assistance.64

Environmentally friendly road construction carried out effectively provides the opportunity for a significant contribution to economic growth and at the same time minimises the negative environmental impacts.

4.7 Urban Development

Environmental improvements in urban areas offer significant potential for economic growth. A decline in air quality has been blamed for increased incidences of respiratory diseases including asthma in Thimphu.65 Thus, reducing air pollution in cities through enforced controls on vehicle emissions66, improved fuel characteristics and promoting electrical appliances to replace wood burning stoves, will have a beneficial impact on the health of urban populations. This in turn will reduce the need for health care services.

The improvement of urban infrastructure such as roads, footpaths, parks etc will reduce the effects of traffic congestion and make for a more aesthetically pleasing environment for city dwellers. Thimphu City Corporation has adopted strict rules to make it mandatory for households to be linked to the city’s modern sewage system. This will enhance the city’s hygiene standards and general cleanliness, which will have flow-on economic and social benefits.

The establishment of policies, plans, rules and regulations to facilitate urban development efficiently and effectively provides the opportunity for environmental considerations to be integrated into the urban planning framework. Such planning includes measures for protecting valuable agricultural land from urban expansion, managing air pollution, solid waste management and protection of water bodies, etc. This has significant

64 Ministry of Works and Human Settlement, Department of Roads and SNV (2004) Road Sector Development and Environmental Friendly Roads in Bhutan : Providing Access to Rural Communities Whilst Protecting the Environment, SNV 65 NECS (2002) Bhutan the Road from Rio:p20 66 In accordance with Motor vehicle emission standard as given in the recently revised Environmental Discharge Standard NEC (2004) Environmental Discharge Standard

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economic benefits in the long term as good environmental planning can reduce the need for costly remediation measures in the future. Opportunities can be created for private sector participation in the provision of urban services such as waste collection and management of waste disposal facilities. This could provide new employment opportunities and result in improved service delivery to urban consumers and release urban administrations from some of the financial and human resources burden of providing such services. There is currently no private sector involvement in urban services in Bhutan, however the TCC has expressed interest in such a possibility. Given the limited financial resources of urban authorities and the increasing demands of rapid urbanisation, promoting private sector involvement in service provision could have considerable economic benefits.

Raising public environmental awareness through the innovative use of the media, involvement of schools and interest groups would reap sustainable economic benefits in the long term. Instilling civic pride through promoting environmentally friendly practices and aesthetically pleasing surroundings would serve to sensitize the population to wider environmental issues and promote the pursuit of environmental studies. Much could be gained from fostering the linkages between traditional Bhutanese respect for the environment and modern environmental principles.

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5.0 Regulatory and Institutional Framework

5.1 Overview

Environmental conservation, environmental management and environmentally sustainable development are accorded top priority by the RGOB. In recent years the RGOB has made rapid progress in shaping the national policy and legal framework for the environment sector. Bhutan’s environmental policy and regulatory framework are underpinned by two key strategy documents, The Middle Path, National Environmental Strategy Bhutan 1998, and Bhutan 2020 A Vision for Peace, Prosperity and Happiness, 1999. These two strategy documents are described briefly below. This is followed by a description of Bhutan’s environmental legislation and institutional setting.

The second part of this section assesses the policies and strategies and the effectiveness of the regulatory framework. The nature of public consultation in decision making is then examined and a review of lessons learned from donor activities presented.

National Environmental Strategy The National Environmental Strategy “The Middle Path” is the main policy document for the environmental sector. The National Environmental Strategy (NES) was prepared with three key principles in mind; sustainable economic development depends on effective natural resources management; urban growth requires integrated urban / rural planning, and all development planning and management should be sensitive to traditional Bhutanese values. Designed to guide environmental conservation in Bhutan, the NES aims to minimize or mitigate the impacts likely to result from the development process. The NES is further supported by policies strategies and action plans of the various sectors in the RGOB. The main avenues of sustainable development identified in the strategy include:

· Hydropower development based on integrated watershed management; · Agriculture based on sustainable practices; and · Industrial expansion based on effective pollution control measures and environmental legislation.

The strategy is being translated into action through the implementation of the Ninth Five Year Plan.

Bhutan 2020: A Vision for Peace Prosperity and Happiness Development in Bhutan has been guided by the political commitment and philosophy of the people, epitomised in the statement of His Majesty King Jigme Singye Wangchuck that “Gros s National Happiness is more important than Gross National Product”. For the last two decades, Gross National Happiness has been the guiding principle for the Bhutanese in pursuing national development efforts, the essence of the tenet being that economic, spiritual and environmental well-being are all equally important together with overall development. Bhutan 2020: A Vision for Peace Prosperity and Happiness is a vision statement around the main tenet of Gross National Happiness and is essentially a strategy document to guide implementation of FYPs. In regard to the environment the Vision Statement charts a course for achieving environmentally sustainable development.

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5.2 Environmental Legislation

Currently the majority of Bhutan’s environmental legislation concerns the conservation of forests and the protection of wild life habitat. The core context of environmental policies and legislation in Bhutan is briefly described below:

National Forest Policy 1974 This policy outlines the protection of the land, its forest soil water resources and biodiversity against degradation such as loss of soil fertility, soil erosion, landslides, floods and other ecological devastation and the improvement of all degraded forest land areas, through proper management systems and practices.

Forest and Nature Conservation Act 1995 This Act suggests that strategies for biodiversity conservation should be based on two main precepts: That conservation value lies in the cumulative effect of biological diversity; and that natural resources must be used to meet the collective needs of the Bhutanese people. Two volumes of Forest and Nature Conservation Rules were adopted in 2000 to support implementation of the Act.

Environmental Assessment Act 2000 The Environment Assessment Act establishes the procedures for the assessment of potential effects of strategic plans, policies programmes and projects on the environment and for the determination of policies and measures to reduce potential adverse impacts and to promote environmental benefits. Regulations and guidelines supporting the EA Act include the following:

Regulation for the Environmental Clearance of Projects The Regulation for the Environmental Clearance of Projects was adopted in 2002 to support the implementation of the EA Act. The Regulation defines responsibilities and procedures for the implementation of the EA Act concerning the issuance and enforcement of environmental clearance for individual projects. The regulation was adopted to ensure that the objectives of the EA Act are implemented through a uniform process for all projects while issuing their environmental clearances.

Regulation for Strategic Environmental Assessment The Regulation on Strategic Environmental assessment came into effect in 2002. The purpose of the regulation is to ensure that environmental concerns are fully taken into account by all government agencies while formulating, reviewing, modifying or implementing any policy, plan or programme including national Five Year Development Plans. The regulation also ensures that cumulative and large scale environmental effects are taken into consideration and to promote the design of environmentally sustainable proposals that encourage the use of renewable resources and clean technologies.

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Sector Environmental Assessment Guidelines Eight sectoral guidelines have been developed to assist NEC, line ministries and agencies and project proponents to incorporate environmental protection parameters into the project cycle, particularly at the early planning stage. In addition the NEC has developed an environmental assessment process manual to assist applicants applying for an environmental clearance.

Environmental Codes of Practice (ECOP) To promote sound environmental management for development activities in urban areas and also to specify key environmental terms NEC has developed ECOPs, one or more of which may be attached to the environmental clearance issued for a relevant project. The ECOPs have been circulated to all relevant agencies.

Environmental Discharge Standards The NEC has established environmental discharge standards for water (industry specific), air vehicle emissions and noise. These standards have been developed taking account of the Bhutanese context.

The Proposed National Environmental Protection Act – Umbrella Law on the Environment In view of international experience, the RGOB has recognised the need for environmental issues to be firmly integrated into sector policies and regulations so that environmental regulations are not seen by the various sectors as infringing on their mandates. This requires the development of priorities from a comprehensive or holistic perspective. To do this an umbrella law has been proposed to facilitate the implementation of a holistic approach.

The Proposed National Environmental Protection Act, which is currently being drafted, will define authority for planning implementation and enforcement of environmental legislation over a wide range of areas. The umbrella law will focus on procedures for enabling the various processes needed for developing issue specific regulations and standards and overall planning and co-ordination. It will also have an enforcement section specifying issues concerning freedom of access to information, standing and appeal and the various penalties and enforcement measures including civil liberty issues. It is envisaged that all regulations on the environment would be covered under such an umbrella act, which will greatly strengthen the country’s overall environmental policy and legal framework.

5.3 Institutional Setting

The institutional setting relating to the environment in Bhutan is summarised as follows:

National Environment Commission The National Environment Commission (NEC) was established in 1992 as a high level multi-sectoral agency responsible for preserving the country’s natural resources. The NEC is a high level, cross-sectoral body of senior ministers and officers currently under the chairmanship of the Minister of Agriculture.

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The NEC formulates environmental policy, sets environmental standards and legislation and ensures the use of instruments such as environmental impact assessments. The NEC works closely with donor organisations for environmental projects and represents Bhutan at national and international dialogues on the environment. Over the course of the Eighth Five Year Plan (1997 – 2002) the NEC with bilateral assistance established a consolidated, strategic multi sectoral framework for the environment and facilitated the establishment of the institutional mechanism for co-ordinating conservation activities, monitoring, reporting on status and impacts.

The NEC is empowered to meet its long-term objective of defining policies, programmes, plans and actions whereby the sustainability of natural resources will be fully integrated into every aspect of Bhutan’s social and economic development. The Commission monitors the impact of development on the environment and has begun putting in place the necessary controls, regulations, mechanisms and incentives in the private/public sectors. The NEC also co-ordinates cross-sectoral programmes and the implementation of policies and legislation, in particular the Environmental Assessment Act 2000. In regard to implementation of the Environmental Assessment Act 2000 NEC is mandated to conduct compliance and monitoring activities, refine existing environmental standards and to develop new standards where necessary.

NEC undertakes outreach and capacity development of key implementing agencies including line ministries, Dzongkhag Yargay Tshogchungs (District Development Committees) and the Geog Yargay Tshogchungs (Block Development Committees). The Environmental Assessment section of NEC also facilitates the creation of environmental units within line ministries and the private sector.

Line Ministries Line ministries are responsible for planning and implementing their sectoral programmes and projects in accordance with the Environmental Assessment Act 2000 and its regulations. Under the EA Act 2000 an Environmental Clearance is a prerequisite prior to commencement of any development. Some ministries such as the Ministry of Trade and Industry and the Ministry of Works and Human Settlements have established environmental units. Some of the environmental units have been designated as competent Authorities under the provisions of the Regulation for the Environmental Clearance of Projects 2002. Competent Authorities are responsible for compliance monitoring under the regulation.

Village-Based Institutions Traditional village based institutions have been used and adapted to promote people’s participation in national development planning and decision making processes. These include the Dzongkhag Yargey Tshogchungs (DYTs) established in 1981 and the Geog Yargey Tshogchungs (GYTs) established in 1991. These groups are actively involved in the preparation of local development plans that form an integral part of the nation’s successive five-year plans.

The Nature Conservation Section (NCS) The NCS of the Forestry Services Division of the Ministry of Agriculture has the primary responsibility for the implementation and management of protected areas. The main objective of the NCS is to conserve Bhutan’s rich biodiversity in line with the RGOB’s policy of sustainable development and environmental protection.

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Sustainable Development Secretariat (SDS) The SDS was formed to manage and operationalise the Sustainable Development Agreement with the Government of the Netherlands. The areas of energy, biodiversity and culture have been targeted to operationalise the Sustainable Development Agreement.

Bhutan Trust Fund for Environmental Conservation (BTFEC) The Bhutan Trust Fund for Environmental Conservation (BTFEC) was established so that the country could maintain the large protected areas and biodiversity conservation projects.

Royal Society for the Protection of Nature (RSPN) The Royal Society for the Protection of Nature (RSPN) established in 1987is the only Bhutanese non- governmental organisation (NGO) focusing on environmental issues. The goal of the RSPN is to promote awareness among all Bhutanese on the conservation, restoration and sustainable management of the Bhutan’s rich natural heritage.

