Arya News - With COP31 approaching, Bhutan renews its call for accessible, predictable funding for countries bearing the brunt of climate change.
THIMPHU – Bhutan is paying for climate disasters, and increasingly, the bill is becoming difficult to ignore.
According to Bhutan’s first National Assessment of Climate-Induced Loss and Damage (2025), average annual climate-induced losses is estimated at USD 169.3 million, equivalent to 6.9 percent of the country’s Gross Domestic Product (GDP). Yet, this figure does not fully capture non-economic losses, many of which remain difficult to document and quantify.
The October 29 Shintaphu glacial lake outburst flood (GLOF) is another reminder of the risks facing the country. Every disaster destroys civic infrastructure, threatens communities and hieghtens the cost of recovery. Much of that financial burden falls on the national budget.
Bhutan has maintained its commitment to carbon neutrality and played an important role in advancing international climate diplomacy. Yet its vulnerability to climate-induced disasters continues to grow.
Bhutan is now looking to an international mechanism designed to address precisely this imbalance. The Department of Environment and Climate Change (DECC) has submitted a proposal seeking USD 19.48 million from the Fund for Responding to Loss and Damage, established under the United Nations Framework Convention on Climate Change (UNFCCC) to support vulnerable developing countries. It is a mechanism Bhutan itself helped bring into existence along with other vulnerable countries.
A fund years in the making
The Loss and Damage Fund is the outcome of years of negotiations by developing countries, which argued that reducing emissions and adapting to climate change were no longer enough. Some impacts were already unavoidable, while others had caused losses that could not simply be repaired or reversed.
A breakthrough came at UNFCCC Conference of Parties (COP27) in Sharm El-Sheikh, Egypt, in 2022, when countries agreed to establish a dedicated fund. It was operationalised at COP28 in Dubai in 2023. The principle is rooted in climate justice so that countries who have contributed least to climate change should not be left alone to bear its consequences.
The fund, however, does not automatically bill major polluting countries for individual disasters. It depends on international contributions, and securing adequate, predictable financing remains a major challenge.
What does loss and damage actually mean?
Consider a flood that washes away a bridge. Rebuilding it comes with an obvious financial cost. But the consequences extend much further. Farmers may be unable to transport their produce, children may struggle to reach school, businesses may lose income and families may be displaced.
These are all part of climate-induced loss and damage.
Economic losses include damage to roads, bridges, hydropower facilities, agricultural land, livestock, businesses and household assets.
Non-economic losses are less visible but equally significant. They include human lives, psychological trauma, cultural and spiritual heritage, biodiversity, traditional knowledge and communities’ connections to ancestral land.
A bridge can be rebuilt. A lost life, cultural heritage or sense of belonging cannot always be restored.
This is why loss and damage goes beyond conventional disaster recovery. It recognises the wider consequences of climate change, including those that adaptation and reconstruction alone cannot address.
The cost to Bhutan is already significant
The country’s recent experience reveals the scale of the challenge.
During the extreme rainfall, floods and landslides of October 2025, 29 bridges were affected across the country, of which 22 were completely washed away.
The cost of monsoon restoration of existing roads also increased by about 112 percent, from Nu. 142.1 million in 2021–2022 fiscal year to Nu. 300.9 million in 2024–2025.
The risks have been evident for decades. The 1994 GLOF damaged 91 houses, while Cyclone Aila in 2009 caused about USD 17 million in damages.
A scientific study cited in the national assessment estimates that 22,399 people, 2,613 buildings, 270 kilometres of roads, 402 bridges and 20 square kilometres of farmland are exposed to potential GLOF flooding.
These are not merely environmental concerns. They threaten livelihoods, public finances and development priorities. When government resources are repeatedly diverted towards disaster response and reconstruction, less may be available for other national needs.
A DECC official said that immediate financial assistance following such disasters usually came from the government, through the finance ministry’ in consultation with local governments. “The old industrialised countries must fulfill their climate commitment for their historical and current contribution to climate change.”
Bhutan is seeking USD 19.48 million
Bhutan’s role in establishing the Loss and Damage Fund makes its current proposal particularly significant.
During its tenure as Chair of the Least Developed Countries negotiating group under UNFCCC, Bhutan played an important role in securing agreement on the fund at COP27. It also served on the Transitional Committee tasked with developing recommendations on the fund’s governance and operational arrangements, contributing to its operationalisation at COP28.
Now, Bhutan is seeking to access the mechanism it helped establish.
Under the first funding window, known as the Barbados Implementation Modalities, eligible developing countries can submit proposals ranging from USD 5 million to USD 20 million, subject to review and approval.
Bhutan has submitted a proposal worth USD 19.48 million, excluding the accessing entity fee, for implementation between 2027 and 2031.
The proposal has three priorities.
First, strengthening national and local institutional capacity to assess, prepare for and respond to climate-induced losses.
Second, supporting the safe, planned and dignified relocation of vulnerable communities. A key component focuses on 75 households in Thangza and Toenchey in Lunana Gewog, which face significant GLOF risks.
Third, promoting climate-resilient recovery and protecting critical infrastructure, including addressing loss and damage associated with slow-onset water stress.
If approved, the proposal would help Bhutan move beyond responding to disasters after they occur towards better preparedness, protection and recovery.
However, the USD 19.48 million remains a funding request. It is not money already secured and is subject to the Fund’s review and approval.
Money alone is not enough
Bhutan has also secured USD 750,000 in technical assistance through the Santiago Network for Loss and Damage, another mechanism established under the UNFCCC.
While the Loss and Damage Fund provides financial support, the Santiago Network helps vulnerable countries access the technical expertise needed to assess and address climate-related losses.
USD 750,000 assistance would support the development of a national loss and damage governance framework, a centralised data repository to document economic and non-economic losses, and stronger institutional and local capacities, a DECC official said.
Nepal offers a possible precedent
A significant development came in October 2026, when Nepal became the first country to receive a provisional allocation from the Loss and Damage Fund through an exceptional funding arrangement.
Following devastating flash floods and debris flows on August 26, 2026, the Fund’s Board provisionally set aside USD 21.6 million for Nepal.
The disaster caused around 1,300 deaths. Damages were estimated at up to USD 2.69 billion, while recovery and reconstruction requirements stood at USD 4.71 billion.
However, Nepal must still submit a formal application for consideration. The provisional allocation should not be confused with funds already disbursed.
What Bhutan wants from COP31
The next major opportunity to advance these priorities will be COP31, scheduled for November 9–20, 2026, in Antalya, Türkiye.
Bhutan’s position, as outlined by DECC, goes beyond seeking additional funding.
First, the country wants substantially greater contributions to the Loss and Damage Fund and a predictable replenishment mechanism, rather than continued dependence on occasional voluntary pledges.
The funding gap is considerable. The first funding window had an allocation of USD 342 million, while 176 proposals from developing countries sought a combined USD 2.8 billion, according to DECC.
Second, Bhutan will advocate for grants rather than loans. Countries should not have to increase their debt to recover from climate disasters they contributed very little to causing.
Third, Bhutan wants the specific vulnerabilities of landlocked and mountainous developing countries recognised. While small island states face sea-level rise and coastal erosion, Bhutan faces GLOFs, flash floods, landslides, fragile mountain ecosystems, limited connectivity and high infrastructure recovery costs.
Working in alignment with the Landlocked Developing Countries Group, Bhutan would advocate for dedicated funding arrangements, including consideration of a minimum allocation for landlocked developing countries, a DECC official said.