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Cambodia at the Crossroads of Climate Change and Economic Growth

Published on Thursday, 27 February 2025 - Mak Sithirith and Ang Raksmey
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Key messages:

  • Cambodia experienced strong economic growth (7.6% annually from 2009–2019) but remains highly vulnerable to climate change due to its reliance on agriculture, fisheries, and forestry.
  • Cambodia has contributed to climate change through increasing global greenhouse gas (GHG) emissions per capita of 4.3 tons, less than half the OECD average, with a global share of just 0.14%. However, emissions grew by 8% annually from 2010–2019, outpacing GDP growth. Also, Cambodia remains one of Southeast Asia’s most carbon-intensive economies, emitting more carbon per unit of GDP than others.
  • Floods and droughts have occurred as results of climate change. Cambodia ranks as the world's fourth most flood-exposed country, with floods affecting 80% of the population along the Mekong and Tonle Sap floodplains. Droughts also pose a severe risk, affecting 30% of farmland and causing 36% of crop losses.
  • Climate change is already impacting Cambodia’s key economic sectors, posing challenges to its ambitious growth targets. Cambodia lost USD 1.5 billion (10% of GDP) to climate change in 2015. GDP losses could reach 9.8% by 2050, threatening long-term development goals.
  • Cambodia has implemented policies such as the Climate Change Strategic Plan (2024–2033) and the Long-Term Strategy for Carbon Neutrality (LTS4CN) to promote climate-smart agriculture, renewable energy, and emissions reduction. The government has committed 1% of GDP annually to climate change responses.

Cambodia experienced an impressive annual economic growth rate of 7.6 percent between 2009 and 2019, achieving lower middle-income status in 2015 (World Bank 2024). In the same period, poverty fell by half. The government has ambitious economic growth goals; however, Cambodia is still heavily reliant on agriculture and remains highly vulnerable to climate change, ranking 13th out of 181 countries in terms of vulnerability (Kreft et al. 2016). This raises concerns about the potential impact of climate change on Cambodia's growth trajectory. Cambodia's vulnerability is due to the economy's reliance on climate-sensitive sectors such as agriculture, water resources, forestry, and fisheries. Flooding and droughts, driven by climate change, threaten these industries, which employ 75 percent of the rural population and contribute 22 percent to the agricultural GDP (FAO 2023).

Cambodia ranks as the world’s fourth most flood-exposed country, with riverine flooding particularly affecting communities along the Mekong and Tonle Sap floodplains, where 80 percent of the population resides ((World Bank Group 2023). The country is also highly exposed to flash flooding caused by extreme rainfall, especially during tropical cyclone events and the monsoon seasons. The Tonle Sap region is the most at risk, with over 7,500 hectares of agricultural land is exposed (World Bank Group 2023). These floods account for 62 percent of agricultural production losses (MOE 2020).

Cambodia also faces a 4 percent annual probability of severe drought, with Phnom Penh, Svay Rieng, Prey Veng, and Pailin experiencing drought stress every five to six years. (World Bank Group 2023) These events affect over 30 percent of farmland, threatening key crops like maize and rice, increasing the risk of food insecurity. The 2015–2016 drought impacted 18 out of 25 provinces, affecting 2.5 million people and damaging 235,000 hectares of agricultural land (World Bank Group 2023). Droughts cause 36 percent of crop losses (GSDD, 2017), and risks are expected to rise between 2025 and 2050 (GSDD, 2015). The 2015–2016 drought, driven by El Niño, reduced rainfall, increased heat, and harmed rice production. In addition, climate change has contributed to declining water levels in the Mekong River and Tonle Sap Lake. In 2020, the reverse flow into the Tonle Sap reached a historic low of 18.89 km³, a sharp decline from the 43 km³ average (MRC 2020). The lake's water levels have also dropped significantly, with dry season levels falling to 1.37m, and wet season levels to 7.6 m - reducing wet season inundation by 50 percent. These changes have severely impacted fish production and livelihoods (Sithirith et al. 2024a).

Low agricultural productivity has driven labour migration, with 1.3 million Cambodians (8 percent of the population) migrating to other Asian countries, particularly Thailand (NIS 2020; Sithirith et al. 2024b). Rural-urban migration is increasing, but urban centres lack climate resilience, making them vulnerable to flooding and infrastructure damage.

Cambodia’s energy sector is also climate sensitive. Hydropower, a key energy source, relies on stable rainfall. Changing rainfall patterns may disrupt power production, causing shortages that hinder industrial growth (MRC 2018). However, Cambodia has committed to halting hydropower dam construction on the Mekong River (Koons 2024).

Rising sea levels also threaten Cambodia’s coastal areas. Sea levels are projected to rise 10 cm above the 1986-2005 baseline in Koh Kong by 2025 (Climate Investment Funds 2014). A one-meter rise could inundate 25,000 hectares, increasing to 38,000 hectares at two meters (MOE 2020). Under a high-emission scenario, annual flooding could affect 30,700 by 2070-2100. Additionally, river floods are projected to put 69,800 more people at risk annually by 2030, up from 89,700 in 2010 (WHO 2015).