Private Sector The private sector is expected to comply with all RGOB environmental regulations, relevant codes of practice and environmental quality standards including implementation of environmental mitigation measures stipulated as part of environmental clearance documentation (EIAs Environmental Management Plans, etc.).

NGOs A number of international NGOs have had involvement in biodiversity conservation in Bhutan. Worldwide Fund for Nature (WWF) has had by far the greatest involvement of all NGOs, having assisted Bhutan with biodiversity conservation for many years. Since 1977 WWF has provided significant support for biodiversity conservation including training programs to build staff capabilities, surveys and inventories of biodiversity, assistance to national park development, institutional support to the Nature Conservation Division (NCD) and RSPN. These activities are programmed to continue over the coming 5 years.

5.4 Multilateral Environmental Agreements

Bhutan is committed to strengthening regional and international linkages regarding environmental issues and is currently party to the following international conventions:

· UN Convention on the Law of the Sea, 1982; · International Plant Protection Convention 1994; · Convention on Biological Diversity, 1995; · UN Framework Convention on Climate Change 1995; · World Heritage Convention 2001; · Kyoto Protocol 2002; · Cartegena Protocol on Biosafety 2002;

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· Basel Convention, 2002; · CITES, 2002; · UN Convention to Combat Desertification, 2003; · Vienna Convention; and · Montreal Protocol.

5.5 Assessment of Policies and Strategies

Good stewardship of the country’s rich biodiversity has been integral to its policies and strategies of environmental governance throughout the last four decades of five year plans reflecting the traditional cultural and spiritual roots of its people. Strong political will since its early years of modern development has been a key factor in Bhutan’s environmental conservation.

The RGOB with the assistance of external donors Government of Denmark, Netherlands, UNEP, ADB, UNDP, GEF) has made considerable progress in shaping the national policy and legal framework for the environment sector. Overall, the scope of the environmental framework is sound, it is systematic and it is firmly rooted in the traditions and culture of its people. The framework provides the basis for pursuing sustainable development in an integrated manner. Furthermore, Bhutan’s ongoing participation in global environmental efforts through multi lateral environmental agreements (MEAs) underscores Bhutan’s commitment to trans -boundary, regional and global environmental concerns.

However, while much attention has been given to framework building, little attention has been given to compliance and enforcement. So there is a situation where a policy framework is in place but implementation is weak. There is a need to ensure that institutional capacities and resources exist to effectively implement the new legislation. Thus, more strategic planning is needed with donor agencies so that funding is available for implementation and sustainability. Until now the funding has been directed toward the establishment of a policy framework. In hindsight if the issues of resource requirements for implementation were considered earlier, obstacles during the implementation phase would be more easily overcome.

There are also some policy weaknesses that still need to be addressed to facilitate addressing key environmental issues. One example relates to the Land Act and the constraints it imposes on the need to limit land degradation impacts on the one hand and facilitate sustainable agricultural development on the other. There is lack of clarity and misunderstandings with respect to the Land Act concerning grazing rights in forested areas. The time limit of 12 years for non-use of fallow ground before it reverts to government forest puts pressure on farmers for a shorter fallow period. The Land Act also prohibits the use of wetland for other agricultural uses such as cash crops, horticulture, etc. This places severe constraints on sustainable agriculture development. The current policy of stringently protecting rice farming mak es little economic sense in light of the fact that rice production in Bhutan cannot compete with the significantly lower farm labour costs in India. Bhutan’s competitive advantages in agriculture / horticulture need to be facilitated. The Land Act needs to be revised and strengthened to take account of these issues. This need has been recognised and the Land Act is scheduled for revision over the next few years.

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Available human resources in environmental management are limited in Bhutan. The NEC as the key government agency responsible for the environment currently has a staff of 40 of which 25 are professional and the remainder administrative and support staff. Of the professional staff, more than 50 % have masters degrees or higher. Such institutional capacity is considered good in the Bhutanese context. NEC does not envisage increasing its human resources to any significant extent in the future. The overall approach to environmental management is for the line ministries to establish their own Environmental Units (EUs) which will be responsible for most of the environmental functions within their respective sectors such as approving project for environmental clearance, monitoring and enforcement of environmental compliance etc. Currently, there are limited human and financial resources in the line ministries which means the line ministries are unable to effectively implement and enforce environmental compliance. Ministry of Trade and Industry has an EU comprising two environmental officers and two support staff. The Department of Roads under the Ministry of Works and Human Settlements has one environmental officer.

Similarly, EUs are being established in the dzongkhags, which will fulfil the role of NEC at the district level and assume responsibility as competent authorities to approve projects for environmental clearance under the EA Act, except in the case of large complex projects of national interest. It is also envisaged that dzongkhag EUs will work with Department of Planning in undertaking Strategic Environmental Assessments. The Government of Denmark (Danida) is currently providing capacity building technical assistance for formation of four pilot dzongkhag EUs. The main role of NEC over next 5 years is initiating and capacity building of EUs in the dzongkhags and assisting the line ministries in the same.

There is a pressing need for training of environmental personnel in Bhutan and for financial resources to be made available for the line ministries so that there is adequate capacity for undertaking environmental monitoring and supervision functions within their sectors. Environmental education and training strategies for curricular activities in schools needs to be promoted so that future generations have the knowledge, skills and attitude to contribute to environmental preservation. Along with this, widespread environmental awareness among the general public needs to be created through public awareness campaigns and peoples participation.

Available information on public expenditures allocated to environmental protection is limited to the budgetary expenditure allocated to the National Environment Commission. For 2001 the NEC was allocated Nu 10 million (US$222,000)67 According to the NFYP budget allocation for the NEC between 2002 and 2007 is Nu 12 million per year (US$266,000) which amounts to about 0.1% of the RGOB’s total annual budget outlay. Currently, the RGOB’s budget allocation to the NEC represents less than 20% of NEC’s actual budget requirements and it relies heavily on donor support for the majority of its funding needs. The Government of Denmark provides around 50% of NEC’s budget with the remaining amount provided by UNDP, UNEP, and the Bhutan Trust Fund for Environmental Conservation (BFTEC).68 However, the Government of Denmark plans to phase out its support to the environment sector after 2008 and a new strategic partner will need to be sought.

67 NSB (2004) p154 68 NECS (2002) Ninth Five Year Environment Sector Plan 2002-2007: p29.

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5.6 Performance of Environmental Regulatory Framework

With a sound, but relatively new, regulatory framework in place Bhutan now faces the challenge of implementation, enforcement and compliance of the regulatory framework. There was close consultation with the various sector stakeholders during the development of sectoral environmental guidelines and this has facilitated the institutionalisation of environmental regulations within the sectors. Environmental Clearance (EC) procedures are routinely followed by the line ministries. However, a number of problems have emerged.

The sheer volume of ECs that need to be assessed has put the NEC under significant pressure with the result that screening can be less rigorous than is optimal with the possibility that clearance is given in cases where more information may be needed. In 2003 alone NEC assessed and reviewed more than 164 development projects (roads, transmission lines, industries, urban development etc.). Furthermore, the time taken to process the ECs is often lengthy and sometimes delays implementation of development activities. Once the dzongkhags have adequate capacity they will assume the role of Competent Authorities and this should relieve the short- to medium-term pressure on NEC resources and facilitate the EC approval process.

Another key problem is the lack of resources within the NEC to undertake its role as the lead agency for monitoring and enforcement of the EA Act. Without effective enforcement, non-compliance to environmental obligations can go unnoticed resulting in unexpected and potentially irreversible impacts. Added to this, monitoring and enforcement of environmental standards in Bhutan is hampered by the fact that there is no national laboratory capable of undertaking chemical analyses of environmental parameters. 69 Lack of enforcement could lead to a de-valuing of the regulatory framework by project implementation agencies that could come to view it as little more than necessary paperwork.

NEC undertook 5 regional workshops for the 20 dzongk hags between November 2003 and March 2004. The workshops involved environmental awareness raising and training to facilitate the establishment of Dzongkhag Environmental Committees (DECs). Ten dzongkhags have already established DECs. Some training and awareness raising has been provided by NEC to the EU of the Ministry of Trade and Industry. However, much more environmental awareness raising, training, and capacity building is required among all stakeholders.

Other challenges to environmental compliance include: · The lack of legal expertise within RGOB departments and agencies to oversee interagency co- ordination on compliance and enforcement; · Changing social values related to rapid societal change including the introduction of television could affect environmental compliance; · The low level of understanding of regulated communities of “scientific based” environmental issues; · Lack of advanced training or environmental inspectors; · Lack of third party audits;

69 NECS (2004) Environmental Governance in Bhutan – National Case Study: United Nations University, Japan p23.

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· No mechanism for citizen complaints; · Low public awareness of their own rights and duties as well as their responsibility to obey laws, legal requirements and regulations; and · There are no private lawyers in Bhutan and there is little legal awareness.

Whilst environmental issues have a high priority for the RGOB, the issues have generally been approached on a sectoral basis. There remains a lack of an overall and cross-sectoral plan to implement environmental strategies. Implementation of environmental strategies is in the hands of the various sectors. This gives rise to integration problems and highlights the need for effective inter-sectoral strategic planning. For example, sustainable land management depends on integrating the needs of agriculture, conservation, infrastructure requirements (roads, transmission lines) urban requirements and hydropower requirements. This weakness has been identified and is currently being addressed through the proposed Sustainable Land Management Programme and in respect of water management, the Draft Water Policy.

5.7 Public Consultation in Decision-Making

Peoples’ participation in decision-making processes in Bhutan is central to the RGOB’s decentralisation policy. This has been institutionalised through the establishment of DYTs and GYTs that provide fora for local decision-making. Decentralisation has been running smoothly with district levels assuming increasing planning and decision-making responsibilities. However, devolution is easier for sectoral ministries, since most implementation is already undertaken and co-ordinated at district levels. Cross-sectoral policies such as environment and sustainable development as mandated to the NEC have to be co-ordinated with various ministries. Thus, whilst the institutional framework for effective public consultation and participation in development activities is in place, the challenge is to establish the required capacity at the dzongkhag and geog levels and mainstream participatory procedures. In this regard NEC is currently working with the districts to define what public consultation means and to develop a clear public consultation procedure in regard to facilitating the Environmental Clearance approval process.

One project supporting the local participation process is the “geog level awareness and micro-environmental action plans” which began as a project under the UNDP Capacity 21 Programme. In this programme micro- environmental action plans have been identified in 950 villages throughout the country. These plans include a variety of activities such as community tree plantations, sloping agriculture land technology and protection of drinking water. The impact of this programme is likely to be significant in terms of facilitating environmental awareness raising of important issues and creating innovative solutions to a range of problems in local communities.

5.8 Lessons Learned from Donors’ Activities

A considerable number of bilateral organisations and multilateral donors are active in Bhutan in a wide variety of sectors. The latest ADB CSP Update provides a comprehensive summary of the various strategies/activities

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of the various donors.70 In the environmental sector Danida and ADB have contributed significantly to the development of Bhutan’s environmental policy framework. Other agencies such as WWF UNDP and GEF have contributed significantly to biodiversity issues. Discussions were held in Bhutan with representatives or project management staff of the following donor organisations:

· Danida - Environment Sector Programme Support; · World Bank –Urban Development Project; · SNV/World Bank – Rural Access Project; · UNDP; and · WWF.

A summary of lessons learned from the above agencies is presented below. The lessons learned are based on the views and experiences of donor agencies themselves and / or national counterpart staff. Little documentation on lessons learned was available.

