Bhutan measures prosperity by gauging its citizens' happiness levels, not the GDP. Now its ideas are attracting interest at the UN climate change conference in Doha

A series of hand-painted signs dot the side of the winding mountain road that runs between the airport and the Bhutanese capital, Thimphu. Instead of commands to cut speed or check mirrors, they offer the traveller a series of life-affirming mantras. "Life is a journey! Complete it!" says one, while another urges drivers to, "Let nature be your guide". Another, standing on the edge of a perilous curve, simply says: "Inconvenience regretted."

It's a suitably uplifting welcome to visitors to this remote kingdom, a place of ancient monasteries, fluttering prayer flags and staggering natural beauty. Less than 40 years ago, Bhutan opened its borders for the first time. Since then, it has gained an almost mythical status as a real-life Shangri-La, largely for its determined and methodical pursuit of the most elusive of concepts – national happiness.

Since 1971, the country has rejected GDP as the only way to measure progress. In its place, it has championed a new approach to development, which measures prosperity through formal principles of gross national happiness (GNH) and the spiritual, physical, social and environmental health of its citizens and natural environment.

For the past three decades, this belief that wellbeing should take preference over material growth has remained a global oddity. Now, in a world beset by collapsing financial systems, gross inequity and wide-scale environmental destruction, this tiny Buddhist state's approach is attracting a lot of interest.

As world leaders prepare to meet in Doha on Monday for the second week of the UN climate change conference, Bhutan's stark warning that the rest of the world is on an environmental and economical suicide path is starting to gain traction. Last year the UN adopted Bhutan's call for a holistic approach to development, a move endorsed by 68 countries. A UN panel is now considering ways that Bhutan's GNH model can be replicated across the globe.

As representatives in Doha struggle to find ways of reaching a consensus on global emissions, Bhutan is also being held up as an example of a developing country that has put environmental conservation and sustainability at the heart of its political agenda. In the last 20 years Bhutan has doubled life expectancy, enrolled almost 100% of its children in primary school and overhauled its infrastructure.

At the same time, placing the natural world at the heart of public policy has led to environmental protection being enshrined in the constitution. The country has pledged to remain carbon neutral and to ensure that at least 60% of its landmass will remain under forest cover in perpetuity. It has banned export logging and has even instigated a monthly pedestrian day that bans all private vehicles from its roads.

"It's easy to mine the land and fish the seas and get rich," says Thakur Singh Powdyel, Bhutan's minister of education, who has become one of the most eloquent spokespeople for GNH. "Yet we believe you cannot have a prosperous nation in the long run that does not conserve its natural environment or take care of the wellbeing of its people, which is being borne out by what is happening to the outside world."

Powdyel believes the world has misinterpreted Bhutan's quest. "People always ask how can you possibly have a nation of happy people? But this is missing the point," he says. "GNH is an aspiration, a set of guiding principles through which we are navigating our path towards a sustainable and equitable society. We believe the world needs to do the same before it is too late."

Bhutan's principles have been set in policy through the gross national happiness index, based on equitable social development, cultural preservation, conservation of the environment and promotion of good governance.

At a primary school in Thimphu, the headteacher, Choki Dukpa, watches her students make their way to class. She says that she has seen huge changes to the children's emotional wellbeing since GNH principles were integrated into the education system four years ago. She admits that at first she had no idea what the government's policy to change all education facilities into "green schools" meant.

"It sounded good but I wasn't sure how it would work," she says. But after Unicef funded a "green schools" teacher training programme, things improved. "The idea of being green does not just mean the environment, it is a philosophy for life," says Dukpa.

Alongside maths and science, children are taught basic agricultural techniques and environmental protection. A new national waste management programme ensures that every piece of material used at the school is recycled.

The infusion of GNH into education has also meant daily meditation sessions and soothing traditional music replacing the clang of the school bell.

"An education doesn't just mean getting good grades, it means preparing them to be good people," says Dukpa. "This next generation is going to face a very scary world as their environment changes and social pressures increase. We need to prepare them for this."

Despite its focus on national wellbeing, Bhutan faces huge challenges. It remains one of the poorest nations on the planet. A quarter of its 800,000 people survive on less than $1.25 a day, and 70% live without electricity. It is struggling with a rise in violent crime, a growing gang culture and the pressures of rises in both population and global food prices.

It also faces an increasingly uncertain future. Bhutan's representatives at the Doha climate talks are warning that its gross national happiness model could crumble in the face of increasing environmental and social pressures and climatic change.

"The aim of staying below a global two-degree temperature increase being discussed here this week is not sufficient for us. We are a small nation, we have big challenges and we are trying our best, but we can't save our environment on our own," says Thinley Namgyel, who heads Bhutan's climate change division. "Bhutan is a mountainous country, highly vulnerable to extreme weather conditions. We have a population that is highly dependent on the agricultural sector. We are banking on hydropower as the engine that will finance our development."

In Paro, an agricultural region one hour out of the capital, Dawa Tshering explains how the weather is already causing him problems. The 53-year-old farmer grew up in Paro, surrounded by mountains and streams, but has found it increasingly difficult to work his two acres of rice paddy.

"The weather has changed a lot: there is no snow in winter, the rains come at the wrong times and our plants get ruined. There are violent storms," he says. Around 70% of Bhutan's people are smallholder farmers like Tshering.

"The temperature has got hotter so there are more insects in the fruit and grain. I don't understand it, but if it continues we're going to have many problems in growing food and feeding ourselves."

Bhutan is taking action to try to protect itself. Ground-breaking work is being done to try to reduce the flooding potential in its remote glacial lakes. Yet it cannot do it alone. Last week in Doha, campaigners pushed for more support to countries such as Bhutan that are acutely vulnerable to climate change.

"While the world is now starting to look to Bhutan as an alternative model of sustainable economics, all of its efforts could be undone if the world doesn't take action in Doha," says Stephen Pattison from Unicef UK.

"Small and developing countries like Bhutan must get more support, and the UK and other governments must start actually taking action, like pledging their share of money to the green climate fund and get it up and running as soon as possible."

In Paro, teenagers in school uniform heading home from lessons are well aware of the hard times ahead for Bhutan as it tries to navigate a path between preserving its sustainable agenda and the global realities it faces. All say they are proud to be Bhutanese. They want to be forest rangers, environmental scientists and doctors. At the same time they want to travel the world, listen to Korean pop music and watch Rambo.

"I want to be able to go out and see the world but then I want to come home to Bhutan and for it to be the same," says Kunzang Jamso, a 15-year-old whose traditional dress is offset with a hint of a boyband haircut. "I think we must keep the outside from coming here too much because we might lose our culture, and if you don't have that then how do you know who you are?"