Regional Consultation on Vehicle Import Policy Roadmap for Clean Air: Sharing ’s Experience on Regulations of Vehicle Import, Banning of used vehicles: Impact, Lessons and Next Steps

May 31, 2018, Zanzibar Outline

 Country Background - Socio-Economic Indicators for Bhutan (March 2018) - Brief History of Road Transport in Bhutan - Types of Roads in Bhutan - Factors and Economic Trends  Motorization Trends and growth forecast  Share of vehicle by Type  Forecast of Vehicle Stock/Fleet growth  Vehicle Import Regulation  Policy on Phase out of old vehicles  Importing Countries  Balance of Trade (Export –Import)  Vehicle Emission Regulations  Impact of Ban of secondhand and reconditioned vehicles  Next Steps

Country Background Socio-Economic Indicators for Bhutan (March 2018)

Indicators 1985 2018

Population 678342

Population density (per sq.km) - 16 Population growth rate (%) 2.0 1.3

GDP Per capita in US$ (1 US$=Nu - 2879.07 67.19) GDP growth Rate (%) 6.8 7.99 Brief History of Road Transport in Bhutan

• Over the past 57 years (1961-2018) Bhutan has been transformed from a closed pastoral society with no electricity and no roads into a rapidly emerging economy with aspirations for further substantial development. • Travel in Bhutan was by foot or on mule- or horseback until 1961 • Road construction began in earnest during the First Development Plan (1961–66). The first 171-kilometer long paved road was completed in 1962. • Today the road length has reached over 12,348 KMs. • Vehicle numbers have reached 94956 as of April 2018. Types of roads and length

Sl# Road Type Length (Km)

1 Expressway 6.20 2 Primary National Highway 1974.64 3 Secondary National Highway 584.47 4 Dzongkhag Roads 1504.47 5 Urban Road 396.76

6 Farm Road 5240.32 7 Forest Road 1097.11 8 Approach Road 262.06 9 Power tiller track 111.1

10 GC roads (constructed) 60.30 As of June 2016

GC roads blacktopped 147.87

Total 11,322*

Road Network in Bhutan (December 2015).Source: Department of Roads, MoWHS * As of March 2018..12,348 KMs of Roads of all types 6

Motorization trend

No. of motor vehicles

100000 94956

92008

90000 84297

75190

80000

69602

67926 67,449

70000 62697

60000

53282

45819

50000

40659

35703

40000

33241

29914

26740

25003

30000 24430

22494

19463 18288

20000 15629 13584 10000

0

2011

1998 2003 1997 1999 2000 2001 2002 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 (April) (April) 2018 Share of Vehicle by Type 2018 Forecast of Vehicle Fleet in Bhutan

Bhutan Transport 2040: Integrated Strategic Vision (2011) 9 Vehicle Projections (Vehicle Stocks) Bhutan 2015-2030

Source: Grütter Consulting, 2017 Factors and economic trends affecting vehicle growth Fundamental factors and economic trends that will determine the future of the country. New factors may emerge in the future, but the following seven trends will likely dominate and drive change over the next 30 years:

(1) Electricity production, hydropower projects and exports to (2) Industrial development and new population centres in the south (3) Rural-to-urban migration: bigger cities and declining rural population (4) Tourism: carefully managed growth (5) Gross National Happiness including poverty reduction (6) Regional connectivity and increased levels of trade (7) Brand Bhutan: development of the country’s comparative advantages

All the above trends will have an impact on the future of the transport sector and help defining the Transport Vision and the associated Transport Strategies. Electricity and GDP per Capita

Source: Bhutan Transport 2040: Integrated Strategic Vision (2011) Industrial Areas

Samtse Phuentsholing Samdrup Nganglam jongkhar Annual Average PM10 Levels

Data from other stations (Rinchending, Bajothang, Kanglung) also show that PM10 levels are increasingly critical. Data from other stations (Rinchending, Bajothang,

Kanglung) also show that PM10 levels are increasingly critical.