Cambodia’s rapid economic growth has increased its vulnerability to climate change through deforestation, shrinking wetlands, and urban expansion - factors that also contribute to global GHG emissions. In 2019, the land use, land use change and forest (LULUCF) sector accounted for the largest share of emissions (44 percent), followed by agriculture (30 percent), transport (8 percent), industry (8 percent), and electricity and heat (7 percent). While Cambodia's per capita emissions stood at 4.3 tonnes - less than half the OECD average - they grew by 8 percent annually from 2010–2019, outpacing GDP growth. The country remains one of Southeast Asia’s most carbon-intensive economies, emitting more carbon per unit of GDP than its regional counterparts. The most rapidly increasing sources of emissions have been electricity and heat generation, increasing by 20 percent annually due to coal power expansion and industry, rising by 17 percent per year. Without intervention, Cambodia’s emissions will continue to rise, compounding both environmental and economic risks (World Bank Group 2023).

In view of the above, climate change and environmental degradation are expected to have a significant impact on growth of the economy. Cambodia lost USD1.5 billion (10 percent of GDP) due to climate change in 2015 alone (Sokunthea 2016). By 2050, 61 percent of Cambodia’s rural GDP per capita and 7 million agricultural workers could be at risk, along with 240,000 construction workers, causing further losses of USD1.5 billion (Talberth and Reytar 2014). GDP losses are projected to reach 2.5 percent by 2030 and 9.8 percent by 2050, slowing growth from 6.9 percent to 6.6 percent annually, delaying long-term goals (MoE, 2020). The Cambodian government has launched various initiatives to mitigate climate change and ensure sustainable economic growth. Key strategies include agricultural resilience, improved water management, emissions reduction, and green finance development. The Climate Change Strategic Plan (2024–2033) focuses on renewable energy, sustainable resource management, and climate-smart practices (MOE, 2024). The National Water Resources Policy and Strategy aims to expand irrigation to 2.32 million hectares by 2033, with a USD2.64 billion investment (MOWRAM 2019). Climate-smart agriculture is being promoted, including drought-resistant crops such as cassava and maize. In 2021, Cambodia cultivated 52,000 hectares of maize and 429,000 hectares of cassava, which require less water than rice (Cambodian Agriculture Survey 2020).

In the energy sector, Cambodia targets 70 percent renewable energy by 2030, with 1,000 MW of solar capacity planned and no new coal plants or Mekong hydropower dams (Khmer Times, 2024; Koons 2024). By 2030, the energy mix is expected to consist of 27.7 percent hydropower and 17.9 percent solar, shifting to 21.4 percent hydropower and 29.8 percent solar by 2040 (MINE 2022).

The Cambodia Rural Development Strategy (2019-2030) seeks to reduce rural poverty from 12.5 percent in 2014 to 6.3 percent in 2030 (RGC 2018), create 500,000 jobs (Mathew 2022), and invest USD1.2 billion in infrastructure, including 3,500 km of roads, water supply, and rural electricity access. The Electricity Access Rural Areas Program aims for 100 percent rural electricity access by 2030, reducing urban-rural disparities in energy availability (MIME 2016).

In 2015, Cambodia allocated 1.2 percent of GDP to climate change actions, increasing to 6 percent of the annual national budget between 2018-2021 for climate adaptation, particularly infrastructure (ADB 2023). As of 2020, the government committed 1 percent of GDP annually to climate change responses (MOE 2020). The Ministry of Economy and Finance has integrated climate change into the national budget and is mobilising external funding through global climate finance mechanisms such as the Green Climate Fund. Additionally, Cambodia has strengthened institutional frameworks and private-sector partnerships to encourage green investments and sustainable finance. These efforts aim to enhance climate resilience while sustaining economic growth.

The Cambodian government has committed to reducing greenhouse gas (GHG) emissions 42 percent by 2030 in alignment with global efforts to limit global warming to 1.5°C, as outlined in the Paris Agreement. This commitment is being pursued through strategic policies, including the Long-Term Strategy for Carbon Neutrality (LTS4CN) (RGC 2021) and the Nationally Determined Contribution (NDC) (RGC 2020), among others. The LTS4CN provides a forward-looking roadmap, setting a clear vision for achieving net-zero GHG emissions by mid-century or earlier, in line with international climate goals (RGC 2021). The NDC details actionable steps across critical sectors, including energy, agriculture, forestry, transport, and waste management, to achieve these emission reduction goals while promoting sustainable development (RGC 2020). Climate change is already impacting Cambodia’s key economic sectors, posing challenges to its ambitious growth targets. Agriculture, fisheries, energy, and infrastructure are highly vulnerable, while rural and coastal communities face increased risks from extreme weather and rising sea levels. Current estimates indicate that climate change will slow Cambodia’s projected 6-7 percent annual growth rate, impacting long-term growth goals. However, the Cambodian government has implemented policies and investment strategies to mitigate these effects. Climate-smart agriculture, renewable energy expansion, infrastructure investments, and rural development programmes form the core of Cambodia’s adaptation efforts. Institutional capacity has been strengthened to integrate climate resilience into national planning and secure global climate funding. Achieving Cambodia’s economic and climate resilient goals will be challenging but feasible with continued policy implementation, investment, and climate adaptation strategies.

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