· There is a need to focus activities on Dzongkhags to facilitate decentralisation policy and strengthen district institutions enabling them to implement their mandates. This also assists in bringing to the attention of national policy makers the issues that are constraining the decentralisation process (SNV, Danida). · For capacity building programs identifying the right timing and type of capacity building activities needed is critical to the success of the overall program (Danida). · RGOB is strong on policy development and programming, but capacity for implementation is weak (Danida, WWF). · There is a need for support programs for human resource development (training programs, etc) within line ministries, Dzongkhags and among private sector agencies to ensure the necessary skills are available to facilitate decentralisation (Danida, SNV). · Coherence of individual donor’s activities combined with careful imbedding in the institutional setting contributes significantly to the effectiveness of activities (SNV). · Capacity building activities are more effective in the long term in sustaining development than implementation activities. Capacity development facilitates change and adaptability. The appropriate and strategic use of advisers as facilitators is better rather than having responsibility for implementation (SNV). · It is important that technically compet ent national counterparts are designated to foreign experts during the foreign expert’s missions to facilitate constructive learning exchange and allow reciprocal knowledge transfer. (Danida, SNV) · There should be more involvement of the private sector in development assistance programs. Also any intervention in the private sector should be on a cost-sharing basis to ensure ownership of project and commitment to success (Danida).

70 ADB (2004) CSP: BHU 2004-8 Country Strategy and Program Update 2004-2006 Bhutan

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· Fund releases should be timed to match planned activities and to avoid delays in implementation resulting in programme disruption / slippages. There is a need to synchronise activity schedules with RGOB financial cycle (Danida, WWF). · Joint review meetings should be timed according to RGOB planning and budget cycle (Danida, WWF). · Support for Bhutan’s agencies in participatory working methods creates more effective and sustainable results at the community level. Focus should be more on development management innovation rather than the products of innovations (SNV). · Continuity of same consultants throughout a project rather than changing consultants should be followed as much as possible (Danida, WB). · Meeting donor targets during design and implementation (eg) rigid credit schedules) puts pressure on programmes that can result in inferior or incomplete designs needing to be revisited during the implementation period. This leads to delays or forces shortcuts during implementation to ensure credit targets met. Development credit needs to be flexible to RGOB fiscal policies.(WB – Urban Devt Project, WWF). · Donor resettlement and Land acquisition compensation policies are in conflict with RGOB policies. This can result in potential loan projects being shelved. There is a need for some flexibility in donor safeguard policies to take account of national policies and context. (WB – Urban Devt Project, ADB Industrial Estates & Dry Port Development). · The RGOB civil service policy of 3 - 5 year tenure for placement of senior project management staff can hinder project implementation. The new officer may revert to RGOB procedures. It takes time for government officers to become fully conversant with stringent donor procedures. Therefore, changing officers during implementation projects can cause a vacuum while the new person learns the donor’s procedures. Donor could make it a pre-condition for financing that the same project team remains on the project until completion (WB).

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6.0 Past Environmental Record

This section provides a brief assessment of Bhutan’s record in dealing with difficult environmental issues and complying with environmental conditions in donor-funded projects, based on available information.

Since Bhutan opened itself to the outside world in 1961 the country has made leaps in development, but not at the expense of the environment. This is largely due to political commitment and the philosophy of the people as encapsulated in the Vision Statement 2020. Bhutan’s approach to development is cautious and takes care to maintain the delicate balance that ensures environmental issues are considered equally with other socio- economic issues. This is illustrated most clearly by the fact that Bhutan has been able to retain 72.5 % of its land area in forest cover and moreover 35 % of its land area has been established under a comprehensive protected areas system. In addition the RGOB has pledged to maintain at least 60 % of the country in forest cover for all times.

As noted in previous sections Bhutan is facing a number of environmental pressures related to rapidly increasing population, urbanisation and the establishment of necessary infrastructure (roads, industries, hydropower projects, transmission lines etc) for sustainable economic development. Along with these issues are the additional constraints of steep and fragile terrain, a monsoon climat e, limited agricultural land and a widely dispersed population. These factors combine to form the complex of difficult environmental issues that the country has to deal with to achieve sustainable development.

Weaknesses in implementation of environmental regulations are reflected at the project level. An example of this is seen in a recent Aide Memoire (AM) of an IDA Mission for the Rural Access Project.71. The memoir notes that Environmental Management Plans (EMP) were prepared for subprojects and that the Department of Roads has adopted the Environmental Codes of Practice for mitigating environmental impacts. It also notes that efforts are being made to mainstream environment friendly road construction projects by including provisions in the contract documents. Junior engineers are responsible for supervising implementation of the EMP at the site with some training through Technical Assistance from SNV. However, the AM notes that the actual environmental performance of the sub-projects needs improvement including, among other items the need for more effective construction supervision and the need for higher up front investment for retaining and drainage structures to reduce future maintenance. The latter issue highlights a problem with implementing environment friendly road construction (EFRC) practices where the higher initial investment costs required for EFRC are not considered when resources are mobilised, and therefore not implemented.

Bhutan has had difficulties in complying with both ADB and World Bank resettlement and land acquisition policies as they are contrary to existing rules for compensation under the RGOB Land Act. In the case of ADB the Ministry of Trade and Industry withdrew from a proposed loan for the Dry Port Project in Phuentsholing on the basis that the ADB’s resettlement compensation requirements were contrary to the laws of Bhutan.

71 World Bank (2004) Draft Aide Memoire for the Rural Access Project (Cr 3309-BHU) IDA Mission June 2004:

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On the other hand RGOB civil service procedures can be a hindrance to the smooth implementation of donor- funded projects as in the case of the WB funded Urban Development Project. The RGOB policy of moving key management staff every 3 to 5 years has caused discontinuity and programme delays due to the new staff having to become fully conversant with stringent bank procedures.

Bhutan has a weak record in dealing with Thimphu’s critical waste management problem as described in Section 3.6. The Thimphu waste management problem highlights a weakness in strategic urban planning and a weakness in cross-sectoral co-ordination. Weaknesses in strategic environmental planning and cross sectoral co-ordination in dealing with complex environmental issues remain major challenges for Bhutan particularly in the area of watershed management and integrated land management.

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7.0 Environmental Information Needs

The following section identifies data gaps that need to be filled for a better understanding of the country’s environmental issues and identifies additional indicators to be monitored so that trends in the main environmental problems can be assessed.

Lack of information, inadequate data and insufficient information management are major constraints for the environmental sector in Bhutan. There is a general lack of baseline environmental data to enable accurate assessment of the level and extent of environmental pollution and environmental changes in the country. Baseline environmental information, with the support of environmental standards, is essential for the successful implementation of environmental objectives and effective enforcement of environmental legislation. Baseline information also provides the capacity to undertake strategic assessments such as the State of the Environment reports and enables the more effective implementation of national obligations under the multilateral environmental agreements that Bhutan is a party to. In summary, adequate baseline information and the routine collection and dissemination of environmental information is needed for the following purposes:

· To accurately assess the level and extent of environmental pollution and environmental changes in Bhutan; · To provide the capacity to undertake strategic environmental assessments; · As a baseline for daily environmental management; · For integration of environmental considerations in planning and management within sector ministries; · In response to requirements from international conventions; · As a basis for raising and maintaining environmental awareness; and · As a source for environmental research in order to increase our knowledge on the environment.

Environmental data and information exists in different formats and quality in the various government agencies in Bhutan. An overview of existing environmental information and data management in Bhutan is presented in Appendix 9. The overview was based on a survey of 23 agencies conducted by NEC 2003.

The collection of environmental data is primarily driven by the specific needs of the involved institutions rather than by a coherent environmental information management strategy. Consequently, many of the driving forces, (activities within the various sectors of society), are relatively well covered, whereas environmental state indicators and particularly impact indicators are mostly not covered by systematic data collection. As a consequence, the environmental data that appears for example in the State of the Environment reports is often of a qualitative rather than a quantitative character, and often with incomplete or scarce spatial and temporal coverage. The reliability of the available environmental data is also a major concern as the data collected is of variable quality and proper quality assurance is rarely applied.

Various policy, planning and strategy documents produced over recent years in Bhutan including Vision 2020, NES, NFYP, State of Environment Report 2001, sectoral reports, etc, have identified the inadequacies of existing environmental data sets. In doing so some reports have also stressed the urgent need for improved environmental data collection, monitoring, management and inter-sectoral co-ordination to facilitate a better understanding of the country’s environmental issues. This would lead to more effective implementation of

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Bhutan’s Middle Path sustainable development strategy. Recognising the urgent need of environmental data, NEC with technical assistance from Danida and in close consultation with major stakeholder agencies, has prepared a strategy for an Environmental Information Management System for Bhutan (EIMS). Implementation of the strategy commenced in October 2004.

The stated objective of the EIMS is to enable Strategic Environmental Management in Bhutan, where environmental information is used to identify emerging environmental problems, to set priorities and targets for environmental policies, and to evaluate the effects of the policy actions that have been taken.

The key data gaps associated with the most pressing environmental issues in Bhutan that have been identified in the State of the Environment reports are summarised below:

Rural Urban Migration · Demographic data is inadequate in terms of patterns of migration, gender bias, health, etc, and there is little Information on demography at dzongkhag and geog level; · No firm statistics on urban population, essential to urban planning; · Topographic and cadastral maps needed to facilitate urban development planning; and · Detailed household census needed once in 10 years.

Land Degradation · Systematic registration and evaluation of present land use (including state of degradation) and users is required; · Assessment of land related deficiencies using appropriate criteria and indicators incorporating spatial information is needed (e.g. adopt international systems like soil and terrain database (SOTER) Global Assessment of Soil Degradation (GLASOD)); · Need to design threshold values for fertilisers to promote balanced use of organic manure, chemical fertilisers and agro-chemicals to ensure sustainability of production; and · Nature and extent of deforestation needs to be inventoried.

Air Pollution · Baseline data on primary and secondary air pollutants needed to assess ambient air quality; and · Accurate estimation of pollution loads from different sources (industry, domestic, vehicles, etc.).

Water pollution · Baseline information required for drinking water quality and effluent discharges; · Lack of database on drinking water sources and supply schemes ; and · Lack of database on sanitation systems / facilities

Solid waste management · Data on solid waste generation categories needed (domestic, industrial, hazardous, hospital, etc.); · Waste composition data needed – indicates potential for composting / recycling;

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· Rules for solid waste management needed - currently exist as part of water and sanitation Rules; and · Development of environmental database system for efficient management of municipal waste.

Implementation of the EIMS will involve determination of a comprehensive set of environmental indicators that will form the backbone to the EIMS database. Considerable attention has been given world wide to the development of environmental indicators and sustainable development indicators, in order to accurately and objectively summarise the increasing amount of environmental data and information and make it operational in decision-making. Reference environmental indicator sets have been produced and published by a number of international agencies (UNCSD, OECD and EEA).

The strategy document for the EIMS72 has adopted a model for the identification of indicators whereby driving forces of social and economic development exert pressures on the environment and, as a consequence, the state of the environment changes, such as resources availability and biodiversity. This leads to impacts on human health, ecosystems and materials that may elicit a societal response that feeds back on the driving forces, or on the state or impacts, through adaptation or remedial action. Thus, environmental indicators need to reflect the various elements of the causal chain that links human activities to their environmental impacts and further to the societal responses to these impacts.

In adopting this concept for indicat or development to Bhutan’s priority environmental issues the EIMS strategy document has identified a preliminary set of specific indicators for each thematic area. The EIMS proposed indicator lists are reproduced in Appendix 10. Indicators for which there is presently no data available but which are found to be important and informative would be maintained in the list for later implementation.

72 NECS (2003) EIMS Conceptual Framework and Development Strategy: RGOB Thimphu

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8.0 Review of Country Strategy and Program

8.1 Introduction

The following section provides a review and assessment of ADB’s current sectoral strategies and work programs in Bhutan. Areas where environmental considerations can be further integrated into ADB ’s sector development projects are also identified and a proposed strategy to do this is highlighted. The impact of ADB’s country strategy and program on the key environmental issues is discussed along with identifying specific areas where linkages between ADB’s sectoral objectives and environmental benefits can be optimised.

