Mongolia Country Climate and Development Report

Industry Investment Rating - The report does not explicitly provide an investment rating for the industry, but it highlights significant challenges and opportunities related to climate change and economic diversification in Mongolia [14][15][19] Core Viewpoints - Mongolia's development is uniquely challenged by climate change and the global shift toward a low-carbon economy, with a heavy reliance on coal exports to China [15][19] - The country's economy is highly carbon-intensive, with significant emissions from coal and agriculture, making decarbonization a critical but challenging task [16][55] - Climate change will increase the frequency and intensity of natural disasters like dzuds and floods, disproportionately affecting vulnerable populations and rural areas [20][38] - Decarbonization and climate adaptation measures could yield substantial benefits, including improved public health, economic diversification, and reduced air pollution [19][55][65] Climate Risks to Development - Mongolia is experiencing warmer temperatures and more volatile precipitation patterns, with average surface temperatures increasing by 2.3°C over the past century [37] - Dzuds and floods are expected to become more frequent and severe, potentially leading to significant livestock losses and economic disruptions [38][43] - A plausible worst-case scenario involving consecutive dzuds, flooding, and a loss of coal exports could result in a 20% GDP loss over three years [44][47] Climate and Development in Key Sectors Agriculture and Land Use - Mongolia's agrifood system is highly vulnerable to climate extremes, with livestock accounting for 80% of agricultural output and 25% of jobs [69][70] - Overgrazing and rangeland degradation are major issues, with livestock numbers exceeding carrying capacity and contributing to high GHG emissions [70][72] - Efficient land use allocation could increase carbon storage by 6% and double net economic returns without losing carbon storage [77][80] Water Management - Mongolia faces a growing mismatch between water demand and availability, with agriculture and mining sectors exerting significant pressure on water resources [96][98] - Groundwater is critical for domestic and industrial use, but over-reliance and poor management pose risks to water security [96][97] - Climate change will exacerbate water scarcity, with higher temperatures reducing glacier size and increasing evaporation [97][98] Mining and Energy - Mongolia's mining sector, particularly coal exports to China, is a key driver of economic growth but is vulnerable to global decarbonization trends [15][43] - The country's energy sector is highly carbon-intensive, with coal accounting for 45% of total GHG emissions, making decarbonization a significant challenge [55][56] - Transitioning to renewable energy and electrifying heating systems could reduce emissions but will require substantial investment and policy support [55][60] Managing Disaster Risk and Building Resilience - Adaptation measures, such as improved irrigation and flood defenses, could reduce the impacts of climate change by up to 25% [53][54] - Strengthening disaster risk management systems and financing mechanisms is crucial to mitigate the economic and social impacts of climate-related shocks [54][57] Financing the Transition - The transition to a low-carbon economy will require significant investment, estimated at 3.4% of GDP annually for power and heating alone [60] - Carbon pricing and targeted subsidies could help finance the transition while mitigating regressive impacts on vulnerable households [62][87] Policies, Institutions, and Regulatory Framework - Mongolia's Vision 2050 and the New Recovery Plan prioritize economic diversification, green development, and climate resilience [35] - Strengthening institutional capacity and governance is essential for effective climate action and resource management [105][113]