Mongolia
Steppe change
Over the space of a single generation, the landlocked central Asian nation of Mongolia has seen dizzying economic and social changes. In 1991, the country was communist, dominated by pastoral agriculture, and with a largely nomadic population. Less than thirty years later, a deregulated market economy is well established; heavy industry and mining for coal, copper and gold have transformed Mongolia’s exports; and rapid urbanisation has seen the capital Ulaanbaatar double in size inside just 10 years. But this neoliberal transformation has come at a heavy price - and COVID-19 has hit Mongolia hard as a result.
Mongolia's breakneck industrialisation drove double-digit GDP growth in the early part of the 21st century. But the 2008 global recession, and the associated slump in global commodity prices, caused a severe economic downturn, highlighting the fragility of commodity-led economic growth - a cycle that is now repeating itself as Mongolia struggles with a global COVID-19 recession.
Stringent containment measures have hit Mongolia's export industries hard, and the government's ability to respond to new economic challenges has been severely curtailed by the legacy of high public debt (approx 70% of GDP). Some support packages aim to provide social support to households through tax exemptions, lower fuel prices, etc, but green measures are largely absent and unconditional support has been offered to Mongolia's environmentally-damaging extractives sector.
The unpredictability of boom-bust export cycles isn’t the only problem. Traditionally known as the Land of the Eternal Blue Sky, Mongolia’s air is now amongst the most polluted in the world, thanks to heavy industry, explosive population growth, and a reliance on brown coal for heating and electricity. Meanwhile, soil degradation, over-grazing and water pollution have meant that the legendary Mongolian steppe – birthplace of Genghis Khan and one the world’s largest remaining grassland ecologies – is now rapidly turning to desert.
"I don’t know if it’s Mongolian tradition or not, but we have this attitude that no one should admit that they have problems. We’re just polishing ourselves on the outside."
Recognising that this situation was unsustainable, the Mongolian government has embraced the concept of green economy with some fervour. As a founding member of the UN Partnership for Action on Green Economy, the country’s Green Development Policy and the Sustainable Development Vision, launched 2014 and 2016 respectively, lay out a sweeping programme of change across six strategic cores, 51 targets, and 255 activities.
With $5.5 billion in support from the IMF, Mongolia now has – on paper at least – one of the most ambitious economic reform agendas in the world. An end to poverty through green jobs, the mass restoration of soil and water, and the creation of an entirely new green finance sector are all planned. Mongolia is now aiming to be placed among the top 30 countries on the Global Green Economy Index – no mean feat considering its current ranking of 79thout of 80.
Mongolia’s green national plan is best-in-class. Implementation, however, is another matter. Coal and copper exports still provide +30% of the national GDP; and alongside the green vision, other government targets include expanding coal mining to meet anticipated Chinese demand. Decarbonisation measures are conspicuous by their absence. And efforts to address growing inequality – especially amongst the new precariat of urbanising nomads – are yet to have much impact.
One of the most environmentally degraded countries in the world, Mongolia knows better than most the costs of inaction on the path to sustainability. For now, laudable legislative ambition means that at least the country is facing the right direction. How fast it can scale up its transition remains to be seen.
Policy Scores
Last updated 23 Oct 2022
Green COVID-19 Recovery
Mongolia adopted early and stringent preventative measures in response to COVID-19, closing the border with China, enforcing a strict nationwide lockdown and suspending all international travel. While this approach helped avoid the worst possible health effects of the pandemic, restricted exports and the sharp decline in global demand for commodities crippled the mining-led economy. Over the course of 2020, Mongolia issued in excess of USD$1.4 billion in fiscal stimulus or 10.3% of GDP according to the IMF, eroding the fiscal gains of the past few years and raising already high government debt.