8.2 Sectoral Strategies and Work Programs

ADB’s overall strategic focus for Bhutan over the last five years is to assist the Government in the process of structural transformation and role transition and, at the same time support the Government’s traditional commitment to its social programs and to economic equity.73

The strategic thrust of ADB’s current assistance to Bhutan emphasizes strengthening infrastructure, improving governance, generating employment and promoting private sector development within its overarching goal of poverty reduction. ADB’s strategy focuses on five key sectors; road transport, energy, finance, human resources and urban environment. Environment as a sector was not included in the last Country Operational Strategy (COS 2000), since the RGOB’s programs policies and regulatory framework were proceeding well and sufficient grant resources were available from other donors. However, ADB has provided technical assistance to strengthen environmental impact assessment guidelines in Bhutan (1996-98). This was followed by further assistance in 2003 to update the guidelines, prepare additional guidelines and strengthen NEC’s capacity to implement the guidelines. For the last COS (2000) it was considered that the role of ADB in environment should be concentrated on including environmental components in its loan projects and ensuring their implementation.

Weak capacity in the line ministries and dzongkhags to implement and enforce environmental compliance has been raised as a key issue. Through its sectoral strategies ADB could build on its previous environmental capacity building assistance by strengthening environmental capacity building components in its technical assistance and loan projects. Not only would this facilitate environmental compliance in ADB funded projects but would contribute significantly to the overall need for environmental capacity building in the line ministries.

The Bank’s transport sector strategy focuses on supporting economic development by improving access to regional and domestic markets and improving the road system and expanding the road network in rural Bhutan. Improving rural access will open up market opportunities for farm products and handicrafts and facilitate private sector activities including tourism. Development of road infrastructure has been accorded the highest priority in the NFYP in response to the priorities of geog and dzongkhag development committees. ADB’s recent road sector program has included the Road Improvement Project (loan) for the East-West Highway (2000 - 2005) and project preparation for the Road Network Expansion Project due to be implemented in 2005 and the

73 ADB (2000) Country Operational Strategy for Bhutan

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Integrated Rural Development Project proposed for 2006. The latter recognises the interrelated nature of transport, agriculture, natural resources management and improved rural livelihoods.

Road development has the potential for significant environmental impacts on forests, land and water resources in Bhutan. ADB’s environmental assessment requirements and those of the RGOB are comprehensive. ADB’s road sector strategy could be enhanced by specifying the incorporation of Environmentally Friendly Road Construction (EFRC) practices in accordance with Department of Roads recently published guidelines for EFRC.74 This would strengthen measures aimed at reducing the effects of land degradation and land use conversion.

ADB’s energy sector strategy focuses on extending rural electrification to support agro-processing, tourism, education and health facilities, reduction in fuel wood and respiratory disease and generally increasing the quality of life in rural areas. The sectoral strategy also includes institutional development of the power sector. ADB’s recent energy sector projects include the Sustainable Rural Electrification Project (2000 – 2004), which focuses on rural electrification through grid and off-grid technologies to enhance rural livelihoods, and the Rural Electrification Network Expansion Project (2004 -2007), which plans to electrify 8,000 rural consumers to improve living standards and rural economic opportunities. Environmental considerations are integral to ADB’s energy strategy since rural electrification is well known to have significant environmental and social benefits.

ADB’s urban sector strategy recognises and responds to the critical issues associated with Bhutan’s rapid urbanisation. The strategy focuses on developing managerial capacity, policy setting, physical needs of urbanisation and support for the development of a sustainable housing policy. Recent work programs have involved the Urban Infrastructure Improvement Project (1999-2005) aimed at improving the urban environment in Thimphu and Phuentsholing through appropriate infrastructure development, and the TA for Housing Sector Reform (2002). TA for Strengthening Town Planning is proposed for 2006. A second Urban Infrastructure Project is also proposed for 2006 aimed at reducing urban poverty, improving community health and preventing environmental degradation in the selected project areas. The project will involve improving water supply, sanitation, solid waste management and roads for low-income communities. It will also ensure sustainability of urban investments by strengthening institutional capacities and financial revenues for key urban centres.

Environmental concerns are well integrated into the urban sector strategy. However, in view of the critical nature of Thimphu’s waste management problem a more focused intervention in waste management and promotion of private sector participation in urban services is recommended. Interventions could include identification a short term solution for alleviating Thimphu’s waste management problem, and formulation of a waste management strategy for Thimphu and the country as a whole, taking account of limited availability of land, rapid urbanisation, changing consumption patterns and viable options for private sector participation.

74 MWHS, DOR (2004)

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ADB’s strategy in human resources focuses on developing the country’s skill base to provide Bhutanese labour more productive job opportunities to enhance private sector development and stimulate economic growth. Currently, the strategy is being implemented through the Basic Skills Development Project (2001-2007). The main objective of the project is to improve the quality and relevance of the Technical Vocational Education and Training (TVET) system in Bhutan to provide employment oriented basic skills training to the large number of school graduates who currently cannot be absorbed into the workforce. In view of the shortage of trained staff in environmental management in the country integrating a focus on environmental skills training and development of environmental curricula into the strategy would seem logical. Environmental training could be geared to the needs of environmental implementation and enforcement such as training of site inspectors. Such a strategy could enhance the implementation of the environmental regulatory framework and have the spin-off of raising public environmental awareness.

Promotion of private sector development is a cross cutting issue for all ADB sectoral strategies and work programs. As such it provides the opportunity for raising public environmental awareness, bedding-in the environmental policy and regulatory framework within the private sector and enhancing environmental performance through improved service delivery. The opportunity to take advantage of private sector development as a means to integrate environmental considerations into all sectors should not be lost. The Bank’s planned assistance to prepare a comprehensive sector assessment for the promotion of small and medium enterprises (SME) will assist the Government formulate and implement policies for SME promotion.

8.3 Impact of Country Strategy and Program on Key Environmental Issues

Key environmental issues facing Bhutan include the need to preserve biodiversity, reduce land degradation, protect water resources and manage / mitigate the environmental effects of urbanisation and industrial development (air and water pollution, solid waste management, loss of agricultural land). Strategies to address these issues in the Bhutanese context should be guided by the concept of Gross National Happiness which emphasises balancing economic development with environmental protection and cultural preservation.

The impact of ADB’s country strategy on the key environmental issues is assessed below alongside assessment of the degree to which the strategy contributes to gross national happiness. Thus the assessment identifies and discusses links between environmental variables and the objectives in the sectors where ADB provides support.

In providing support for strengthening EIA capabilities and preparation of sectoral environmental guidelines, codes of practice and environmental standards, ADB has facilitated the establishment of a sound environmental assessment process for development activities across all sectors. Such a framework is fundamental to ensuring environmental considerations are integrated into all development initiatives and that there is a consistent approach in all sectors.

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ADB’s focus on road development recognises the priority demand and necessity of rural access and communications as the key factor for inducing economic development at the national level and poverty reduction at the local level particularly through providing access to markets. Whilst the potential environmental impacts of road construction in Bhutan are significant (land degradation, loss of biodiversity) the impacts can be mitigated to acceptable levels through implementation and enforcement of the environmental regulatory framework that is now in place. Implementation of environmental mitigation measures opens up the possibility of enhanced economic benefits.

For example, land degradation can be avoided by careful planning based on land use mapping and thorough geotechnical investigations so that unstable slopes, areas of high biodiversity and valuable agricultural land are avoided. These considerations may add to the length of the road and increase the costs of the road but a longer-term benefit to the environment and economy would be realised. The avoidance of agricultural land conversion particularly when considered cumulatively over many kilometres of road would be beneficial to agricultural development. Thus, the economic benefits of the road are enhanced through increased access to markets and potential increased agricultural production as new technologies are applied to the agricultural land that was not disturbed.

The proposed integrated rural development project also provides opportunities for increased environmental benefits. For example a component promoting the use of LPG stoves in rural areas would fit well in such a project, This would have a complimentary effect to rural electrification expansion in that use of LPG stoves would reduce the pressure on fuel wood and deforestation and facilitate improved health. Given that 100% rural electrification will take time, promotion of LPG stoves offers an opportunity to speed up the reduction in dependency on fuel wood in the near term.

ADB’s support for rural electrification has significant benefit to the key environmental issues. Rural electrification reduces the need for fuel wood thereby reducing deforestation, which in turn reduces land degradation and protects watersheds. The protection of watersheds is vital for the sustainable development of hydropower, which is the engine room of Bhutan’s sustainable development strategy. The potential environmental impacts of transmission lines can be mitigated through implementation of the EIA process including Environmental Codes of Practice. Additional environmental / socio-economic benefits of rural electrification include a reduction in respiratory disease due to smoke inhalation, opportunities for the development of agribusinesses which in turn reduces poverty, improves rural educational opportunities through lighting and access to media, and provides the opportunity for improved health care facilities.

ADB’s strategy for the urban sector directly addresses some of the key environmental problems related to rapid urbanisation. It focuses on improved urban planning and appropriate infrastructure development with the overall objectives of reducing urban poverty, improving community health and preventing environmental degradation through improvements to water supply, sanitation, solid waste management and roads. The strategy is also aimed at ensuring the sustainability of urban investments by strengthening institutional capacities.

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ADB’s strategy to develop the country’s basic skill base and facilitate the development of SME as a means to absorb the increased number of educated young people has the potential downstream benefit of reducing urban migration to the main centres. By promoting the establishment of small businesses in the district towns the need to move to the main centres for employment could be alleviated. Any efforts to reduce the high rate of population growth in the main centres will alleviate the pressures on existing urban infrastructure in the main centres.

Promotion of SME development can be linked to specialised skills training programmes further linked to promotion of private sector participation in urban services. For example, business skills could be taught in combination with technical service skills such as infrastructure maintenance (plumbing, pipework, etc), waste handling, landfill management, etc, to take advantage of potential new opportunities created for private sector involvement in urban service provision. The resulting benefits would be improved urban service provision, increased private sector activity, technical and entrepreneurial skills development, reduction in unemployment and government agencies able to focus more on policy planning and regulation activities.

ADB’s strategy for skills training could include developing appropriate curricula and training courses aimed at building capacity in environmental management. This would assist in filling the demand for trained personnel able to undertake environmental implementation and compliance activities. The lack of resources for implementation and enforcement of the environmental regulatory framework is a key constraint to Bhutan’s environmental sustainability within the context of rapid development. Bhutan’s sustainable development depends on ensuring environmental preservation through rigorous enforcement of environmental compliance. For example, Bhutan’s fragile terrain is highly vulnerable to land degradation and its economic development is dependant on hydropower, which in turn is dependant on well-preserved watersheds. The rapid development of road infrastructure puts pressure on these fragile linkages through triggering direct and indirect land degradation if impacts are not effectively mitigated.

Thus, ADB’s strategy of skills training has the potential for significant environmental and economic benefits for the country. Relevant training courses could focus on awareness raising of Bhutan’s key environmental issues including causes and impacts, practical environmental mitigation measures, Bhutan’s environmental regulatory framework, preparation of basic EIAs and environmental management plans, environmental monitoring and audit, environmental site inspection procedures and preparation and implementation of event action plans for non compliance. Courses could be geared for the needs of contractors as well as for the needs of implementing agencies. In the case of contractors, basic awareness raising of environmental friendly practices along with awareness raising of the regulatory framework and process would be beneficial.

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9.0 Recommendations

The assessment of ADB’s current sectoral strategies for Bhutan has shown that they are consistent with and contributing to the concept of Gross National Happiness. Environmental considerations are integral to ADBs current strategy but there are opportunities for these to be enhanced in the light of Bhutan’s current needs in the environment sector. ADB’s strategy can be easily adapted to meet the needs.

