Mongolia

Project title Sector SCP practice
Green Products and Labelling Food and beverage, Textile and leather industry Eco-labels, Product design for sustainability
Greener Construction Project Building materials industry Cleaner Production, Product design for sustainability
Recycling Building Materials Building materials industry Waste Management
Sheep Wool Building Materials Building materials industry Product design for sustainability

Focal point

Bulgan Tumendemberel

Head of Green Development Strategy and Policy Planning Department

Ministry of Environment, Green Development and Tourism

Status of SCP policy framework

Mongolia is a landlocked country bordered by China and Russia. It has rich endowment of mineral resources, such as copper, gold, uranium and coal. Foreign direct investment is mainly directed towards the mining industry and this is as well an important source of government revenues. 
Due to its geographic location Mongolia is vulnerable to climate change and the effects have already been felt in the form of changing rainfall patterns and increasing incidence of grass and forest fires. Water resources are generally scarce and infrastructure for seasonal storage and irrigation are far from sufficient. Other environmental challenges include air pollution, mainly due to coal burning and emissions from vehicles in Ulaanbaatar, deforestation and forest degradation, partly as a result of illegal logging, soil erosion and desertification, caused mostly by overgrazing in combination with natural factors.

The development of Mongolia is mainly guided by its 15-year plan (2007-2021), entitled “Millennium Development Goals-based Comprehensive National Development Strategy of Mongolia” (NDS)
The document provides fairly concrete policy directions along with some details for the policy tools to be employed.

NDS represents fairly traditional development pathway based on strong economic growth. The country plans to expand its economy by exploiting its mining resources for export while gradually moving up the value chains by building up the capacity for industrial processing and manufacturing. 

One of the six priorities identified in the NDS deals with environmental protection. The strategy also contains a separate section on environmental policy, which lists five strategic objectives related to the following areas: pollution control, use of land and mineral resources, water resources, forests, and biodiversity. 

Mongolian Law foresees a large number of resource related fees, such as fees for hunting, forest use, water withdrawal, and mining. This trend is interesting from the perspective of SCP since this system applies the polluter-pays approach. However the fees were set in nominal terms and are not adjusted in line with inflation making this a relatively ineffective control measure but a good start to shape consumption patterns of the population. 

Resource consumption and production

Main Resource Consumption and Resource Efficiency Indicators (2010)

Population (thousands) 2800 (2011)
GDP (million USD) 8567 (2011)
GDP is in USD exchange rate based on year 2005 and deflated.
Source: UNSD database.
Subject Area Total Per person Per USD$ of GDP
Domestic Material Consumption, DMC
(tonnes, tonnes per capita, kgr per 1USD$)
60,171,488.00 22.18 0.007
GHG emissions
(kilotonnes,tonnes per capita, kgr per 1USD$)
24,860.38 9.16 2.90
Total Primary Energy Supply, TPES
(Petajoules, Gigajoules per capita, Megajoules per 1USD$)
187.92 69.27 2.19
Water Use
(Trillion litres, Kilolitres per capita, Litres per 1USD$)
0.55 203.10 6.4
Subject Area Indicator
Population density 2015 (UNESA 2012 revision), population per sq.km 2
GDP per capita (USD), 2013 WB 4,056.40
HDI Rank (2013) UNDP 0.698
Arable land (hectares per person) WB 2012 0.23
Forest cover in % (2010), UNSTATS 7
Material intensity (2010)UNEP 17.42
Per-capita energy use (kg of oil equivalent per capita) 2011, WB 1,310
Energy intensity (total primary energy consumption per USD of GDP) 2011, EIA 27,918.09
GHG intensity (2010) UNEP 7.2
CO2 emissions (metric tone per capita), 2010, WB 4.2
Number of Middle Class consumers % (2010), ADB 52
Number of people with income < 2USD/day (PPP, USD, %), 2010, ADB 48

Trends in Resource Consumption and Resource Efficiency Indicators (1970-2010)

DE: Domestic Extraction;
MI: Material Intensity of the economy;
MF: Material Footprint.
All other abbreviations explained in the table above

