Background

Mongolia is a landlocked country located in central Asia. It has a dry continental climate and its terrain consists of vast semi-deserts, desert plains and mountains.  Some of the most important economic sectors are mining and agriculture, accounting for around 20% and 15 % of GDP respectively. Mongolia suffers from heavy exploitation of its natural resources and owing to urbanization, air pollution in Mongolia’s cities is one of the heaviest in the world. For example, by 2010, a total of 7,359.5 thousand ha of lands were ecologically damaged, and 70% of pasture lands were overgrazed. In terms of air pollution, the capital city, Ulanbaatar,’s air pollution is six to seven times the acceptable World Health Organisation standard.  Coal and wood burning by households and coal emissions from power plants contribute to the air pollution levels.

Fossil fuel use is a significant source of energy. Coal, for example, remains a significant source of energy production in the country, accounting for 59% of total energy production, as of 2010.

Overall Fiscal Profile

Mongolia  has been running a fiscal deficit, which stood at 10.9% of GDP in 2012, fuelled by high government spending, including the Development Bank of Mongolia’s off-budget spending. However, after Parliament passed the Fiscal Stabilization Law in 2010, which included setting up a Fiscal Stabilization Fund, the government is obliged to keep the structural deficit at 2% of GDP as of 2013.

Policy and Legal Framework for a Green Economy

The Mongolian government has revised its environmental legal and strategic framework in recent years in order to better align policies with green economy principles and build the capacity to move forward on a green development path.  In 1999, the 100,000 Solar Ger National Electrification Program was launched, with the aim of providing portable photovoltaic solar home systems to 100,000 nomadic herders who lacked access to electricity. By 2012, over 67,000 solar heating systems has been sold to 60-70 per cent of Mongolia’s herders in every province of the country,  and as a result. 500,000 people now have access to electricity. The Solar Ger National Program was funded by the  Mongolian government and donors.

The National Renewable Energy Program (2005-2020) was launched by the Parliament in 2005 and aims to increase the share of renewables by 20-25% by 2020 and to decrease energy loss by 10%by the same date. In 2007, the Law on Renewable Energy introduced a feed-in tariff for renewable energies and established a Renewable Energy  Fund. In addition, a Sustainable Energy Development Council (2009) was launched. To date, Strategies for Green Public Transport and Strategies for Green Energy Systems have been conducted by the Global Green Growth Institute (GGGI). Mongolia is prioritizing a Green Economy shift across its big economic sectors such as mining and promoting environmental awareness among youth. The country is currently developing its own green economy strategy.

Fiscal Measures for a Green Economy

One of the key features of the 2007 Law on Renewable Energy is the feed in tariff program. The Law set tariffs for electricity generated by wind, hydro and solar electricity generation by grid-connected and independent power generators for at least 10 years from the date the law came into force. The Energy Regulatory Authority sets tariffs of energy generated and delivered with various limits on renewables connected to the grid/stand alone: US$ 0.08-0.95/0.08-0.10 per kWh for wind, US$ 0.045-0.06/0.05-0.06 per kWh for hydro power stations with a capacity of less than 5000kW and $0.15-0.18/0.2-0.3 per KWh for solar power.

Another initiative that has been launched is the Ulaanbaatar Clean Air Initiative, which seeks to invest funds to replace coal stoves with a cleaner, coal-based fuel that has fewer emissions. The Government of Mongolia has mobilized about $45 million in donor assistance for the initiative, of which $15 million is a credit loan from the World Bank.

In addition, the GSI reports that subsidies associated with rural electrification and resource development in rural and remote regions of Mongolia are likely substantial, though difficult to track.

Fossil Fuel Subsidy Reform

Mongolia is a fossil fuel importer and has implemented an import tax on fossil fuels, which is adjusted in order to stabilize prices. Mongolia has a liberal fossil fuel pricing system, although the Ministry of Mineral Resources and Energy can act  as a price supervisor in its function as an anti-monopoly agency. Mongolia invests in the coal industry, at a range of 11.49% of the government budget, as of 2011.

 Additional Reading

UNEP, The Ministry of Nature, Environment and Tourism UNDP. 2009 Mongolia: Assessment Report on Climate Change Retrieved from: http://www.unep.org/pdf/MARCC2009_BOOK.pdf

UNDP, Mongolia’s Sustainable Development Agenda: Progresses, Bottlenecks and Vision for the Future. Retrieved from: http://www.mn.undp.org/content/dam/mongolia/Publications/Environment/rio_report_mongolia_eng.pdf

World Bank, Mongolia: Portable Solar Power for Nomadic Herders, April 8, 2013, http://www.worldbank.org/en/results/2013/04/08/portable-solar-power-for-nomadic-herders

Renewable Energy Development in Mongolia: http://www.carecprogram.org/uploads/events/2013/ESCC-Meeting-KAZ/005_104_209_Renewable-Energy-Development-in-Mongolia.pdf

(World Bank, 2013). http://www.worldbank.org/en/news/feature/2012/04/25/curbing-air-pollution-in-mongolia-capital