The most pressing need is for capacity building to facilitate implementation of the environmental regulatory framework. The lack of resources has been expressed strongly by the NEC and also through lessons learned from other donors.

In light of the CEA the following environmental strategies are recommended for ADB’ operations in Bhutan:

Short-term Initiatives

· Provide TA to support NEC in strengthening environmental management capacity in the line ministries and within the Dzongkhag Environment Committees. The focus of the assistance should be on establishing standard procedures for environmental site supervision, monitoring, audit and reporting procedures, preparation of environmental checklists and event action plans, establish procedures for dealing with non compliance and public complaints;

· Advisory technical assistance to provide a short-term solution to Thimphu’s waste management problem;

· Support for the establishment of a national laboratory with capability to undertake routine chemical analyses of environmental parameters for air quality, water quality and sediment quality to strengthen capability for environmental monitoring and enforcement; and

· Provide capacity building support to the judiciary on environmental law with a view to strengthening enforcement of environmental regulations .

Medium-term Initiatives

· Continued support for the urban sector focusing particularly on: § the promotion of private sector involvement in urban service provision; and § technical assistance to prepare a waste management strategy for Thimphu that explores viable options for private sector participation. This should be undertaken in co-ordination with Danida’s Environment and Urban Sector Program which is currently focused on the district towns. The thrust of the approach would be to develop a countrywide waste management strategy.

· include a component focusing on the promotion of LPG stoves for rural households in the proposed integrated rural development project; and

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· It is recommended that the proposed small and medium enterprise (SME) promotion project supporting private sector development have a component that focuses on the development of environmental services enterprises (eg. drain and pipe maintenance, waste handling services). This should be linked to the basic skills promotion program.

Longer–term Initiatives

· Expansion of ADB’s current support for human resources development to include specific training in environmental management. It is recommended that ADB considers funding for formal training institutions to establish environmental studies programs and curricula. This would also include providing short courses for people in relevant occupations (eg training for site inspectors, contractors, etc.);

· Continued support for the road sector as a means of facilitating economic development at the national level, improving rural livelihoods at the local level and taking advantage of opportunities to prevent land degradation and support agricultural development through incorporation of environmental considerations throughout the project cycle;

· Continued support for rural electrification expansion promoting appropriate off-grid and renewable energy technologies where grid connection is uneconomic. This supports the RGOB’s goal of 100 % electrification by 2020 and supports measures to reduce deforestation and improve rural livelihoods; and

· Support for the establishment of a bio-prospecting research programme in partnership with other donors or the private sector. This could be done as part of a wider initiative to establish a biotechnology education and research program within an appropriate tertiary educational institution.

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1.0 References and Bibliography

Asian Development Bank, 2004, Country Strategy and Program Updates Bhutan 2000-2006. Bhutan Water Partnership, Royal Government of Bhutan, Bhutan Water Policy, Thimphu, December 2003 Bhutan Water Partnership, Royal Government of Bhutan, Draft Bhutan Water Act (Revision 1), June 2002 Chencho Norbu et al 2003 Types of Land Degradation in Bhutan: Journal of Bhutan Studies Vol 8. The Centre for Bhutan Studies, Thimphu Chhenpo, Nima Sangye, 2003, A Glimpse of Bhutanese Culture, [no publication details] Department of Energy 2004 Water Resources Management Plan and Update of the Power System Master Plan, Bhutan – Final PSMP Update: Ministry of Energy, Royal Government of Bhutan Department of Planning, Ministry of Finance, Royal Government of Bhutan, 2004, Poverty Reduction Strategy Paper – A Cover Note to the Ninth Plan Main Document Department of Health, Public Health Engineering Section / UNICEF 2001 Report of Arsenic Detection Test, Phase 1 & 2 Department of Urban Development and Hous ing 2002 Human Settlements Sector Plan Ninth Five Year Plan: RGOB Hummel, John & Nadik, Thuji, 2004, Sustainable Tourism Development in Bhutan: An Overview of Tourism Development in the Last Ten Years, Department of Tourism [Draft, May 12, 2004] Jamtsho,K 2004 Payment for Environmental Services, A Concept Paper: Ministry of Agriculture Bhutan Joshi, Yateendra & Eashwar, KP (eds), 2001, State of the Environment, Bhutan, 2001, United Nations Environment Programme, Regional Resource Centre for Asia and the Pac ific, Thailand Ministry of Agriculture, 1997, Atlas of Bhutan, 1:250,000, Land Cover and Area Statistics of 20 Dzongkhags, Land Use Planning Project, Bhutan Ministry of Agriculture, 2002, Renewable Natural Resources Statistics 2000, Volume I. Ministry of Agriculture, 2002, Biodiversity Action Plan for Bhutan 2002, Keen Publishing (Thailand) Co, Ltd Ministry of Agriculture, 2002, Renewable Natural Resources Sub Sector Plan, Ninth Five Year Plan (2002- 2007), May 1, 2002. Ministry of Agriculture, Department of Forestry Services, 2002, Forestry Sub Sector Plan, Ninth Five Year Plan (2002-2007), May 1, 2002. Ministry of Agriculture, Department of Forestry Services, 2003, Revised Forest and Nature Conservation Rules of Bhutan, 2003, Vol I. & II. Ministry of Agriculture, Department of Forestry Services, 2003, Vision and Strategy for the Nature Conservation Division 2003, Thimphu, 9th January 2003. Ministry of Agriculture, Forestry Services Division, 1993, Framework for Implementation of Decentralized Forestry Activities as per the Recent Policy Decision of the Royal Government of Bhutan on Decentralization, dated 27 December 1993 Ministry of Agriculture, Nature Conservation Division, 2004, Bhutan Biological Conservation Complex: Living in Harmony with the Nature), Thimphu, February 2004. Ministry of Agriculture, Policy and Planning Division, 2003, Facts and Figures of RNR Sector 2003, October 29, 2003

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Ministry of Works & Human Settlement, Department of Roads, and SNV, 2004, Road Sector Development and Environmental Friendly Roads in Bhutan: Providing Access to Rural Communities Whilst Protecting the Environment, SNV National Environment Commission Secretariat (NECS), 2003 EIMS Conceptual Framework and Development Strategy: National Environment Commission Secretariat (NECS), 2002, Ninth Five Year Environment Sector Plan (2002- 2007) National Environment Commission Secretariat (NECS), 2004, Brief Report on State of the Environment, Thimphu, May 2004 National Environment Commission Secretariat (NECS), 2004, Environmental Governance in Bhutan – National Case Study, United Nations University, Japan National Environment Commission, 1998, The Middle Path: National Environment Strategy for Bhutan National Environment Commission, 2002, Bhutan: The Road from Rio: National Assessment of Agenda 21 in Bhutan, Thimphu 2002 National Environment Commission, 2004, Environmental Discharge Standard, August 2004 National Statistical Bureau, Royal Government of Bhutan, 2003, National Accounts Statistics Report 2002 National Statistical Bureau, Royal Government of Bhutan, 2004, Bhutan at a Glance 2003 National Statistical Bureau, Royal Government of Bhutan, 2004, Poverty Analysis Report (Draft) National Statistical Bureau, Royal Government of Bhutan, 2004, Statistical Yearbook of Bhutan 2003, Catalogue No. 101, March 2004 Planning Commission Secretariat, 1999, Bhutan 2020: A Vision for Peace, Prosperity and Happiness Planning Commission Secretariat, 2002, Ninth Plan Main Document 2002-2007 Sustainable Development Secretariat, 2004, Annual Report for Programs under the Sustainable Development Agreement UNICEF 2002 Bhutan Water Supply and Sanitation Assessment Urban Sector Program Support Secretariat 2000 Solid Waste Management Plan for Thimphu City, Bhutan World Bank 2004 Draft Aide Memoire for the Rural Access Project (Cr 3309-BHU) IDA Mission June 2004:

Draft Country Environmental Analysis Revision 0 November 2004 Page 2 Appendix 1 - Terms of Reference for the Assignment

Draft Country Environmental Analysis Revision 0 November 2004

Appendix 1 - Terms of Reference for the Assignment

BHUTAN: COUNTRY ENVIRONMENTAL ANALYSIS TERMS OF REFERENCE FOR INTERNATIONAL ENVIRONMENT SPECIALIST

I. Background and Rationale

1. ADB is in the process of formulating Country Strategy and Program (CSP) for Bhutan and in this context, a country environmental analysis (CEA) needs to be prepared as an input to the CSP. The CEA outlines environmental issues that are most important to Bhutan’s development strategy and describes ADB’s role in helping remove the environmental constraints on the country’s sustainable development. In doing so, the CEA will outline possible alternatives for alleviating environmental constraints. The CEA also provides an environmental strategy for ADBs operations in Bhutan focusing at the policy, program and sector levels.

II. Objective

2. The objectives of the proposed CEA are to (i) identify and analyze the key environmental problems and opportunities that Bhutan is encountering and their underlying causes; (ii) review Government’s priority programs and investments in natural resources and environmental management and, (iii) recommend a strategy to integrate environmental considerations in Bhutan. The results of the study should serve as a core input to the ADB’s CSP in Bhutan.

III. Scope of the Study

3. In the preparation of the CEA, the consultant is expected to fully familiarize her/him self with ADB’s overall environment policy and guidelines [available online at [http://www.adb.org]. In addition, use should be made of various documents prepared to date concerning the state of environment and natural resources in Bhutan by the National Environment Commission of Bhutan and development partners. In addition to ADB, World Bank, UNDP and DANIDA have undertaken major activities. The Bhutan CEA should includes, but not be limited to, the following:

(i) Background Information:

a) Role of Environment and Natural Resources in Economy § Identify the role of environment and natural resources in the economy, and livelihoods and well being of the poor communalities; § Assess the sector share of GDP from natural resources and agriculture; § Identify opportunities for sustainable development through integration of environmental consideration in natural res ources sector;

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b) Key Environmental Issues Faced in Bhutan § Conduct a review of the key environment issues and opportunities in the country – The is a review of key environmental indicators, including qualitative and quantitative information at national and sub-national levels, in different geographic areas and key sectors [forestry and biodiversity, water, land and agriculture, industry and urban environment (including air quality issues), among others],

§ In the Bhutanese context, discuss the special relationship between environmental and cultural factors, and their interaction with tourism. Further, identify any transborder environmental issues.

§ Identify the underlying reasons causing the environmental problems including policy failures, institutional failures, and social and economic factors; § Identify the main impacts of the environmental problems, emphasizing impacts on livelihoods, health and vulnerability of poor communities, and global and regional concerns; § Ascertain the extent to which environment could contribute to economic growth and the gains to be made from environmental improvement in key sectors, (agriculture, forestry and water resources, energy, transportation, and urban development);

c) Regulatory and Institutional Framework

§ Describe and analyze Government’s responses to the key environmental problems, especially its regulatory framework (including environmental policies, laws, regulations and environmental standards, signed and ratified international conventions) and institutional setting (including the key government agencies responsible for environmental management, monitoring and enforcement, the role and functions of National Environment Commission, line ministries and other key government agencies, roles and functions of NGOs, private sector organizations, citizen groups);

§ Identify and assess the Government’s polices and strategies in the past and in the future in addressing the key environmental problems, including government’s strategies, available human resources on environmental management, and public expenditures allocated to environmental protection.