In panel a) the most rapid growth for Mongolia was in GHG emissions and GDP, with most of the increase of GHGs concentrated in the period from 1970 to 1990, while GDP growth was stronger in later years. DMC also grew strongly for a brief period in the 1980s, but then largely levelled off. The trajectory of DMC clearly reflects an abrupt increase in DE of metal ores in 1984 (panel b), followed by commencement of recorded fossil fuel extraction the subsequent year. Renewed growth in DE in the latest years is driven by expanded fossil fuel extraction, while DE per capita of biomass has been in steady decline since 1980. Mongolia’s MF per capita, in panel c), began the period 1990 to 2010 much higher than DE in gross terms, but by the end of the period was less than one half DE. This indicates Mongolia has gone from a strong reliance on resources embodied in imports to being a net source of resources to other countries. Panels d), e) and f) indicate that there has been strong relative decoupling of economic growth from each of the six different metrics for material, energy, and GHG intensity. In most cases that decoupling was concentrated in the first decade of the period 1990 to 2010. Footprinting metrics are largely consistent in indicating lower consumption per capita and lower intensities than conventional DMC/TPES/GHG metrics.

(Source: UNEP CSIRO Indicators for a Resource Efficient and Green Asia and the Pacific, 2015).

Key references relevant to SCP

UNEP's relevant activities

The information in the country profiles herein have been obtained through research with firsthand and secondhand sources. The information presented herein cannot be considered as official policy of governments or other official bodies. The SWITCH-Asia Programme cannot be held responsible for the content of the sites to which it provides links or for the availability of servers or links. Information is being continuously updated in order to maintain an up to date country profile. If you would like to contribute information for this profile or have any further comments, please send an email to: SWITCH-PSC@unep.org

Status

Introduction

Although in Mongolia around 90% of businesses are classified as SMEs, the economy is heavily reliant on the mining industry, which impairs SMEs ability to contribute to economic diversification and growth.

Commercial banks dominate the financial sectors, however overall the financial sector is underdeveloped and there are no fully licensed foreign banks operating in Mongolia, which constrains financial product availability. ADB reports that the average loan tenor is only 2.5 years and the average loan size is MNT 7.5 million (approximately EUR 2900).[1]

Mechanisms for green financing are not yet a focus, and there is a lack of government support. Financing for energy efficiency or clean energy has not been developed yet and there is a lack of project financing and much needed long-term funding.

Mongolia’s National Development Strategy 2008–2021 makes strengthening its banking, non-banking, and financial sectors a key priority. Currently UN Partnership on Action for a Green Economy is aiding Mongolia to mobilize finance for sustainable development, to develop green and inclusive financial products.[2]


[1] https://www.adb.org/sites/default/files/linked-documents/icps-mon-2014-2016-ssa-02.pdf

[2] http://www.un-page.org/countries/page-countries/mongolia

Challenges

·      Lack of credit

·      Lack of loan and financially literacy, especially in rural areas

·      Limited financial services suited SME needs

·      Insufficient or lack of collateral

·      High interest rates

·      Limited legal and regulatory framework

·      Limited capacities and human resources

·      Limited access to technology 

Government institutions for cooperation

·      German Agency for Technical Cooperation

·      Mongolian Government and Local Governors’ offices

·      SME Development Fund, part of Ministry of Food, Agriculture and Light Industry

Main institutions providing Green Finance

Main institutions providing green finance

  • Mongolian Banking Association
  • Capital Bank Mongolia
  •  Mongolia Xacbank
  • Khan Bank
  • State Bank
  • Mongolian Ministry of Environment Green Development and Tourism (MEGDT)
  • Bank of Mongolia
  • Trade and Development Bank
  • Golomt Bank
  • International Finance Coporation (IFC)
  • World Bank
  • Asian Development Bank (ADB)
  • United States Agency for International Development (USAID)
  • Japan International Cooperation Agency (JICA)
  • International Fund for Developing Agriculture
  • Microfinance Development Fund 

 

Mongolian Sustainable Energy Financing Facility (MonSEFF) 

A credit line developed by the European Bank for Reconstruction and Development (EBRD) to enable the Partner Banks in Mongolia to finance loans to businesses seeking to invest in equipment or processes that reduces energy consumption. 

