World Bank Group Report Spotlights Critical Climate Challenges and Pathways to Strengthen Mongolia’s Economic Resilience

ULAANBAATAR – Mongolia faces unique challenges from both climate change and the global shift towards a low-carbon economy, underscoring the need for urgent actions to enhance climate resilience while also transitioning away from its reliance on coal as a key driver of economic activity, according to a new World Bank Group report.

The Mongolia Country Climate and Development Report (CCDR) details comprehensive reforms that complement Mongolia’s current climate and development strategies, while balancing environmental concerns with economic growth.

“While challenging, climate action presents Mongolia with opportunities to achieve important development benefits,” said World Bank Country Director for China and Mongolia, and Director for Korea Mara K. Warwick. “An effective and strategic policy that balances climate concerns with economic development objectives can help the country achieve a sustainable path that is more diversified, inclusive, and resilient.”

Already, natural disasters such as dzuds—extreme weather events marked by frigid temperatures, strong winds, and heavy snow and ice—and floods are becoming more frequent and severe, threatening livelihoods and developmental progress across the country. Climate projections indicate that the risks of dzuds and floods will progressively worsen by mid-century, with these extreme weather events potentially increasing in frequency and intensity.

At the same time, Mongolia’s dependence on coal exports exposes the economy to economic risks from the potential shift away from fossil fuels in other countries, which will reduce global demand for coal.

Simulations indicate that adaptation measures are critical because without them, the convergence of several low-probability but still plausible high-impact climatic and economic events over a period of three years could put at risk as much as 20 percent of Mongolia’s annual economic output, increasing unemployment, lowering incomes, and pushing more people into poverty.

“To achieve Mongolia’s climate and development goals, additional investment of more than $10 billion (in today’s money) is needed over the next 25 years,” said IFC’s Regional Director for East Asia and the Pacific, Kim-See Lim. “Implementing the necessary fiscal and policy reforms is crucial for mobilizing the private capital needed to accelerate the energy transition. IFC is committed to bolstering Mongolia’s sustainable-finance market through innovative instruments and programs.”

The report recognizes Mongolia’s ongoing efforts towards a green transition, including its commitment to reducing greenhouse gas (GHG) emissions by 22.7 percent by 2030, compared to a baseline scenario, which would still represent a 122 percent increase in GHG emissions since 2010. However, greater action is required to further lower GHG emissions and build nature-based carbon sinks—Mongolia currently ranks ninth in per capita emissions globally— and to strengthen the resilience of its ecosystems, people, and economy.

The report recommends a series of short- and medium-term policy actions that balance climate concerns with economic development objectives. The most immediate steps include:

Increase climate resilience and reduce emissions in rural areas by optimizing the management of its natural capital, reforming agricultural incentives and taxes, managing and restoring forests, and improving agricultural water use efficiency.
Prepare for an eventual reduction in coal demand while positioning the country as a global supplier of other minerals and related services; the report notes that while global decarbonization efforts are expected to reduce coal demand by the 2040s, posing economic risks for Mongolia, they could also boost demand for Mongolia’s copper and other minerals, thereby creating potential economic opportunities.
Implement electricity and heating tariff reform to reduce subsidies, invest in energy efficiency measures to reduce current energy system pressures, integrate energy storage, and improve grid capacity and flexibility to facilitate wind and solar deployment.
Augment and recalibrate disaster response financing, boost disaster preparedness in rural areas, and better monitor and report adaptation and decarbonization efforts.