§ Identify and assess the performance of the environmental regulatory and institutional framework, including policy failures, institutional weaknesses, as well as social and economic factors; Review of the environmental standards, regulations, and assessment of appropriateness and effectiveness of regulatory environment

§ Examine the extent and nature of public consultation in decision making;

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§ Outline donors’ activities, including World Bank, UNDP, and selected bilateral organizations, such as DANIDA, amongst others; and discuss lessons learned from these activities (factors influencing success or failure should be covered);

(ii) Priorities for Actions:

a) Past Environmental Record

§ Briefly assess Bhutan’s record in dealing with difficult environmental issues and in complying with environmental conditions in projects financed by international financial institutions, based on the findings in the first part.

b) Environmental Information Needs

§ Identify data gaps that need to be filled for a better understanding of the country’s environmental issues, and identify additional indicators to be monitored so that trends in the main environmental problems can be assessed for the CEA.

c) Review of Country Strategy and Program

§ Examine ADB’s sectoral strategies and work programs and highlight a strategy to integrate environmental consideration into sector development projects;

§ Conduct an assessment of the impact of ADB’s country strategy and program on the key environmental issues facing Bhutan

§ Identify the links between environmental variables and the objectives in each key sector where ADB provides support, including possible win-win situations (e.g. reducing natural resources degradation problems to help achieve agricultural growth).

d) Recommendations

§ Recommend ADB’s overall environmental strategies for ADB operations in Bhutan including possible loan and technical assistance projects/programs.

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IV. Implementation Arrangements

4. A consultant (team leader) with expertise in environmental management and environment/natural resources will be recruited to assist in carrying out the CEA. A local consultant (team member) may be recruited to assist the lead consultant to prepare and finalize the CEA. As a wrap-up to the field part of

the assignment, a stakeholder consultation meeting would be held involving NGOs/CBOs, the Government, and other representatives, as appropriate.

5. The assignment will be for a 45-day period, on a lumpsum basis. The assignment will be on an intermittent basis, with approximately 15 days time spent in the field and the remainder at the home station. The assignment is expected to commence o/a October 2004

V. Reporting Requirements

6. A final draft CEA will be delivered within five weeks of start of the assignment; ADB’s comments on the final draft will be available to the consultant within 1 week. A final report revised based on the ADB’s comments (both in print and electronic form) should be provided at the end of the consultant’s assignment. The main report could be a maximum of 50 pages supported by annexes. The report should also include an executive summary, which will be included in the CSP document.

7. The international environment specialist will have overall technical responsibility for the quality of the report. He/she will liaise with and report progress to the ADB Project Officer ADB Head Quarters, and have primary responsibility for submitting the reports to ADB, as outlined above.

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Appendix 2 - List of People Met

Country Environmental Analysis Draft Revision 0 November 2004

Appendix 2 - List of People Met

List of People Met

Name Agency Title Date Lepo Department of aid and Debt Chief Program Officer 6 Oct management Tshewang Norbu Department of Aid and Debt Deputy Chief Program 6 Oct Management Officer Dechen Wanudu National Statistics Bureau, 6 Oct National accounts Unit Cheku Dorji National Statistics Bureau, 6 Oct Co-ordination & Information Division Dechen Tsering National Environment Head of Policy Co- 7 Oct Commission ordination Division Karma Lodey Rapten National Environment Technical Division 6 Oct Commission Karma Tshering Nature Conservation Head of Protected Area 7 Oct Division, Department of Planning and ICDP Forests, Ministry of Agriculture Sangay Ministry of Agriculture Senior Forest 7 Oct Policy & Planning Division Economist Sonam P Wangdi Ministry of Trade and Deputy Secretary 7 Oct Industry Cencho Norbu National Soil Services Program Director 8 Oct Centre Ministry of Agriculture Karma Tsering Planning and Co-ordination Executive Engineer 8 Oct Division Department of Energy Ministry of Trade and Industry Sonam Ranchen Planning and Policy Director 11 Oct Division Ministry of Works and Human Settlement Bachu Phub Dorji Planning and Policy Deputy Director 11 Oct Division Ministry of Works and Human Settlement Chukey Wangchuk Bhutan Trust Fund for Program Officer 11 Oct Environmental Conservation

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Name Agency Title Date Nim Dorji Sustainable Development Director 11 Oct Commission Lhan Dorji Centre for Bhutan Studies Research Officer 11 Oct Tek B Chetri DANIDA Programme Officer 12 Oct Kinzang Norbu Department of Urban Head of Urban 12 Oct Development and Infrastructure Division Engineering Services, Ministry of Works and Human Settlement Chadho Tenzin WWF Conservation Program 12 Oct Director Tsering Tashi NECS Head of Technical 12 Oct Division Kezang Jamtsho PPD Ministry of Agriculture Head Policy and Legal 12 Oct Section Tshering Lham RSPN Program & 13 Oct Development Officer Kencho Wangdi SNV Program Services 13 Oct Officer Reindert Augustijin SNV Road Maintenance 13 Oct Specialist Thuji Nadik Department of Tourism Joint Director 13 Oct Ministry or Trade and Industry Seeta Giri UNDP Environmental 13 Oct Specialist Jigme Tobgyal UNDP Environment Associate 13 Oct Lhaden Pema Ministry of Works and Project Manager Urban 14 Oct Human Settlement Development Project D.K. Pradhan Dzongkag Administration, Project Manager, Bajo 15 Oct Wangdue New Town Aku Dorji Dzongkag Administration, District Engineer 16 Oct Punakha Phuntsho Wangdi Thimphu City Corporation Mayor (Thrompon) 19 Oct Mahesh Pradhan Thimphu City Corporation Executive Engineer 19 Oct Engineering Divison Chengay Pengore Thimphu City Corporation Assistant Engineer 19 Oct Environmental Division

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Appendix 3 - Stakeholder Consultation Presentation Including List of Invitees and Attendees

Draft Country Environmental Analysis Revision 0 November 2004 BHUTAN – Country Environmental Analysis

Stakeholder Consultation Thimphu 9:30-11:30 Monday 18 October 2004 Programme

• Introductions

• Purpose of Stakeholder Consultation

• Background and Rationale of CEA

• Objectives of Bhutan CEA

• Discussion of Key Environmental Constraints & Opportunities For Sustainable Development in Bhutan Purpose of Stakeholder Consultation

• Explain the background and rationale of CEA in context of ADB policy & operations • Outline objectives of the CEA • Facilitate discussion on key environmental constraints and opportunities Background and Rationale of CEA

• ADB formulating Country Strategy and Program (CSP) for 2005 – 2009 • CSP – Defines ADB’s medium term development strategy as agreed with RGOB – Identifies and describes ADB’s role as well as RGOB’s development priorities – Anchored on strong poverty, economic, social, environmental and sector analysis – Determines ADB’s country specific poverty reduction strategy, thematic and sector priorities Background and Rationale (contd)

• CEA is a Core Input to ADB CSP – outlines environmental issues most important to Bhutan’s development strategy – describes ADB’s role in helping to remove environmental constraints on Bhutan’s sustainable development – outlines possible alternatives for alleviating environmental constraints – provides an environmental strategy for ADB’s operations in Bhutan focusing at policy, programme and sector levels Bhutan CEA Objectives

• Identify and analyse key environmental problems and opportunities in Bhutan and underlying causes • Review RGOB priority programs and investments in natural resources and environmental management • Recommend strategy to integrate environmental considerations in Bhutan Discussion of Key Environmental Issues in Bhutan Land Degradation

Threat to agricultural self sufficiency policy Types: – Land use changes – Physical loss of soil – Loss of soil fertility Underlying causes: – Urbanisation – Deforestation – Overgrazing – Intensive use of land/fertilisers etc – Infrastructure - roads, hydropower, transmission lines, mines and industry Loss of Rich Biodiversity Main threats • Land conversion - deforestation • Over exploitation – habitat destruction • Competition/replacement by domestic species • Infrastructure activities – roads, hydropower, industries mining etc

Local Threats • human/wildlife conflicts, forest fires, illegal logging overgrazing, unsustainable cropping practices etc.

Institutional Threats • Conflicting policies, weak law enforcement etc Pollution Related to Urban Development

• Air pollution • Water pollution • Solid waste • Pressure on urban infrastructure (quality of life) • Underlying causes • Rural-urban migration - high population growth rate Industrial Development

• Polluting air emissions • Polluting water emissions • Solid waste including hazardous waste Water Resources Conflicts

• Hydropower • Agriculture/irrigation • Industrial uses • Potable water supply

Appendix 3 – Stakeholder Consultation Presentation Including List of Invitees and Attendees

List of Invitees and Attendees at Stakeholders Consultation

Name Agency Title INVITEES Dechen Tsering National Environment Commission Head of Policy Co-ordination Division National Environment Commission Head of Technical Division Kezang Jamtsho PPD Ministry of Agriculture Head Policy and Legal Section Cencho Norbu National Soil Services Centre Program Director Ministry of Agriculture Karma Tsering Planning and Co-ordination Division Executive Engineer Department of Energy Ministry of Trade and Industry Sonam P Wangdi Ministry of Trade and Industry Deputy Secretary Department of Roads / PPD Kinzang Norbu Department of Urban Development Head of Urban Infrastructure Division and Engineering Services, Ministry of Works and Human Settlement Nim Dorji Sustainable Development Secretariat Director Commission Tobgyel Namgyel BTFEC Director Tshering Lham RSPN Program & Development Officer Chadho Tenzin WWF Conservation Program Director ATTENDEES Kezang Jamtsho PPD Ministry of Agriculture Head Policy and Legal Section Ichharam Ministry of Works and Human Head, UISD Settlement Chhewnukpa DOR, Ministry of Works and Human Assistant P Manager Settlement Karma Dama NSSC, MOA Research Officer Tsering Tashi NECS Joint Division, Head of Technical Division Chadho Tenzin WWF Conservation Program Director Dechen Tsering National Environment Commission Head of Policy Co-ordination Division Kunzang Xanter OCS Local Consultant

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Appendix 4 - Examples of Payment for Environmental Services

Draft Country Environmental Analysis Revision 0 November 2004

Appendix 4 - Examples of Payment for Environmental Services

Examples of Payment for Environmental Services

In Australia, irrigators finance upstream reforestation. It is done to solve the problem of salinity due to deforestation. In Murray-Darling watershed, the State Forest of New South Wales (SF) has entered into a Pilot Salinity Control Trade Agreement with the Macquarie River Food and Fibre (MRFF), an association of 600 farmers. The irrigators, pay US $ 42 per ha of reforested land per year for 10 years to SF, purchasing transpiration or salinity reduction credits which were earned before by SF through reforestation of 100 ha of land. The revenue generated is used by SF to replant more trees on public and private land. Private landowners received an annuity but the forestry rights remain with SF.

In Columbia, irrigators pay upstream landowners for improvements of stream flow. In the extremely fertile Cauca River Basin, water scarcity in summer and floods in the rainy season became twin problems. Further, rapid urban, industrial and agricultural development resulted in sedimentation of irrigation channels. In order to solve these problems, farmers organized themselves into more than 12 water users associations in different sub-watersheds and decided to pay upstream forest landowners for the management for their forests. The third participant in the scheme is the Cauca Valley Corporation (CVC), the regional environmental authority responsible for water allocation and the protection of resources. The farmers make voluntary payments to CVC, an additional water use fee of US $ 1.5-2/litre on top of an already existing water access of US $ 0.5/litre. CVC awards contracts to upstream forest landowners for reforestation, erosion control, spring and stream protection works according to sub-watershed management plans. Further, the final is used for land acquisition and economic development in upland communities.

In Costa Rica, hydroelectric companies pay upstream landowners via National Forest Office and National Fund for Forest Financing (FIONAFIFO). From 1050 – 1983, Costa Rica’s forests were reduced to 49% due to clearing for coffee, banana and sugar plantations. The remaining forests were mostly in protected areas. In 1996, a new forestry law was approved to encourage conversation through PES provided by forests. Landowners who protect their forests receive US $ 45/ha/year, those who sustainably manage their forests receive US $ 70/ha/year and those who reforest their land receive US $ 116/ha/year. For the second and third cases, management plan shave to be made by professional foresters. Besides the public agency FONAFIFO, which serves as a mediator between the contracting parties, there are two other partners in the voluntary PES program. These are public or private hydroelectric companies who pay for the services and upstream landowners who provide them. FONAFIFO serves as a mediator between contracting parties and provides an institutional and standardized framework for compensation payments. The hydroelectric companies pay to FONAFIFO. Hydroelectric Platanar pays US $ 30/ha/year to which FONAFIFO adds a certain amount. The National Power and Light Company pays US $ 45/ha/year to FONAFIFO for forests management, conservation, or reforestation project as well as the promotion and follow up of such projects in its watershed.