The facility has a credit line of EUR 23 million and has achieved 60,150 MWh/y Total Annual Energy Savings from approved projects and 19,795 Ton eq. CO2/y Total Annual CO2 emission reductions from approved projects.

 Capital Bank Mongolia:

Mongolia’s Ministry of Food, Agriculture and Light Industry partnered with them to create the SME Development Fund

 Mongolia Xacbank:

Xacbank has various programs to provide loans to SMEs with resources from the Mongolian Government.

SME loan amounts:

  • Projects in Ulaanbaatar: Up to 200 million MNT
  • Projects in provinces: Up to 100 million MNT
  • With a 7% interest rate per annum, and loan period up to 5 years. 

Loan for SMEs that achieve GHG emission reductions: Any SME that produces, trades, or installs products reducing GHG emissions by at least 20% and any end users of products that reduce GHG emissions by at least 20%. Loan period up to 5 years, with loan size depending on the business capacity.

 “Market and Pasture Management Development" loan guarantee program, cooperation between XacBank and  IFAD's project unit.

Maximum loan amount is up to the equivalent of 300,000 USD (EUR 283,336) in MNT for SME factories and up to the equivalent of 100,000 USD (EUR 94,455) in MNT for herders and suppliers; with a guarantee period of up to 5 years.

Khan Bank:

SME Development Loan from the Ministry of Labor

Small loans:

  • Loan amount: Up to MNT 100,000,000
  • Annual interest rate: 7%
  • Term: Up to 60 months 

Large loans:

  • Loan amount: Up to MNT 100,000,000
  • Annual interest rate: 7%
  • Term: Up to 60 months

Mongolian Sustainable Energy Financing Facility loan

The facility is used to finance projects that promote energy efficiency and renewable energy in its business operations.

  • Loan amount: USD 2,500,000 (EUR 2.36 million) or equal MNT
  • Annual interest rate:      1.8%- 1.4% (USD 1%-0.85%)
  • Term:    Up to 5 years
  • Loan application fee: MNT 5,000-15,000 (USD 5.0-15.0)

 JICA 2 Step Loan Project for SME Development and Environmental Protection

  • Loan amount: USD 10,000-600,000 or its equivalent in MNT
  • Interest rate:  Variable interest rate on every 6 months
  •  Loan term:  Up to 36-120 months

State Bank:

 Provides project loans from the SME Development Project Loan, funded by Ministry of Food, Agriculture and Light industry.Provides microbusiness loans taking only movable assets as collateral.

  •  Loan amount:  MNT 100 thousand - MNT 10 million
  • Loan term: up to 24 months
  • Annual interest rate: 30.0%-26.4% 

Trade and Development Bank:

At the end of March 2015, TDB’s total SME loan amount reached MNT 117.0 billion.

JICA Two step project loan for SME development and environmental protection:

  • Loan amount: Up to USD 600,000 (EUR 566,732.79) or an equal amount of MNT
  •  Interest rate (varies semi-annually): 7%
  • Term: up to 10 years 

Ministry of Labor project loan for SMEs

  • Loan amount: no limit; amount approved by the project selection committee
  • Annual interest rate: 7%
  • Term: up to 5 years
  • At least 20% of the project cost should be financed by the borrower’s own fund 

Bank of Mongolia:

 World Bank Export Development Project: EUR 18.89 million to support Mongolian small- and medium size enterprises (SMEs) in non-mining sectors to strengthen their export capabilities and expand access to export markets.

Golomt Bank:

 In August 2016 IFC provided a trade guarantee of up to EUR 9.44 million to Golomt Bank to support SMEs to improve import and export relationships within the energy, agriculture and commodity sectors. 