Through a series of relief and stimulus packages, funds have largely been directed at non-health sectors, vulnerable households and businesses with measures spanning enhanced food and social welfare allowances, reduced social security contributions, tax relief, increased credit guarantees to SMEs and easing repayment terms for existing state funded mortgages. So far, no specific green stimulus or support for a green recovery is apparent as part of these economic support packages. Government support for national cashmere companies (in the form of loans to incentivise the continued purchase of cashmere at a fixed price from herders) could have indirect environmental benefits, as it coincides with a recently approved 7-year UNDP backed project to strengthen climate-resilient and sustainable herder practice and promote rangeland regeneration, aligned with Mongolia's National Action Program on Climate Change. Elsewhere, the Mongolian government is providing business-as-usual support (without green conditionality) to its environmentally-harmful extractives sector, having signed a power purchase agreement indicating plans to invest USD$600 million in a new coal-fuelled power plant fed by existing Tavan Tolgoi coal mines. Introducing a further package of support measures in December 2020, the government launched a set of utilities waivers for businesses and households, alongside a coal subsidy reducing the price of briquettes by 75 percent. These measures further entrench the countrys fossil-based economy and directly undermine incentives to invest in green initiatives.
Going forward, Mongolia faces considerable financial instability, with high levels of indebtedness amongst its peers (at approximately 70% of GDP), and constrained fiscal capacity without external support. While the pandemic has revealed the vulnerability of an economy almost entirely dependent on extractives, the opportunity to reduce this dependency has been missed so far. Reforming fuel subsidies and diversifying Mongolias energy mix are key steps which will be needed to set the economy on a greener and more fiscally sustainable path.
Mongolia adopted early and stringent preventative measures in response to COVID-19, closing the border with China, enforcing a strict nationwide lockdown and suspending all international travel. While this approach helped avoid the worst possible health effects of the pandemic, restricted exports and the sharp decline in global demand for commodities crippled the mining-led economy. Over the course of 2020, Mongolia issued in excess of USD$1.4 billion in fiscal stimulus or 10.3% of GDP according to the IMF, eroding the fiscal gains of the past few years and raising already high government debt.
Through a series of relief and stimulus packages, funds have largely been directed at non-health sectors, vulnerable households and businesses with measures spanning enhanced food and social welfare allowances, reduced social security contributions, tax relief, increased credit guarantees to SMEs and easing repayment terms for existing state funded mortgages. So far, no specific green stimulus or support for a green recovery is apparent as part of these economic support packages. Government support for national cashmere companies (in the form of loans to incentivise the continued purchase of cashmere at a fixed price from herders) could have indirect environmental benefits, as it coincides with a recently approved 7-year UNDP backed project to strengthen climate-resilient and sustainable herder practice and promote rangeland regeneration, aligned with Mongolia's National Action Program on Climate Change. Elsewhere, the Mongolian government is providing business-as-usual support (without green conditionality) to its environmentally-harmful extractives sector, having signed a power purchase agreement indicating plans to invest USD$600 million in a new coal-fuelled power plant fed by existing Tavan Tolgoi coal mines. Introducing a further package of support measures in December 2020, the government launched a set of utilities waivers for businesses and households, alongside a coal subsidy reducing the price of briquettes by 75 percent. These measures further entrench the countrys fossil-based economy and directly undermine incentives to invest in green initiatives.
Going forward, Mongolia faces considerable financial instability, with high levels of indebtedness amongst its peers (at approximately 70% of GDP), and constrained fiscal capacity without external support. While the pandemic has revealed the vulnerability of an economy almost entirely dependent on extractives, the opportunity to reduce this dependency has been missed so far. Reforming fuel subsidies and diversifying Mongolias energy mix are key steps which will be needed to set the economy on a greener and more fiscally sustainable path.
Governance
National green economy plan
Detailed and ambitious. The 2014 Green Development Policy (GDP) sets bold targets across six strategic objectives, including 30% renewables, reclaiming 70% of degraded land, and protecting 60% of the countrys water supply by 2030. Supplemented by the Sustainable Development Vision and the Law on Development Policy Planning, which spell out national conception of sustainable development across the three pillars of environment, economy and society. Delivery of this green economy vision is the challenge for Mongolia.
Detailed and ambitious. The 2014 Green Development Policy (GDP) sets bold targets across six strategic objectives, including 30% renewables, reclaiming 70% of degraded land, and protecting 60% of the countrys water supply by 2030. Supplemented by the Sustainable Development Vision and the Law on Development Policy Planning, which spell out national conception of sustainable development across the three pillars of environment, economy and society. Delivery of this green economy vision is the challenge for Mongolia.
