GTAP Resources: Resource Display
| GTAP Resource #7730 |
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"Macroeconomic Impact of Climate Change for a hydropower-led economy: A CGE analysis" Authors: Dorji, Pema, Chimi Dema, Veronique Robichaud, Karma M.P. Dorji, Yeshi Lhendup, Lungten Tshewang, Sejal Chhetri, Rinchen Dolkar, Phurpa Gyeltshen and Thinley Penjor Abstract The study examines how climate change affects Bhutan’s macroeconomy, with a focus on its hydropower sector. Hydropower has been the backbone of Bhutan’s economy since the 1980s, playing a key role in economic growth, balance of payments and government finances. Although Bhutan is known for environmental preservation and is the first carbon-negative country, it remains vulnerable to climate shocks. Extreme weather events have been observed, yet their economic effects remain poorly understood. To address this, we built a recursive dynamic CGE model and a social accounting matrix tailored to Bhutan. The model incorporates seasonal differences in hydropower productivity and capital depreciation, and accounts for climate change effects on the broader economy. It differentiates between summer and winter electricity production to reflect seasonal hydro fluctuations and vulnerabilities. We simulated three scenarios until 2050: (i) decreased winter hydropower output due to less rainfall and snowfall, (ii) increased infrastructure depreciation from climate stress, and (iii) a combination of productivity decline and depreciation. Results indicate that productivity reductions alone have a limited economic impact, while increased depreciation causes significant effects across the economy. It lowers electricity output and exports, increases winter electricity imports, and raises investment needs to sustain hydropower capacity, thereby crowding out private-sector investments elsewhere. Consequently, economic growth slows, and government revenue declines. The findings highlight Bhutan’s growing macroeconomic risk from climate change, driven by dependence on hydropower. They emphasize the importance of diversification, climate-resilient infrastructure, and the establishment of a resilience fund for future disasters. |
| Resource Details () | GTAP Keywords | ||||||||||||||||
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- Climate impacts - Natural disasters - Renewable energy - Economic development - Economic growth - Infrastructure - Dynamic modeling - Asia (South-Central) |
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Public Access  Dorji_Bhutan_2026 (1.1 MB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 4/30/2026 12:56:16 PM