Vehicle Import Regulations

 Bhutan is an import dependent country  Prior to 1999, secondhand vehicles could be bought from India and other countries. Reconditioned vehicles started coming in from 1994 (Mostly from Japan)

 Since 1999, import of Second hand/reconditioned vehicle is not allowed for into the country, regardless of the country of origin except: (a) a second hand electric vehicle which has not run for more than 30,000 Kilometres, may be registered. (b) an expatriate may bring a used vehicle on posting in Bhutan but must be re-exported upon completion of term of employment in the country. (c) A Bhutanese expatriate may bring the used while stationed temporarily abroad but under the following conditions: (i) A Bhutanese national has worked continuously abroad for a period of at least two years; (ii) The vehicle must be procured and registered in his/her name in the country of residence at least one year prior to its importation into Bhutan; (iii) The vehicle procured abroad, is new and not second hand; and (iv) Duty and sales tax applicable shall be payable.

Vehicle Import Regulations

Vehicle Standards are set by the RSTA ( Three wheelers like Auto, Tempo etc. not allowed) Only four stroke two wheelers allowed  Age limit exists for Commercial Vehicles (14 years for high end buses, 9 years for others and 9 years for taxis)

Fuel Import

Estimated comparison between the revenue from hydropower and expenditure on fossil fuel imports for Bhutan in 2015. (Source: Data from Bhutan Broadcasting Service) Custom Duty, Sales Tax and Green Tax Schedule Importing Countries (1) India (Maruti, Tata, Mahindra, Ford, Nissan etc) (2) Japan (Toyota, Hybrids, Power Tillers, Earth Moving Machines)- (3) South Korea (Hyundai, Kia, Sorento) (4) China ( Pick ups and Buses) (5) Vietnam (Power Tillers) (6) Thailand ( Pick ups and vehicle parts)

Balance of Trade

Source: Bhutan Trade Statistics 2016 Balance of Trade Excluding Electricity

Source: Bhutan Trade Statistics 2016 Top Imports

Source: Bhutan Trade Statistics 2016

Source: Bhutan Trade Statistics 2016 Overall Trade

Source: Bhutan Trade Statistics 2016 Imports

Source: Bhutan Trade Statistics 2016

Source: Bhutan Trade Statistics 2016 Proposed Policy on Phase out of old vehicles (1) National Transport Policy (Final revised) Policy Objective 4.1.6: Systematically reduce pollution from transport sector to contribute to maintain pristine environment for safeguarding human health and reduce Environmental footprint

4.1.6.3 RGOB will frame appropriate regulations related to end of life of vehicles. This would also cover the process of disposal of vehicles once they reach their end of life.

4.1.6.4 Differential taxes, tax exemptions on electric & hybrid vehicles will be provided to promote use of vehicles designated as fuel-efficient. Measures such as high ‘feebates’ or fuel surcharge will be explored to dis-incentivize private users from buying personal-use diesel vehicles.

Proposed Policy on Phase out of old vehicles

(2) Vehicle Emission Road map 2017 (3)Strategy for Carbon Commercial Vehicles in Bhutan 2017. Vehicle Emission Standards

The Constitution mandates that Bhutan should maintain 60% forest cover for all times.

At the 15th Conference of Parties to the United Nations Framework Convention on Climate Change in Copenhagen 2009, Bhutan declared itself to remain carbon neutral. Made commitment to maintain Bhutan’s status as a net sink of Greenhouse Gases by ensuring that greenhouse gas emission levels do not exceed the sequestration capacity of the country’s forests.

Current Emissions Scenario in Transport Sector

The 2000 National GHG inventory identifies the energy sector as the second highest contributor of GHG emissions after agriculture, of which the transport sector was responsible for 118.11 Gg of CO2 equivalent, or about 45 percent of all energy-related emissions and about 7.6 percent of the total GHG emissions.

The graph depicts the emissions from the energy sector vis-à-vis the emissions from transport sector.

Contribution of transport sector to CO2 emissions in Bhutan In 2040, the totalBaseline emissions Projections forfrom Transport Bhutan’s Sector economy are projected to be 4.7 million t CO2e or more than double the level in 2010, but still below the expected sequestration of 6.3 million t CO2e.