Inclusive governance
Strong aspirations for increased inclusion of civil society, and on-going work on gender equality including solid legislation guaranteeing gender equality in all spheres, including the workplace and government policies, and a National Committee on Gender Equality chaired by the Prime Minister. No targeted policy for employee involvement in corporate governance.
Strong aspirations for increased inclusion of civil society, and on-going work on gender equality including solid legislation guaranteeing gender equality in all spheres, including the workplace and government policies, and a National Committee on Gender Equality chaired by the Prime Minister. No targeted policy for employee involvement in corporate governance.
SDG business strategy
Some private sector plans laid out in the Green Development Policy, but no overall SDG-business strategy. Emphasis on public-private partnerships for government guidance of green development, and an Eco-Label certification scheme to support business ambition on the environment.
Some private sector plans laid out in the Green Development Policy, but no overall SDG-business strategy. Emphasis on public-private partnerships for government guidance of green development, and an Eco-Label certification scheme to support business ambition on the environment.
Wealth accounting
Some mention of national wealth accounts included in the Green Development Policy, in particular natural capital and the contribution of nature to socio-economic development. Implementation so far is not clear.
Some mention of national wealth accounts included in the Green Development Policy, in particular natural capital and the contribution of nature to socio-economic development. Implementation so far is not clear.
Finance
Green finance plan
The Mongolian Sustainable Financing Initiative, launched 2013, has been a successful pathfinder for green finance, and the Green Development Policy now seeks to mainstream many of its findings to the wider national economy. Action plan includes a green credit fund, strengthened regulatory agencies, new incentive mechanisms, and new legislation to support renewables, mining rehabilitations, and sustainable investment.
The Mongolian Sustainable Financing Initiative, launched 2013, has been a successful pathfinder for green finance, and the Green Development Policy now seeks to mainstream many of its findings to the wider national economy. Action plan includes a green credit fund, strengthened regulatory agencies, new incentive mechanisms, and new legislation to support renewables, mining rehabilitations, and sustainable investment.
Green fiscal & monetary policy
No reviews found; some subsidies and fiscal incentives to encourage investment in environmental restoration. The Green Development Policy is relatively ambitious on tax, lending, and investment for sustainability, but green monetary policy still vague and aspirational; no specific targets and green procurement rules still in the planning stage.
No reviews found; some subsidies and fiscal incentives to encourage investment in environmental restoration. The Green Development Policy is relatively ambitious on tax, lending, and investment for sustainability, but green monetary policy still vague and aspirational; no specific targets and green procurement rules still in the planning stage.
Safe & accountable banks
While the Bank of Mongolia and the International Monetary Fund have conducted some formal stress tests on the Mongolian banking sector (a requirement for continued international finance), an independent stress-testing framework for the Mongolian financial system has not yet been systematically developed by the authorities.
While the Bank of Mongolia and the International Monetary Fund have conducted some formal stress tests on the Mongolian banking sector (a requirement for continued international finance), an independent stress-testing framework for the Mongolian financial system has not yet been systematically developed by the authorities.
Pricing carbon
No carbon pricing policy, trading scheme or similar.
No carbon pricing policy, trading scheme or similar.
Sectors
Green sectoral policy plan
The Standing Committee of Environment, Food and Agriculture brings together MPs and civil servants to develop green economy policy for high-impact sectors, and relevant sectoral policies include up to 70 detailed plans for green construction, transparency and accountability in mining industries, nature rehabilitation, sustainable agriculture, eco-tourism, etc. However, inter-sectoral linkages or cross-cutting themes are missing.
The Standing Committee of Environment, Food and Agriculture brings together MPs and civil servants to develop green economy policy for high-impact sectors, and relevant sectoral policies include up to 70 detailed plans for green construction, transparency and accountability in mining industries, nature rehabilitation, sustainable agriculture, eco-tourism, etc. However, inter-sectoral linkages or cross-cutting themes are missing.
Small business support
Several tools available to support SMEs on the green transition, but no distinct legal basis provided for social enterprises. Specific support for green SMEs through capacity development, preferential loans, and rental services.
Several tools available to support SMEs on the green transition, but no distinct legal basis provided for social enterprises. Specific support for green SMEs through capacity development, preferential loans, and rental services.
