From Coal to Cattle: Why Mongolia Needs a Structural Economic Shift to Meet Its Climate Targets

Mongolia’s emissions rose 31.6% between 2017 and 2023, outpacing economic growth as coal, livestock and mining continue to anchor its development model. Meeting its 2035 climate targets will require cleaner energy, methane reduction, industrial modernisation, international finance and private investment without undermining jobs, exports and livelihoods.

Mongolia is facing a difficult development challenge: the same sectors that power its economy are also driving its greenhouse gas emissions. An Asian Development Bank (ADB) study, prepared through its Data Division within the Economic Research and Development Impact Department with inputs from the National Statistics Office of Mongolia, finds that emissions are growing faster than the economy despite improvements in efficiency. For the government, development partners and private investors, the findings suggest that Mongolia will need to modernise agriculture, mining and energy rather than rely on incremental efficiency gains if it wants to meet its climate commitments without weakening economic growth.

Economic Growth Is Still Tied to Rising Emissions

Between 2017 and 2023, Mongolia's direct sectoral emissions increased 31.6%, from 60,575 Gg of CO2 equivalent to 79,715 Gg. Over roughly the same period, real GDP grew 24.5%, meaning production-based emissions expanded faster than the economy.

This is important because Mongolia's NDC 3.0 aims to reduce greenhouse gas emissions by 30.3% by 2035 against a business-as-usual scenario through domestic action. Reductions could reach 46.3% when forest carbon sinks are included and as much as 52.8% with international support.

There has been progress in efficiency. Production-based emissions intensity measured against constant-price GDP fell from 1.45 Gg CO2eq per dollar in 2017 to 1.28 in 2023. But these improvements have not been strong enough to offset expanding economic activity.

ADB's decomposition analysis makes the problem clearer. Improved emissions intensity created a 68% downward effect on emissions, but rising final demand added 80%, while changes in production structures added another 19%. Mongolia is becoming more efficient in some areas, but it continues to expand activities that depend heavily on carbon-intensive inputs.

Livestock, Coal and Power Hold the Key

Agriculture, mining and power are at the centre of Mongolia's emissions challenge, but each requires a different solution.

In agriculture, 69.1% of direct emissions in 2023 came from enteric fermentation, mainly methane produced by livestock. Direct nitrous oxide emissions from managed soils accounted for another 21.6%. Renewable electricity alone cannot solve this problem. Mongolia needs better livestock feed, improved feed digestibility, selective breeding, better manure management and other measures that reduce methane while maintaining agricultural productivity.

Mining presents another challenge. Around 94.3% of direct mining and quarrying emissions in 2023 were methane linked to solid-fuel activities, particularly fugitive emissions from coal extraction and handling. Improving mining machinery will therefore not be enough. Methane monitoring, capture technologies and cleaner production processes will become increasingly important.

Power offers perhaps the clearest opportunity. About 90.5% of direct emissions from electricity, gas and water supply came from electricity and heat production in 2023. Expanding renewable energy and improving power-plant efficiency could reduce the sector's own emissions while also lowering the carbon footprint of industries that use its electricity.

Mongolia Is Exporting Emissions With Its Commodities

ADB finds that Mongolia's production-based emissions remained consistently above its consumption-based emissions between 2017 and 2023. This makes Mongolia a net exporter of embodied emissions: emissions are produced domestically while making commodities that are ultimately consumed elsewhere.

Interestingly, Mongolia's consumption-based emissions fell 0.58% between 2017 and 2023, even as real GDP increased 24.5%. The contrast shows that exports and international demand are important drivers of the country's carbon footprint.

Supply chains also deserve greater policy attention. Indirect emissions averaged about 27% of Mongolia's total emissions during 2017–2023. This means climate policies focused only on emissions directly generated by individual mines, factories or businesses could miss a substantial part of the problem.

For development partners, this creates opportunities to support cleaner regional supply chains, emissions measurement, renewable electricity, methane management and industrial modernisation. Cooperation with major trading partners such as China, the Republic of Korea and the Russian Federation could also help reduce emissions embedded in Mongolia's exports.

Climate Targets Can Become an Investment Strategy

For Mongolia's government, climate policy now needs to work alongside economic, industrial and investment policy. Priorities include cleaner electricity, stronger energy-efficiency standards, methane reduction in livestock and coal mining, modern industrial technologies and better measurement of supply-chain emissions.

International development partners could play a particularly important role because Mongolia's potential emissions reduction rises to 52.8% with international support. Climate finance and technical assistance could target renewable energy, grid improvements, agricultural productivity, methane reduction and industrial efficiency.

For private companies, the transition creates both opportunities and risks. Renewable power, methane monitoring and capture, energy-efficient equipment, cleaner manufacturing and carbon-accounting services could attract new investment. Companies heavily dependent on coal and emissions-intensive exports, however, may face growing transition risks as climate requirements tighten.

The central message is that Mongolia cannot simply shut down the sectors responsible for emissions. Agriculture supports livelihoods and food security, mining generates export revenues, and power supports the entire economy. The more practical strategy is to change how these sectors create economic value. If Mongolia can combine domestic reforms with international finance, cleaner technology and private investment, its climate commitments could become a pathway not only to lower emissions but also to a more productive, resilient and competitive economy.