Other SME financing initiatives

  • The International Investment Bank (IIB) has joined the International Finance Corporation (IFC) and the Netherlands Development Finance Company (FMO) has organized a USD 125.5 million (EUR 118.54 million) facility for Mongolia’s XacBank for SME financing.[1]
  • In April 2017, the Kenya Banking Association (KBA) and the Mongolian Bankers Association (MBA) signed a Memorandum of Understanding (MOU) to improve environmental and social risk management and sustainable financing practices in the Kenyan and Mongolian banking sector.
  • In 2015, the EU approved EUR 9.3 million for the Support to Mongolian Economic Diversification project through the SME Access to Finance program, to provide business advice and SME capacity building.
  • The Development Bank of Austria (OeEB) has provided a preferen­tial credit line of more than EUR 13 million to the XacBank in Mongolia, in order to facilitate SME investments and boost productivity.
  • ADB: strengthening the Credit Guarantee Fund of Mongolia: EUR 56.67 million loan for a project from 2016- 2021 to improve the credit guarantee system in order to help Mongolian SMEs access finance. 
  • European Bank for Reconstruction and Development – EUR 3.8 million to support the sustainable development of SMEs 
  • EU and Czech co-funded project implemented by Caritas Czech, where 20 local SMEs are operating in sustainable construction, building a viable domestic market for construction materials made from ash produced by power plants. This reduces the needs of power plants to dispose fly ash. The project has funding of EUR 1.4 million through the SWITCH Asia program.
  •  USAID REACH project will improve and scale access to credit for underserved SMEs. Its program aims to strengthen SMEs’ capacity to qualify for loan requirements through the awarding of 500 hundred loans worth EUR 23.61 million to SMEs with improved borrowing capacity. 
  • Mercy Corps’ Rural Agri-business Support program: in cooperation with the United States Department of Agriculture (USDA) and the United States Agency for International Development (USAID). In 2015 has had EUR 9.45 million more invested to fund education for entrepreneurs and building businesses’ climate resilience.  
  • Loan amount: MNT 500,000-MNT 20,000,000
  • Term: 3 to 24 months. 
  • Monthly interest rate: Business loan interest rate being adhered to the specific province.[2]

[1] https://www.iib.int/en/articles/iib-joins-ifc-and-fmo-in-supporting-mongolian-smes

[2] https://capitalbank.mn/mercycorps/

Status and policies

GHG emissions data

2015 total territorial GHG emissions (excluding land use change and forestry): 45 MtCO2

2015 territorial GHG emissions per capita:  15 tCO2/person

2014 CO2 consumption emissions:[1] 40 MtCO2

*GHG territorial emissions are Carbon dioxide emissions from the use of coal, oil and gas (combustion and industrial processes), the process of gas flaring and the manufacture of cement.


[1] Carbon dioxide emissions occurring anywhere in the world attributed to the country in which goods and services are consumed. For more information see: Section 2.1.2, The global carbon budget 1959-2015, Le Quéré et al. 2016. 

GDP

2015 GDP: EUR 10.37 billion

GDP composition by sector:

Agriculture: 16.6%
Industry: 33.1%
Services: 50.3%

Industries[1]construction and construction materials; mining (coal, copper, molybdenum, fluorspar, tin, tungsten, gold); oil; food and beverages; processing of animal products, cashmere and natural fiber manufacturing.

Agriculture - products[2]wheat, barley, vegetables, forage crops; sheep, goats, cattle, camels, and horses.


[1] https://www.cia.gov/library/publications/the-world-factbook/fields/2090.html

[2] https://www.cia.gov/library/publications/the-world-factbook/fields/2052.html

Industries’ contribution to climate change

·      Improved pasture management has the potential to increase the carbon sink of CO2e 29 million tonnes per year, which is equal to 1/3 of emissions reduction in energy sector.

·      Sustainable production and consumption could create impetus for cleaner technologies for SMEs, moving away from coal burning.

