The Correlation Between CO2 Emissions and GDP in Bhutan - A Threat to Carbon Neutrality?

Abstract: The nexus between environmental degradation and economic growth is becoming of greater importance globally and in order to limit global warming at an increase of 1.5 ° C there needs to be a net zero-transition towards carbon neutrality. The Kingdom of Bhutan has over the last decades experienced continuous economic growth while being carbon negative and adhering to its unique Gross National Happiness development framework. This study investigates the relationship between carbon dioxide emissions and gross domestic product in Bhutan and evaluates how Bhutan’s aspirations toward economic growth might threaten its carbon-neutral status. The analysis is drawn from descriptive statistics and compared to the theory of the environmental Kuznets curve, the Decoupling theory and the theory on Green growth. The study finds a positive linear relationship between CO2 emissions per capita and GDP per capita and no substantial evidence of sustained decoupling. While an immediate threat to carbon neutrality is not found due to the country’s large carbon sequestering capacity, there are challenges ahead if Bhutan wants to experience sustained economic growth and remain carbon neutral.