Mining firms make way for shoots of green economy in Mongolia

Government faces challenge to encourage sector to adopt measures that do not help bottom line

Wednesday, 25 September, 2013 [UPDATED: 4:04AM]
Travel 13 kilometres north of Ulan Bator's city centre and you will find a new front in Mongolia's battle to develop the country: a gigantic tree nursery.
Operated by international tree-growing specialists Tree Global, it is capable of producing half a million trees a year with the potential for many more, and forms part of a newly conceived effort to put the country's environment at the forefront of policymaking. The challenge will be in encouraging a mining-focused economy to adopt measures that do not contribute to the bottom line.
Covering 1.56 million square kilometres and regarded as a country of outstanding natural beauty, Mongolia's sparsely populated landscape is nonetheless pockmarked by areas of degradation following decades of loosely regulated mining and industry.
In recent years, the environmental impact from ongoing urbanisation has also been felt, with sanitation, heating and transport infrastructure overwhelmed by demand. After last year's election and change of government, a Ministry of Environment and Green Development was created and elevated to one of four super ministries.
"Because the environment was overlooked, unfortunately we have inherited a lot of problems," Minister of Environment and Green Development Sanjaasuren Oyun said.
"While the country is overall in a relatively good environmental position, we face air pollution, river pollution, soil pollution, with mining, especially the large number of small-scale operations inherited from the 1990s. [There are] 600-plus sites that are degraded."
The impact is keenly felt in Ulan Bator, where many homes lack central heating and, during the sub-zero winter months, residents resort to burning scavenged rubbish and construction materials, resulting in noxious smoke and some of the worst air quality in Asia.
A World Bank study found residents' exposure to harmful PM2.5 particles was, on average, 10 times higher than Mongolian air quality standards. The burning of wood also contributes to deforestation, which exacerbates soil erosion and desertification in a steppe country where topsoil layers are thin and at risk.
Environmental issues have come to the forefront in Mongolia.
The potential impact of global warming is also a concern.
"Climate change is disproportionately affecting Mongolia," Oyun said. "Since the 1940s, the average temperature change is 0.7 degree Celsius. In Mongolia, it is 2.1 degrees."
She said it was "causing desertification and drying of rivers, glaciers are melting and permafrost is thawing", and nomadic herders were being affected.
Oyun said various initiatives were being implemented to tackle the problems. The package of reforms includes a series of incentives and penalties for misuse of water and waste disposal as well as tax benefits for firms investing in green technology. It also includes the introduction of environmental audits for mining projects and restrictions on mining activities.
Some of these measures build on efforts by the former government to introduce an element of environmental awareness into corporate decision-making.
Oyun said the "government will come up with a list of areas that are ecologically and environmentally important and they will be off-limits to mining", and her ministry planned to have demarcated two-thirds of the country within the next 18 months as either being suitable or unsuitable for mining activities.
By the end of this year, she hopes to have a draft proposal ready for parliament that will upgrade overall environmental standards at the mines. Her goal is to reach European Union-level compliance.
How the changes affected the mining industry "depends on what kind of operation you are running", said Chris Cowan, a director of Toronto-listed Erdene Resource Development, a specialist in mineral prospecting in Mongolia.
"For large-scale mines, water is a very big issue as water is like gold", he said, and miners would sometimes run into conflicts with herders and local governments.
Cowan said the cost of implementing new rules was no different from operations elsewhere in the world and his main concern was how the rules were interpreted, leading to confusion over where exploration could be carried out and mines developed.
Dale Choi, who runs Independent Mongolian Metals & Mining Research, said that in recent years more than 400 mining licences had been cancelled without compensation because of proximity to water sources or newly designated protected areas.
The government will also be diverting a share of revenues raised from water, hunting and forestry tariffs to local authorities for investment in environmental protection. Ultimately, the goal is to spend at least 1 to 2 per cent of annual gross domestic product on a green economy. The government hopes to work with the private sector and is launching a series of potential public-private partnerships, including the construction of reservoirs and dams to improve Ulan Bator's water supply and work on waste-water facilities.
Inside the Tree Global greenhouses, seedlings are grown for private-sector clients using a containerised process whereby the tree is moved to successively larger pots as the roots develop. Depending on the species, the trees can grow up to a metre between February and October, when they will be moved offsite for planting.
Tree Global chief executive Gregory Hess said historical survival rates for locally managed nursery-grown trees were 5 to 10 per cent but his trees were averaging above 90 per cent survival rates once planted.
The firm's trees include poplar and pine species. They are planted in sites along the Tuul River valley, which flows from northern Mongolia through the capital and at various mines around the country. They are also being used to help repopulate the forests that sporadically cover the landscape north of Ulan Bator.
"The need for trees is huge. The rate of deforestation in the northern forests and Gobi area is very high. In the north, it exceeds 80,000 hectares per year," Hess said.
"If you look at comparable forest-based economies, Germany has the same size of forest area and Germany plants between 150 million and 180 million seedlings per year. Mongolia is effectively at zero."
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