Source: MOA / PPD Thimphu

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Appendix 5 - List of Protected Areas and Biological Corridors and Their Areas

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Appendix 5 - List of Protected Areas and Biological Corridors and Their Areas

List of Protected Areas and Biological Corridors and their Area

Protected Area / Biological Dzongkhags covered Area Corridor (km2) Bumdeling Wildlife Sanctuary Lhuentse, Mongar and Trashi 1,487 (BWS) Yangtse Jigme Dorji National Park (JDNP) Gasa, Paro, Punakha and 4,349 Thimphu Jigme Singye Wangchuck Trongsa, Tsirang, 1,723 National Park (JSWNP) Wangduephodrang and Zhemgang Khaling Wildlife Sanctuary (KWS) Samdrup Jongkhar 273 Phipsoa Wildlife Sanctuary Sarpang 278 (PWS) Royal Manas National Park Samdrup Jongkhar, Sarpang 1,023 (RMNP) and Zhemgang Sakten Wildlife Sanctuary (SWS) Trashigang 650 Thrumshingla National Park Bumthang, Mongar, Lhuentse 768 and Zhemgang Torsa Strict Nature Reserve Haa and Samtse 644 (TSNR) TSNR - JDNP Corridor Haa and Paro 149 JDNP - JSWNP Corridor Thimphu and 275 Wangduephodrang JSWNP - JDNP Corridor Wangduephodrang 601 JSWNP – North Corridor Trongsa and 549 Wangduephodrang North Corridor Bumthang, Lhuentse, Trongsa 663 and Wangduephodrang TNP - North Corridor Bumthang and Lhuentse 142 BWS - North Corridor Lhuentse 119 TNP - BWS Corridor Lhuentse and Mongar 79 JSWNP - TNP Corridor Trongsa and Zhemgang 385 KWS - SWS Corridor Samdrup Jongkhar and 160 Trashigang PWS - RMNP Corridor Sarpang and Tsirang 376 RMNP - KWS Corridor Samdrup Jongkhar and 212 Sarpang TNP - RMNP

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Source: (a) The areas of Bumdeling Wildlife Sanctuary, Jigme Dorji National Park, Jigme Singye Wangchuck National Park, Royal Manas National Park and Thrumshingla National Park have been obtained from their respective conservation management plans. (b) The areas of rest of the protected areas are as per the revised notification of protected areas issued by the Ministry of Agriculture in 1993. (c) The areas of the biological corridors are as per the NCD/WWF biological corridors survey report of 1999. Note: The areas of the protected areas do not include buffer zones.

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Appendix 6 - Characteristic Flora and Fauna of Bhutan’s Ecological Sub-Zones

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Appendix 6 - Characteristic Flora and Fauna of Bhutan’s Ecological Sub-Zones

Zones Altitude (m) Precipitation Characteristic Flora Characteristic Fauna (cm per year) Dry 4,000-4,600 Ephedra gerardiana, Mammals: Marmot, Snow leopard, Alpine Meconopsis simplicifolia, Blue sheep, Pika, Red fox, Musk Scrub Chesneya nubigena, deer. Picrorhiza scrophularifolia, Birds: Tibetan snow cock, Snow Tanacetum gossypinum, partridge, Grandala, Lammergeier, Saussurea gossypiphora, Himalayan monal pheasant, Rheum nobile. Himalayan griffon, Alpine accentor, Oriental skylark, Blood pheasant. Juniper / 3,700-4,200 Juniperus recurve, J. Mammals: Wild dog, Barking deer, Rhodo- squamate, Rhododendron Serow, Musk deer, Takin. dendron lepidotum, Morina Birds: White-browed rose finch, Scrub nepalensis, Thalictrum Snow pigeon, White-browed bush chelidonii, Pedicularis robin, Golden bush robin, Blood megalantha pheasant, Fire-tailed sunbird. Fir Forest 3,100-3,300 130 or more Abies densa, Juniperus Mammals: Musk deer, leopard, (-3,800) pseudosabina, Skimmia Yellow-throated martin. Birds: laureola, Viburnum Rufous-vented tit, Grey -crested tit, nervous, Rheum organe-flanked bush robin, long- acuminatum, Maddenia tailed thrush, White-browned himalaica fulvetta, Eurasian tree creeper. Hemlock 2,800 - 130-200 Tsuga Dumosa, larix Mammals: Sambhar, Serow, Black Forest 3,100 (- griffithiana, Gaulteria Bear, Barking deer. 3,300) fragrantissima, Panax Birds: Black-throated tit, Black- pseudo-ginseng, Dophne throated fulvetta, green-tailed bholua, Arundinaria sunbird, Rusty-flanked tree creeper, griffithiana. lesser cuckoo. Spruce (2,500-) 50-100 Picea Brachytyla, Rosa Mammals: Sambhar, Forest 2,700-3,100 macrophylla, Taxus Birds: .Black-throated tit, Rusty- (-3,200) baccata, Picea spinulosa, flanked tree creeper, Black-throated Acer cappadocicum, Larix fulvetta. griffithiana, Hydrangea sp. Blue Pine 2,100-3,00 70-120 Pinus wallichiana, Berberis Mammals: Leopard, Sambhar, and Forest (-3,100) asiatica, Cotoneaster Goral. Birds: Green-backed tit, griffithii, Lyonia ovalifolia, Yellow-billed Blue magpie, Grey- Rhododendron arboretum, backed shrike, Red-billed cough, Arisaema consanguineum. Common kestrel, Collared backbird, White-throated laughing thrush.

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Zones Altitude (m) Precipitation Characteristic Flora Characteristic Fauna (cm per year) Evergreen 1,800-2,000 200-300 Acer campbelli, Mammals: Tiger, leopard, Barking / Oak (-2,600) Castanopsis, hystric, C. deer, Sambhar, Wild dog. Forest tribuloides, Elatastema Birds: Kaleej’s pheasant, leaf hookerianum, Quercus warbler, Grey-winged black bird, lamellosa, Skimmia Green-backed tit, Chestnut - arborescens breasted partridge, wood snipe. Cool 2,000-2,900 250-500 Acer Campbell, Betula Mammals: Leopard, Black bear, Broadleaf alnoides, Exbuclandia Barking deer, Red panda. Birds: Forest populnea, Lindera White-throated laughing thrush, pulcherrima, Persea Refuous-necked hornbill, Chestnut - clarkeana, Symplocos crowned laughing thrush, Snowy - dryphila browed fly catcher, Mountain hawk eagle, Tawny owl, Ward’s trogon, Pygmy wren babbler, Great babbler. Chir Pine 900-1,800 100-130 Pinus roxburghii, Cycas Mammals: Goral, Yellow-throated Forest (-2,000) pectinata, Cymbopogon martin, Barking deer. Birds: Black flexousus, Euphorbia bulbul, Mountain bulbul, grey-tree royleana, Woodfordia pie, Rufous woodpecker, Red- fructicosa, Grewia sapida, vented bulbul, Bar-winged Buddleja Bhutanica, flycatcher shrike, Saphire Rhododendron arboretum. flycatcher, Himalayan bulbul. Warm 1,000-2,000 230-400 Altingio Excelsa, Bischofia Mammals: Red panda, Barking Broadleaf (-2,300) javanica, Castanopsis deer, Sambhar, Tiger, Capped Forest indica, Engelhardia langur, Serow, leopard. Birds: spicata, Macaranga Rufous-necked hornbill, Palla’s fish postulate, Schima eagle, Great hornbill, Wreathed hornbill, Common lora, White- breasted kingfisher, oriental turtle dove, leaf warbler, Hodgson’s hawk cuckoo, Chestnut-breasted partridges. Sub- 200-1,000 (- 250-500 Acrocarpus fraxinifolius, Mammals: Golden langur, Capped tropical 1,200) Ailanthus grandis, Bombax langur, Pygmy hog, Marbled cat, Forest ceiba, Duabanga Asiatic golden cat, Fishing cat, grandiflora, Shorea Tiger, Elephant, Clouded leopard. robusta, Pterospermum Birds: Largebilled crow, Blue acerifolium, Aquilaria whistling thrush, Pin-tailed green

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Zones Altitude (m) Precipitation Characteristic Flora Characteristic Fauna (cm per year) agaloocha, Gmelina pigeon, Orange-breasted green arborea, Terminalia sp., pigeon, Spotted dove, Great Michelia champaca, coucal, Rose-ringed parakeet, Acacia catechu, Chukrasia Asian emerald cuckoo, Blue- tabularis, Toona ciliata, bearded bee eater, Blue-bearded Lagestroemia sp., Phoebe barbet, Large hawk cuckoo, sp., Artocarpur sp. Rufous-necked hornbill, Pallas’s fish eagle. Note: some species are subject to change Source: NCD< Flora of Bhutan, Vols. I, II and III.

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Appendix 7 - List of Totally Protected Species in Bhutan

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Appendix 7 - List of Totally Protected Species in Bhutan

List of Totally Protected Species

Common Name Scientific Name Birds 1. Black-necked crane Grus Nigrocollis 2. Monal pheasant Lophophrus impejenus 3. Peacock pheasant Polyplectron Bicalcaratum 4. Raven Corvus corax 5. Rufuos-necked hornbill Aceros nipalensis Fish 1. Golden mahseer Tor tor Mammals 1. Asian elephant Elephas maximus 2. Clouded leopard Neofelis nebulosa 3. Gaur Bos gaurus 4. Golden langur Trachpithecus geei 5. Himalayan black bear Selenarctos thibetanus 6. Leopard Panthera pardus 7. Leopard cat Felis bengalensis 8. Musk deer Moschus chrysogaster 9. Pangolin Manis crassicaudata 10. Pigmy hog Sus sylvanicus 11. Red panda Ailurus fulgens 12. Serow Capricornis sumatraensis 13. Snow leopard Uncia uncia 14. Spotted deer Axis axis 15. Takin Budorcas taxicolor 16. Tiger Panthera tigris 17. Wild buffalo Bubalus bubalis Plants 1. Blue poppy Meconopsis grandis 2. Chinese caterpillar fungus Cordyceps sinensis 3. Eagle wood / Indian aloe Aquilaria malaccensis wood 4. Gentiana Gentiana crassuloides 5. Ginseng Panax pseudo-ginseng 6. Himalayan Yew Taxus baccata 7. Snow down lily Lloydia yunnanensis Source: Forest and Nature Conversation Act 1995 Note: Scientific names of golden langur and snow leopard have been updated as per new information

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Appendix 8 - Drinking Water Quality of Samples Water Supply Schemes in Bhutan

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Appendix 8 - Drinking Water Quality of Samples Water Supply Schemes in Bhutan

Box 4.1 WHO Classification of Bacteriogical Water Quality Thermotolerant Coliform per 100ml Risk Classification CFU/100ml 0 In accordance with WHO guidelines 1-10 Low risk 10-100 Intermediate risk 100-1000 High risk >1000 Very high risk

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Appendix 9 - Summary Results of NEC Environmental Data Availability Survey 2003

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Appendix 9 - Summary Results of NEC Environmental Data Availability Survey 2003

