This report has been written in 2002 for Sustainable Energy Watch (SEW) to assess Mongolian energy use in relation to its impact on Global Climate and sustainable development. SEW methodology is based on 8 indicators. For each of these indicators, the value of 1 is either the global average or the historical trend for Mongolia, while the value of 0 is the sustainability target. Both national sources and data from international organisations (World Bank, ALGAS Project) were used in the preparation of the Mongolian SEW report.

Mongolia is a large, land-locked, lightly populated eastern Asian economy sandwiched between Russia and China. Almost half of population is engaged in agriculture, particularly the uniquely Mongolian herding industry. The urban population is primarily located in the capital, Ulaanbaatar, and a few other large towns, aimag centers. The major industries outside of agriculture are cashmere processing, copper and gold mining, food processing, and the construction materials. Agriculture accounts for close to 33 percent of GDP, industry and construction for 27.5 percent, and services for about 40 percent (1998). Mining, mainly copper, provides an estimated 27 percent of the economy 's export earnings (1998). 

The Mongolian transition to market economy began in 1990. By contrast with many other transition economies, especially those from the former Soviet Union, Mongolia has suffered a smaller fall in national output, with 1999 at 93 percent of 1989 according to the October 2000 World Economic Outlook.

Mongolian economy consumes much more energy than the world. Tendency so far was to increase energy consumption. The government has declared energy saving as a major energy strategy. However, this decision has hardly been implemented. Energy consumers lack incentives for effective use of resources. End-use consumers often pay too little or do not pay at all for the energy consumed. 

Renewables are seen as one of the major way to reduce the country's dependence on energy imports. Mongolian coal is of bad quality leading to low efficiency and fast degradation of the coal-fired power plants. At the same time, Mongolia has tremendous potential for developing wind power generation and small hydro. Developing local renewable sources would decrease air pollutants, particularly CO₂ emissions. Small local renewable sources will help local authority to get independence from central electricity grid. 

To summarize, most of the positive trends you might notice are misleading and are caused by the economic crisis in Mongolia. Mongolia requires urgent steps to reduce its energy intensity and develop renewable sources of energy.