Mining:

  • Air pollution
  • Depletion of water resources (accelerating desertification)
  • Heavily polluted rivers and freshwater
  • Land degradation from the creation of roads for the transportation of minerals
  • Dust containing heavy metals (from transportation)
  • Loss of traditional livelihoods
  • Worker health and safety issues especially for illegal “ninja” miners[1]

The mining industry could form cooperation with local communities and the government to strengthen climate change resilience, improve waste management, monitor and deepen knowledge on desertification, find new ways to deploy traditional knowledge, etc.

However, reducing Mongolia’s dependence on mining and focusing more on renewable energy such as wind energy would be a win-win for the economy and local livelihoods.


[1] http://www.scmp.com/magazines/post-magazine/article/1939514/winners-and-losers-mongolias-mining-gold-rush

Climate change policies

National policies:

  1. The Comprehensive National Development Strategy 2008
  2. National Action Program on Climate Change (NAPCC) 2011
  3. Green Development Policy (GDP) 2014
  4. National Action Plan to Combat Desertification 2010 -2020
  5. The National Renewable Energy Program (2005-2020)
  6. The Mongolian Action Program for the 21st Century (MAP 21)
  7.  State Policy on Energy (2015-2030)
  8. National Biodiversity Program 2015-2025

International mitigation targets: 

  • Ratified UNFCCC in 1993
  • Ratified Kyoto Protocol in 1999

Mongolia’s INDC[1] to the United Nations Framework Convention on Climate Change (UNFCCC):

A 14% reduction in total national GHG emissions from energy, industry, agriculture, and waste sectors by 2030 (excluding Land use, land use change and forestry (LULUCF)) compared to the projected emissions under a business as usual scenario.

 Mongolia intends to include actions for mitigation in the forestry sector to reduce GHG emissions from deforestation and forest degradation by 2% by 2020 and 5% by 2030 (according to State policy on forest, 2015).


[1] Intended Nationally Determined Contribution. More information on INDCs here: http://unfccc.int/focus/indc_portal/items/8766.php

Climate change adaptation efforts

INDC includes an adaptation component. Mongolia focuses on the following sectors for adaptation:

 

  • Animal husbandry – Improve pasture management to main ecosystems
  • Arable farming – build climate resilient agriculture; use zero-tillage, increase crop variety, and implement water saving techniques.
  • Water resource management – expand protected areas such as river and headwater areas that hold 70% of water resources.
  • Forest resource management – reduce forest degradation; increase forest area up to 9.0% by 2030 and reducing forest fire affected area by 30%.
  • Natural disaster management

To implement all adaptation goals, Mongolia estimates it will need around 3.4 billion USD for funding in technology and capacity building. 

Climate change impacts

Mongolia is a land-locked country with climate fluctuations of extreme temperature and precipitation. Its geography consists of mountains, steppes, and the Gobi desert, which has rich biodiversity. Around 73% of the country’s land is agricultural land.[1] Mongolia has a small population of 3 million and livelihoods rely heavily on pastoral animal husbandry and agriculture, both of which are very vulnerable to climate change. The group German Watch ranked Mongolia the eighth most vulnerable country to direct economic losses from weather-related events.[2] Mongolia has large coal, gold, and copper reserves and the mining sector makes up around 20-30% of the country’s GDP and 89% of exports.[3] Mining activities causes air, water, and land pollution and has overexploited water resources, causing problems for Mongolia’s traditional herders.

 Main climate change impacts include:

  • Drought
  • Changes in precipitation
  • Desertification and land degradation
  • Water scarcity
  • Winter dzud –heavy snow fall and storms
  • Forest and steppe fires
  • Glacier melt
  • Flash floods
  • Human health

[1] http://data.worldbank.org/indicator/AG.LND.AGRI.ZS
[2] https://www.theguardian.com/global-development/2016/mar/10/climate-change-mongolia-destroying-pastures-nomadic-herders-dzud
[3] https://www.chinadialogue.net/article/show/single/en/8849-Mining-threatens-Mongolia-s-fragile-environmental-balance

Economic, social, and environmental impacts of climate change

Agriculture and animal husbandry:

