Coal is a double-edged sword for Mongolia

By bne IntelliNews December 7, 2011

Oliver Belfitt-Nash in Ulaanbaatar -

Coal is now Mongolia's biggest earner and the country recently rose to become the biggest exporter of coking coal to China. Yet at home in Ulaanbaatar, coal is having an altogether more detrimental effect.

In winter, Mongolia's capital is the most polluted city in the world. The traditional nomadic ger tents pump out enough coal smoke to produce 14 times the World Health Organization's recommended level of particulate matter, resulting in more deaths than car accidents. For those who have driven through Ulaanbaatar's treacherous streets, this is a grave comparison to make.

To combat the growing pollution problem, an ambitious scheme is being rolled out this winter to introduce 70,000 energy efficient stoves that will cut household emissions by 90% each. Not only will the plan save lives, it marks a turning point in the country's ability to meet the needs of its people in a time of rapid change.

With funding from Millennium Challenge Account (MCA) and additional support from the Mongolian government, the stoves are sold at a heavily subsidised price and distributed through centres all around the city. A citizen of Ulaanbaatar can now pick up a brand new eco-stove for just under $20. XacBank, originally a micro-finance initiative and now Mongolia's 4th largest high street bank, leads the sales and distribution of the stoves. "We provide the loans and manage delivery of the stoves directly to their homes," says Delgerjargal Bayanjargal, XacBank's vice president of retail banking. "Since July, we have sold over 25,000 stoves. Now with sales centres throughout the city, we expect to reach our target of 70,000 next year."

Your health!

An estimated 175,000 families live in the ger districts, accounting for over half the city's population or a quarter of the whole country. As more and more people migrate to the city, the problem has gotten worse very quickly. The -40°Celsius temperatures make staying warm a necessity, and when coal or wood are not available, anything is burnt to keep from freezing. Burning plastics and tyres can be seen as black pillars of smoke swirling on the horizon - and are smelt by everyone.

A report by Simon Fraser University estimates that one in every 10 deaths can be attributed to the dire pollution in Ulaanbaatar, through respiratory illness and cardiovascular effects, including heart attacks and strokes. If the target for selling stoves is reached this year, this single project will reduce the entire city's pollution by over a fifth. This means the stoves project can technically save 1 in every 50 lives when fully implemented - a big motivator for all involved.

The benefits of such a project are not just social - the Mongolian government is in fact predicted to save money by funding this project. The World Bank estimates that Mongolia's health costs from air pollution have reached as high as $147m, or 8% of the city's GDP, creating a financial incentive behind the scheme.

Beyond the savings, XacBank is also engaging in international carbon markets to trade carbon emission offsets and generate extra revenue. "When a family switches to the energy efficient stove," says Delgerjargal, "they burn less than two-thirds of the coal and wood that they used to. The reduction in carbon emissions can be sold on the international carbon markets."

Through an agreement with Micro Energy Credits, a US organisation that links microfinance organisations to international carbon markets, XacBank expects to trade over 1m tonnes of CO2 emission offsets over the next six years. This would bring in around $10m at today's carbon prices, and add a very green feather to the bank's cap. "In 2009, XacBank became the first microfinance institution in the northern hemisphere to receive carbon revenues," Delgerjargal says proudly, "and all the revenue will be poured back into our Eco Banking department to expand our services."

Although this is a swift and effective response to the pollution, it can by no means stop the problem completely. Coal and wood will still be burnt in open furnaces for thousands of families in the city and the smoke will continue to sit heavily on residents. "This is just the beginning," admits Delgerjargal. "While this project will make a difference, we cannot solve the pollution problem in one season. In the long term, people will have to move into more energy efficient housing."

Another of the government's projects aims to do just that. The "100,000 homes" scheme will move people to the suburbs and free the city centre of congestion, pollution and health risks. But for now, the stoves offer a short-term and practical way to clean Ulaanbaatar's sooty air.

Coal is Mongolia's key resource, and huge revenues are expected over the next few decades from selling the commodity to China. For many it symbolises a fuel for developing the country's economy and lifting the living standards of all. For others, it is simply a killer.

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