Emissions from road transport (ktCO2e), 2005-2040 1000 905 906 885 400 376 361 348 350 800

300 600 250 228 468 357 376 361 200 177 400 348 228 150 177 200 100

50 0 0 2005 2010 2020 2030 2040 2005 2010 2020 2030 2040 Energy sector emissions (ktCO2) Road transport emissions (ktCO2)

• In the course of the 35 year period 2005-2040, the emissions from • In the course of the 35 year period 2005-2040, the share of the road transport sector are projected to increase from 177 kt emissions from the road transport sector to total emissions is CO2e to 348 kt CO2e, showing a 96% increase in emissions projected to go down from 49.6% in 2005 to 39.3% in 2040. from the sector in the 35-year time period. • This implies that the emissions from the transport sector • The energy consumption of the road transport sector is projected would grow at a smaller pace as compared to the overall to increase from 55.09 toe in 2005 to 108.6 toe, showing a 97% emissions from Bhutan. increase in the energy consumption from the sector. Vehicle Pollutant Emissions Bhutan 2015 (in tons and as share)

Vehicle category PM NO2 SO2 tons Share tons Share Tons share

12 Passenger cars 9.5 24% 174 10% 28% 2 Taxis 0.9 2% 29 2% 5% 0 Motorcycles 0.1 0% 13 1% 1% Heavy Duty Vehicles 30 (HDVs) 28.3 73% 1,509 88% 67%

Total 38.9 1,724 45

Source: Grütter Consulting, 2017 Emission Standard for Motor Vehicle

• Permissible level of emission for every motor vehicle shall be: • • Diesel: 75% Hartridge Smoke Unit (HSU) for vehicles registered before 1/1/2005 and 70% HSU for vehicles registered after 1/1/2005 • • Petrol: 4.5%Carbon Monoxide(CO) for vehicles registered before 1/1/2005 and 4%CO for vehicles registered after 1/1/2005 • • The permissible smoke density level and emission level for all other pollutants present in vehicular exhaust (like hydro carbons, oxides of nitrogen, etc.) shall be as laid down by the National Environment Commission from time to time.

Vehicle Emission Targets Bhutan (Vehicle Emission Road Map) 1. Average annual air quality levels of all air pollutants are by 2025 below WHO guideline standards. 2. Vehicle emissions of SO2, NO2 and PM are by 2030 65 to 95% lower than in 2015. 3. CO2 emissions of the transport sector are by 2030 25% lower than under a Business as Usual scenario.

Future Policies Proposed

1. In line with the Indian fuel standard Bhutan will only import diesel and gasoline with less than 50ppm sulphur as of 01.2018 and diesel and gasoline with less than 10ppm sulphur as of 01.2021. 2. Bhutan will implement in line with India new vehicle emission standards for gasoline and diesel vehicles requiring as of 01.2018 BS-IV (equivalent to Euro 4) and as of 01.2021 BS-VI (Euro 6).

3. Bhutan will upgrade the current Inspection/Maintenance system improving impact and controls.

4. Bhutan will restrict the import of diesel powered cars and light vehicles of less than 3.5t as of 01.2018.

5. Bhutan will design a low-carbon vehicle strategy and tap international climate finance to assist in the implementation of latter. Impact of Ban of secondhand and reconditioned vehicles

(1) Save the country from being a scrap dump yard (2) Reduction in GHG emissions (3) Cleaner, safer and more efficient vehicles (4) Promotion of eco-friendly and mass transport system. (5) Help in de-congestion. Next Steps

1. Implementation of the National Transport Policy 2. Promotion of Eco-friendly vehicles (start with replacement of 300 Taxis with EV Taxis) 3. Implement Low Carbon Vehicle Strategy. 4. Implementation of the revised Surface Transport Act. 5. Continue with the Ban on Import and work on tightening of standards. 6. Implementation of 12th Five Year Plan (100 buses, 300 electric taxis, etc.) Glimpses of Transport in Bhutan

City Bus Parking in Thimphu Main Street in Thimphu

THANK YOU

Karma Pemba Chief Transport Officer Road Safety and Transport Authority Bhutan Email: [email protected] Mobile: 97517744402