  • 40% of Mongolians still rely on animal herding for their livelihoods. Assessments show that wheat production could decrease by 15% by 2030 due to climate change.[1]
  • In Mongolia the growing season lasts for only 90 days, and climate conditions are increasing unpredictable, affecting crop production and food security.[2]
  • The increasing frequency of climate-related natural disasters including droughts, dzud, strong winds, storms, and extreme cold temperatures cause losses in livestock. 8.5 million livestock (approximately 20% of all livestock in Mongolia) were lost in the last dzud in 2009-2010, affecting 769,000 people.[3] This cost an estimated 4% of GDP.[4]

Small and Medium-sized Enterprises (SMEs):

  • Extreme events like dzud and heat waves damage infrastructure and facilities.
  • Interruptions to business transactions.
  • Transport and logistics routes are damaged or disrupted.
  • Heightened price and market volatility.
  • Impacts on employees and consumers – lack of access to basic goods and services.
  • Lack of water and energy availability affect operations and productions.
  • Health issues from heat waves and increase of disease will cause decreases in labor and work production.

Land resources:

  • Over 70% of Mongolia’s lands are degraded from overgrazing, deforestation, and climate change.
  • Poor natural resource management has created desertification, which will worsen with climate change.
  • Land degradation also increases aridity in regional climate. Grasslands have further degraded with people’s migration to cities.

Water resources:

  • Drying up of water resources has adversely impacted the number of plants species, crop yields, and livestock quality in Mongolia. The recent surface water resource inventory confirmed that 12% of rivers, 21% of lakes and 15% of springs have dried up.[5]

[1] Mongolia INDC 2015
[2] http://www.fao.org/in-action/mongolias-farmers-build-resilience-to-climate-change/en/
[3] https://www.csrm.uq.edu.au/publications/final-report-can-traditional-livelihoods-mining-co-exist-in-a-changing-climate
[4] http://www.aljazeera.com/indepth/features/2016/10/mongolian-herders-collectivize-adapt-climate-chag-161004101523157.html
[5] Mongolia INDC 2015

International cooperation on climate change

 

Status: 2017. Inclusive of grants and loans; not an exhaustible list.

     

Partner

No. of Projects

Program /Areas of focus

Funding Amount

Duration

Funding Sources

Global Environment Facility

58

 

Biodiversity, climate change, land degradation, Persistent Organic Pollutants, Chemicals and waste

€317.16

Million

 

Ongoing

GEF Trust Fund, Special Climate Change Fund (SCCF)

 

USAID Global Climate Change Program

2

Forestry

€14.17

Million

 

USAID

UN REDD Mongolia National Program

1

 

 

€3.68 Million

2015-2018

UN-REDD MPTF, GIZ, GEF/FAO

 

Asian Development Bank (ADB)

 

 

2

Conservation of Forest Genetic Resources

 

€472,277

 

Approved 2016 – 11/2018

Japan Fund for Poverty Reduction

 

Upscaling Renewable Energy Sector Project

€1.42

Million

 

11/2016 – 7/2018

Strategic Climate Fund – SREP

 

UNDP

 

 

 

2

Ecosystem-based Adaptation Approach to Maintaining Water Security in Critical Water Catchments in Mongolia

€9.92 Million

 

2012 - 2017

Adaptation Fund, UNDP

 

Strengthening Local Level Capacities for Disaster Risk Reduction, Management and Coordination in Mongolia

€1.42

Million

2013 - 2016

TRAC, Government of Luxembourg

 

Biodiversity Finance Initiative (BIOFIN)

 

1

BIOFIN provides countries with a model to develop investment plans for the primary biodiversity-related SDG goals

€500,613

 

2015 - 2018

European Union and Governments of Germany, Switzerland, Norway and Flanders

Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ)

 

 

2

REDD+ National Forest Inventory in Mongolia

 

n/a

2014-2016

German Federal Ministry for Economic Cooperation and Development (BMZ)

 Biodiversity and adaptation of key forest ecosystems to climate change II

 

n/a

2015-2018