LocationsFrom Readiness to Action: Mongolia's Carbon Market Journey
July 28, 2026
Mongolia is entering a defining phase in its climate journey. On 2 July 2026, Parliament adopted the country's first Climate Change Law, the product of years of collaboration among government institutions, lawmakers, development partners, the private sector and civil society. This milestone comes at a pivotal moment. As Mongolia develops the enabling conditions at the national level to participate in carbon markets, accelerates its transition to cleaner energy and prepares to host the UNCCD COP17 in Ulaanbaatar from 17–28 August 2026, climate action is becoming increasingly integrated into the country's broader development agenda.
The decisions being made today on energy, land use, investment and governance will shape Mongolia’s resilience, economic competitiveness and ability to attract sustainable investments for decades to come. Mongolia’s first Climate Change Law represents a shift from fragmented climate action towards a coordinated, whole-of-government approach. It establishes a comprehensive legal framework by clarifying institutional mandates, strengthening greenhouse gas monitoring, reporting and accountability systems, guiding sectoral mitigation and adaptation planning and creating an enabling environment for climate finance.
UNDP worked alongside the Government of Mongolia to strengthen institutional capacity and provide technical support during the final stages of the legislative process. Climate legislation does not reduce greenhouse gas emissions on its own, but it provides the governance, accountability and long-term policy direction needed to mobilize public and private investment in Mongolia's low-carbon transition.
With funding from the Green Climate Fund and support from UNDP, the Ministry of Environment and Climate Change is building the institutional, technical and regulatory foundations for a transparent and inclusive carbon market aligned with the Paris Agreement. This includes developing a national carbon registry, strengthening monitoring, reporting and verification systems, establishing operational procedures for authorizing and transferring mitigation outcomes under Article 6, and preparing a roadmap to support responsible private sector participation. These are building blocks that create the enabling conditions needed for government, investors and communities in Mongolia to trade carbon credits with confidence.
Carbon market readiness only has value if it enables real investments and delivers measurable benefits for people. In Ulaanbaatar’s Chingeltei district, coal-based household heating contributes significantly to winter air pollution, with profound impacts on air quality, public health and energy security. Through UNDP’s Solar Facility initiative, implemented since 2024 in partnership with Ulaanbaatar City and the local startup URECA, households are transitioning from coal-based heating to cleaner energy solutions that combine solar panels, battery storage, electric heating systems and smart meters.
A small but transformative policy change helped unlock greater potential for household renewable energy. With UNDP’s support, Mongolia introduced a framework allowing households with small-scale renewable energy systems to sell surplus electricity back to the grid. With support from Parliament and the Ministry of Energy, this change transformed renewable energy from a household expense into a potential income-generating investment, while reducing emissions and improving air quality.
This is where climate policy begins to matter in everyday life.
Smart meters record the emissions each household avoids by not burning coal, creating the transparency needed for credible carbon credit verification. The first 68 households in the pilot have generated 392 tons of carbon credits under a Gold Standard methodology for solar heating. Revenue from selling these carbon credits will be reinvested into the Solar Facility, creating a virtuous cycle in which climate action helps finance further climate action.
Scaling that model beyond a few hundred households will take more than carbon credits. It will take commercial lenders and financial institutions willing to underwrite clean heating at the scale of a city where nearly half the population still burns coal each winter.
Mongolia hosts UNCCD COP17 this August under the theme “Restoring Land. Restoring Hope”. The gathering will focus global attention on land restoration, drought resilience and desertification, but for the Government it is also a chance to demonstrate that climate ambition is being matched by credible institutions, practical implementation and innovative financing solutions.
The Solar Facility illustrates what this transition can look like in practice. By reducing dependence on polluting fuels, improving household living conditions and generating verified emissions reductions, the initiative demonstrates how climate action can deliver both environmental and social benefits. During COP17, it will be showcased as an example of how enabling policies, market-based mechanisms and community-level solutions can work together to build resilience while mobilizing investment for sustainable development. Carbon credits generated through the initiative will also contribute to compensating for GHG emissions associated with the conference itself.
Mongolia's carbon market is still young. The registry is being built, the pipeline of investable projects is thin, and most of Ulaanbaatar's ger districts still burn coal each winter. But the foundations set this year make one thing different: there is legal and institutional architecture ready to receive the investment Mongolia needs. Whether that translates into cleaner winters for the next family in Ulaanbaatar is the only measure that will matter.