Carbon budgeting
No carbon budgeting policies implemented or under preparation.
No carbon budgeting policies implemented or under preparation.
Clean energy policy
The 2007 Law on Renewable Energy sets a target of 30% RE share by 2030, with tax exemptions for renewable energy technology and equipment and a specific path to 2030 through three implementation phases. However, Mongolias world-class solar potential is undercut by a lack of long-term planning, relatively low ambition, and preference for nuclear.
The 2007 Law on Renewable Energy sets a target of 30% RE share by 2030, with tax exemptions for renewable energy technology and equipment and a specific path to 2030 through three implementation phases. However, Mongolias world-class solar potential is undercut by a lack of long-term planning, relatively low ambition, and preference for nuclear.
People
Green jobs
One of the Green Development Policys six core objectives is social equality and poverty reduction through green employment, while the Sustainable Development Vision sets out a strong definition of green jobs and 36 activities to promote livelihoods that address climate change, environmental restoration, natural disasters, eco-friendly lifestyles etc.
One of the Green Development Policys six core objectives is social equality and poverty reduction through green employment, while the Sustainable Development Vision sets out a strong definition of green jobs and 36 activities to promote livelihoods that address climate change, environmental restoration, natural disasters, eco-friendly lifestyles etc.
Pro-poor policy
Some direct targeted cash transfers for vulnerable groups, and an ambitious target of ending all poverty by 2030 through phased social welfare, vocational training, and tackling income inequality. But no overall strategy found for integrating environmental vulnerability and poverty programmes.
Some direct targeted cash transfers for vulnerable groups, and an ambitious target of ending all poverty by 2030 through phased social welfare, vocational training, and tackling income inequality. But no overall strategy found for integrating environmental vulnerability and poverty programmes.
Participatory policymaking
Transparent and open government a core policy goal; strong record of promoting gender equality through legislation; and specific policies for improving livelihoods of people with disabilities, mothers with young children, elderly citizens and other vulnerable groups. However, evaluation and consultation procedures are vague.
Transparent and open government a core policy goal; strong record of promoting gender equality through legislation; and specific policies for improving livelihoods of people with disabilities, mothers with young children, elderly citizens and other vulnerable groups. However, evaluation and consultation procedures are vague.
Innovative social protection
Several new social welfare programmes were introduced under the Green Development Policy. However, these are more a reinforcement of traditional welfare models including social insurance, vocational training and productivity gains rather than innovation in social protection initiatives.
Several new social welfare programmes were introduced under the Green Development Policy. However, these are more a reinforcement of traditional welfare models including social insurance, vocational training and productivity gains rather than innovation in social protection initiatives.
Nature
Ocean & land conservation
A comprehensive national strategy on land restoration in place, but not linked to the SDGs, thereby keeping the score down. Targets include 60% of fresh water reserves under protection, and 70% of industrially degraded land restored by 2030; new legal frameworks for reducing air, water and soil pollution, and desertification & drought prevention programmes also launched. SDG 14 less relevant due to land-locked status.
A comprehensive national strategy on land restoration in place, but not linked to the SDGs, thereby keeping the score down. Targets include 60% of fresh water reserves under protection, and 70% of industrially degraded land restored by 2030; new legal frameworks for reducing air, water and soil pollution, and desertification & drought prevention programmes also launched. SDG 14 less relevant due to land-locked status.
Natural capital accounts
A broad and detailed national assessment of natural capital in place. Government policy is now targeting a wider record of natural resources, and including natural indicators in national development indicators.
A broad and detailed national assessment of natural capital in place. Government policy is now targeting a wider record of natural resources, and including natural indicators in national development indicators.
Natural capital committee
No commission or committee for natural capital or biodiversity governance currently in place.
No commission or committee for natural capital or biodiversity governance currently in place.
Nature-based fiscal reform
Some environmental taxes in place, but principally in the mining and processing sectors; local governments receive fees on natural resource usages, of which 50% must be allocated to environmental protection activities.
Some environmental taxes in place, but principally in the mining and processing sectors; local governments receive fees on natural resource usages, of which 50% must be allocated to environmental protection activities.