What COP26’s Shift Away From Coal Means for Mongolia

In early November, world leaders gathered in Glasgow, Scotland – home of the first industrial revolution – to find a tangible solution to growing climate change issues. The 26th United Nations Global Climate Change Conference (COP26) urged both developed and developing countries to shift from coal-based energy to clean energy by rewiring investments from fossil fuel to environmentally friendly solutions. As a result of this significant pledge, Mongolia and other coal-dependent countries’ long-term economic strategies will be deeply affected.

Mongolia ratified the Paris Agreement in 2016 and has been following the necessary steps by making, reviewing, and updating its Nationally Determined Contribution (NDC) every five years. Mongolia’s national concern for climate change stems from multilayered environmental problems, including air pollution, land degradation, desertification, and mining malpractices that pollute the country’s water resources.

In 2019, Mongolia’s NDC set a target to reduce total greenhouse gas emissions by 14 percent compared to “business-as-usual” levels by 2030, using integrated national and cross-sectoral planning. However, at the Climate Ambition Summit in December 2020, the then-president of Mongolia, Battulga Khaltmaa, stated that Mongolia could achieve a higher NDC target of 27.2 percent reduction in greenhouse gases if conditional mitigation measures such as carbon capture and storage and waste-to-energy technology were implemented. The Ministry of Energy, Ministry of Transport, and Ministry of Agriculture would all need to be involved in mitigation efforts.

Reducing the usage of coal at a local level is a start. Individual coal usage for cooking and heating homes can be limited at the local level because of its direct environmental effects and toxicity. However, the use of coal for energy grids will most likely continue – not just in Mongolia but in other coal power dependent countries such as Russia, China, Japan, South Korea, Australia, and more. In Mongolia and other countries, securing the financial resources to fully replace the old system of coal-fueled power plants, both at a national and local level, is a major obstacle to fully switching to clean energy by 2030.

Moreover, while coal and air pollution are closely linked, particularly in the Ulaanbaatar area, the coal sector has major economic significance in Mongolia, which gives it precedence over any other issues. The most recent developments during COP26 will challenge Mongolia’s coal sector while opening investment opportunities in clean energy, technology, and green initiatives with its partners worldwide.

During Energy Day, 40 countries, including Canada, the United Kingdom, Poland, Chile, and Vietnam, pledged to shift away from coal and fossil fuel-based investments. Moreover, in a surprise move, in addition to China’s earlier pledge to halt funding for overseas coal plants that are part of Beijing’s Belt and Road Initiative, the United States and China – the world’s two largest greenhouse gas emitters – issued a joint statement pledging to cut fossil fuel use. The joint declaration stated that “China will phase down coal consumption during the 15th Five Year Plan [which covers the period from 2026 to 2030] and make best efforts to accelerate this work.” According to the International Institute of Green Finance, China has already increased spending on clean energy initiatives.

At a time when Mongolia has been stepping up its supply of coal to China, China’s latest pledges – if followed through – are a warning sign for Mongolia’s coal sector at large.

Russia, too, has been slowly but surely formulating a climate change policy. The Carnegie Moscow Center reported, “in less than two years Russia has clearly formulated its climate priorities, including the climate emergency in its National Defense Strategy for the first time, implementing indicative planning on achieving the goals set out in its low-carbon strategy, and initiating its first projects for the transition over to green energy.”

The fact that both Russia and China are moving toward clean energy is an indication of both future challenges as well as investment opportunities.

The latest COP26 conference highlighted the vulnerabilities of coal-dependent economies, including Mongolia but also Russia, China, Indonesia, India, and more. As both developed and developing countries are urged to transform their energy sources, there must be a realistic, practical transitional period, methodology, and most importantly, financial resources to make such a switch possible.

For example, Britain, France, Germany, the European Union, and the United States pledged $8.5 billion in grants to South Africa to assist in the transition, while India, Indonesia, and the Philippines have agreed to join South Africa’s Coal Transition Program, a multibillion-dollar pilot program that can assist in the transition to clean energy. Energy analysts say that South Africa’s program is a new model, and the world is watching how South Africa will utilize these funds to determine whether moving from coal to clean energy with foreign funding is a sustainable long-term solution.

While Mongolia is not yet equipped to stop its coal-based power generation entirely, the country is working with European partners to limit CO2 emissions. Sources in the French diplomatic service stated that “France has demonstrated an increasing role in fighting deforestation, forest fires and investing in green energy and agriculture as with EU priorities towards Mongolia.”

To combat climate change, Mongolia has focused on forestry, land use, and establishing a habit of planting trees. Mongolian President Khurelsukh Ukhnaa attended the World Leaders Summit event at the COP26. During the “Action on Forests and Land Use” segment, Khurelsukh stated, “By planting a single tree, it creates the condition for other plants and bushes to grow, absorbing carbon dioxide and retaining soil moisture – contributing to the preventive action has been taken against land degradation and desertification. However, by planting hundreds and thousands of trees, it is possible to return an area to its former state, whereas by planting millions and billions of trees, it is possible to bring back health to an entire region.”

During COP26, “over 130 countries, covering 90% of the world’s forests, have committed to halt and reverse forest loss and land degradation by 2030.” Mongolia is a signatory country to this “Declaration on Forests and Land Use.”

Coinciding with the COP26, Mongolia hosted three climate change-themed forums at a national level. First, the president’s initiative, the “One Billion Tree” campaign, was well-received nationwide and joined by 21 organizations to combat desertification by pledging to plant 600 million trees. Moreover, the National Forestry Forum aimed to expand Mongolia’s forestry programs, and demonstrated the additional funding needs for significant climate change projects involving reforestation, mitigating desertification, and preserving the country’s natural habitat.

The following five to 10 years are crucial for observing where the global climate change trend is heading. While developed countries aim to tackle climate change, it raises an important question on how and whether developing countries can cope with such an acute push. Furthermore, it begs the question of whether developing countries possess the technological, economic, and financial mechanisms to meet such policy goals.

The rewiring of climate finance will force countries like Russia, China, Mongolia, Japan, and South Korea to diversify their energy sources and economic activities. As a significant coal-dependent economy, Mongolia’s strategic and global partners must step up economic cooperation with Mongolia in order to truly assist in diversifying its economy. Mongolia, in turn, can present a better business climate and regulations.