Organization Data type start date Description/method Software used Data need Reports type NECS Ambient Air sampling is done Excel & Word Meteorology NECS data used for establishing Quality & using high volume data baseline data Industrial sampler ( HVS) Emission Vehicle emission point survey by Excel & Word NECS Vehicle standard and monitoring equipment the registration PPD MOA- Land use & land 1994 land use/cover arcinfo, arcview,erdas metrology, planners, land use data GIS cover through satellite imagine hydrology, consultants, images, topography, solid was te projects drainage, disposal, air settlements, pollution boundaries, roads, statistics, vehicular compression RNR census data 2000 Census data through ms access sample design & structured questionarries Industry Environmental 2002 information on new excel from NEC MTI number of EC issued/processed clearance of and existing industrial on EC projects projects related PPD MTI Emission from 2003 air, mg/m3 excel Ambient industries ormg/Nm3 condition waste water water, mg/L excel plans to usew for monitoring data sheets discharge from EC industries and mines Workers Noise, vibration excel exposure to adverse environmental conditions

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Organization Data type start date Description/method Software used Data need Reports type City Thimphu Solid waste 2002 Quality of waste manual type & NA NA collected quality of waste being generated urban household 1999 rural-urban migration, excel wood govt. private, Population ration of male/female, survey employment statistics consumption donors No of students, etc , traffic related issues DGM geoscience, 1980 collection from field GMIS yes NA NA minerals, mines staffs & from existing mines

RSTA total vehicle 1994 excel analyzed RSTA/NEC registered data from NEC emission test DUDH population water source, manual manual population, Ministry, Donors Annual reports, progress reports sanitation water supply and sanitation coverage in rural areas DRC Import & Export 1980 Daily customs returns BACS Govt. private, statistical reports data are collected from international non-computerized organizations checkposts and import and export declaration from computerized checkpost

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Organization Data type start date Description/method Software used Data need Reports type DOR Road network na road names, excel no DOR, projects, agencywise information on information categories, agencies, donors roads,dzongkhawise information road length through on roads, categorywise correspondence with information on roads field divisions initial environment 2001 data pertains to no flora & funa, NECS, NASQC completed checklist examination ( existing air & water IEE) environmental quality, conditions & potential geological & impacts of the road hydrological projects on data environment, data collected using check list Road Survey & na existing topography, geocomp geological DOR, projects, Road design details/drawings, design data geological, data, donors earth work quantities hydrology, existing hydrological structures along the data road corridor NPPC Pesticides 1970's Pesticides quantity excel pesticides NPCC/DoA/MoA Simple pesticides status report procurement & received from contaminatio use/distribution dzongkhags n of air & water/soil CSO official statistics 1980 secondary data from spss, access, imps environment govt. donors, statistical year book for all administrative al stock, researchers development records, and primary emmisions, sectors, specific data collection industrial survey reports through sample pollution surveys/census DOE metrology/ 1980 maximum & minimum excel and hydata maybe govt, private annual data book climatology data temperature, humidity, rainfall, sunshine,wind speed, evaporation

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Organization Data type start date Description/method Software used Data need Reports type river flow data 1983 river flow data, hydata no users annual data book current meter measurement, float method NBC Inventory of plant 1998 passport data, access, pendora biodiversity policy makers, user friendly reports for project genetic resources inventory, related project managers formulation characterization & evaluation NSSC Soil, Landuse & 1993 Computer compatible access, excel, VB Climatic clients, RNR-RC, Technical reports & maps solid fertility field cards data planners CORE Weather data 1988 Through met. Station Climatic MOA daily weather forecast located at various data locations, manually NCD Related to 1985 Filed visit, point access & excel EIA, from WWF, NCD Ad-hoc reports protected area sampling power, including roads, biodiversity-flora surveys &funa DEL Labour Force 1998 Economically active Access & Excel No DEL, Ministry As desired Survey,Health & population, total Saftey population by level of education RSPN Water Pollution 2001 Through nature club No No Advocacy, NA data students under water information pollution project dissemination to students, researchers, conservation agencies

Avifauna data 2000 RSPN Ornithologist spss, access, imps No students, carries out bird researchers, bird surveys enthusiasts

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Organization Data type start date Description/method Software used Data need Reports type Annual Black 1987 Field study done NO No do Necked Crane once a year with the Counts assistance to crane researcher from international crane foundation Nature Club 2000 All nature clubs No No do regular reports from nature clubs Networks in the affiliated to RSPN country FIMS, Forest FMU areas, cushion areas, working circles, forest inventory Non-wood forest products Through collection of utilization quarterly progress MOA, Terminal report, annual report, excel, word EIA issues Social forestry reports and through Department mid-term report activities like adhoc means community forestry, private forestry, forest fire prevention, support to decentralization

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Organization Data type start date Description/method Software used Data need Reports type Nature conservation related information like protected areas, parks, biological corridors, funa & floral abundance , tiger compensation, wild baor crop damage Forest utilization Forest protection

Source: Environmental Information Management System Conceptual Framework and Development Strategy National Environmental Commission Secretariat

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Appendix 10 - Preliminary List o Environmental Indicators Proposed for Inclusion in Environmental Information Management System

Draft Country Environmental Analysis Revision 0 November 2004

Appendix 10 - Preliminary List of Environmental Indicators Proposed for Inclusion in Environmental Information Management System

Preliminary List of Environmental Indicators Proposed for Inclusion in Environmental Information Management System

The information below has bee reproduced from NECS (2003) EIMS Conceptual Framework and Development Strategy: RGOB Thimphu

1. Land degradation. Main environmental issues are deforestation, soil erosion, land slides, loss of nutrients and more broadly the sustainable utilisation of Renewable Natural Resources in Bhutan. Pressures include the intensification of agriculture in response to the demand for increased self-sufficiency in food production, use of shift cultivation, logging and forest fires. Specific indicators following the DPSIR model are suggested in the table below.

Land degradation Potential data sources Driver indicators: · Agricultural expansion (area projections) MOA · Agricultural intensification (Percentage high input / high output) CORE · Shift cultivation DOA · Forestry DOF · Road construction MWHS/DOR · Urbanisation MWHS Pressure indicators: · Soil erosion / land slides NSSC · Loss of arable land MOA · Logging DOF, FDC · Forest fires DOF State indicators: · Arable land MOA · Degraded land MOA/PPD, DOA · Cultivated area of high erosion risk MOA/PPD · Forest cover (according to forest classification) DOF Impact indicators: · Loss of soil fertility NSSC · Loss of forest biomass (deforestation) DOF · Loss of habitats DOF, NCD Response indicators: · Sustainable NRM plans MOA/PPD, NCD · Reforestation DOF, FDC · Management plans for FMUs DOF

2. Natural Heritage. Main issues are biodiversity, protection of endangered species and more broadly the preservation of the pristine landscape and mountain ecosystems of Bhutan. Pressures include land reclamation for development (roads, settlements, industry and agriculture), tourism and possibly climate change.

Natural Heritage Potential data sources Driver indicators: · Agricultural development MOA/PPD, DOA · Forestry development DOF, FDC · Road construction DOR, DOF, FDC, NEC · Tourism DOT, ABTO, NCD, NEC

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Natural Heritage Potential data sources · Mining DOM, NEC · Urbanisation and land tenure issues DUDH, TCC, PCC Pressure indicators: · Conversion of natural habitats to human uses MOA/PPD, NEC, DOF · Fragmentation of natural habitats NCD, DOF · Disturbance from trekking DOT, NEC, NCD · Hunting and poaching NCD State indicators: · Protected areas (parks, biological corridors) NCD · Red listed species NCD, NBC · Geographical distribution of selected endangered species NCD, NBC Impact indicators: · Species becoming endangered/extinct NCD, NBC · Loss of special habitats NCD, NBC Response indicators: · Management plans (for parks, corridors, FMUs) NCD, DOF · Regulation of hunting/poaching NCD · Regulation of tourism/trek king DOT, ABTO

3. Urban development. With rapid urbanisation, urban environment is an increasing concern with potential severe impacts on public health. The main issue is urban air pollution caused by emissions from traffic, industries and wood burning, but also wastewater and solid waste are areas of concern.

Urban Environment Potential data sources Driver indicators: · Urban population CSO, DUDH · Traffic (# vehicles, age distribution, petrol consumption) RSTA, NEC · Use of firewood for bukharis DOF · Import of consumer goods DRC Pressure indicators: · Car emissions (particles) NEC, RSTA · Bukhari emissions (particles) NEC · Solid waste generation TCC, PCC, DUDH · Waste water generation TCC; PCC, DUDH State indicators: · Ambient air quality (particles ) NEC, MTI · Ambient water quality (coliforms, DO, SS, BOD, COD) NEC, MTI · Percentage solid waste managed TCC, PCC, DUDH, NEC Impact indicators: · Respiratory diseases MOH · Water-borne diseases MOH Response indicators: · Regulation of traffic RBP, RSTA · Vehicle inspection RSTA, NEC · Waste water treatment TCC, PCC, DUDH · Solid waste management TCC, PCC, DUDH

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4. Industrial development (including mining). The development goal of increased industrial production in Bhutan implies potential environmental effects from emissions to air and water, and from generation of waste.

Industry and Mining Potential data sources Driver indicators: · Industrial development (# plants, #employees, turnover) MTI/DOI · Mining activities DGM Pressure indicators: · Industrial emissions (particles, NOx, SOx, BOD, Solid waste) MTI · Solid waste generation MTI · Hazardous waste generation · Waste water generation MTI State indicators: · Ambient air quality (particles, NOx, SOx) MTI · Ambient water quality (coliforms, DO, SS, BOD, COD) MTI Impact indicators: · Respiratory diseases MOH · Water-borne diseases MOH Response indicators: · Industrial EIAs NEC, MTI · Cleaner production (#projects, investments) NEC, MTI · Hazardous waste management

5. Water Resources. The main issue is the preservation of the hydrological balance including the water flow in the rivers as a basis for hydropower, irrigation and the functioning of aquatic ecosystems. Bhutan has a rich freshwater resource, but demands from hydropower and irrigation are growing rapidly and could cause periods of local water stress, especially during the dry season. Climate change might affect the hydrological cycle including the risk of floods from extreme rainfalls and glacial lake outbursts. Also water quality is a possible concern due to pollution from point sources (cities, industries and mines) and from the increasing use of agro- chemicals.

Water Resources Potential data sources Driver indicators: · Hydropower development (MW projections) MTI/DOE · Agricultural expansion (area projections) MOA · Agricultural intensification (Percentage high input / high output) MOA · Logging Pressure indicators: · Water use for hydropower MTI/DOE · Water use for irrigation MOA · Use of agro-chemicals (pesticides, chemical fertilizers) MOA/NPPC, DRC State indicators: · Rive r flows (average, min, max) MTI/DOE · Water quality (DO, SS, pollutants) MTI/PPD, NEC, MOH · Aquatic ecosystems (e.g. fish stocks) DOF, DOA Impact indicators: · Water stress / shortage (areas affected, duration) · Downstream effects of hydropower plants DOE, NEC · Biodiversity loss (red listed aquatic) species DOF, DOA Response indicators: · Hydropower EIAs NEC, DOE · Regulation of agro-chemicals MOA · Regulation of irrigation MOA NEC, DOF

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Water Resources Potential data sources · Protection of aquatic ecosystems · Watershed management plans

6. Effects of climate change. Global warming caused by increased atmospheric levels of greenhouse gases may lead to regional climate changes that could have dramatic environmental effects in Bhutan, e.g. on the frequency of extreme weather conditions, on the hydrological cycle, on the distribution of wildlife, on mountain ecosystems, on the conditions for agriculture and forestry, etc.

Effects of Climate Change Potential data sources Driver indicators: · [Global use of fossil fuels] IPCC Pressure indicators: · [Global emissions of greenhouse gases] IPCC State indicators: · [Regional atmospheric warming] IPCC · Rainfall over Bhutan MOA/CORE, DOE · Frequency of extreme weather conditions · Natural disasters · Glacier retreat Impact indicators: · River Flow DOE · Glacial Lake Outbursts DGM, NEC · Changed distribution of endangered species NCD · Changed distribution of diseases and pests NCD, DOA, MOH Response indicators: · Adaptation NEC · Mitigation NEC · Natural disaster response plans NEC · [Compensation]

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