How Mongolia is transforming natural resource revenues into sustained finance for nature

Strengthened implementation of Mongolia’s Natural Resource Use Fee Law, supported by UNDP BIOFIN, has helped mobilize nearly US$28 million in additional environmental expenditure since 2022. A new regulatory reform approved in July 2026 aims to build on these results and direct more domestic finance towards measurable biodiversity and ecosystem outcomes.

Mongolia has a long-established mechanism for turning revenues from natural resources back into investment in nature.

Under the country’s Natural Resource Use Fee (NRUF) Law, revenues generated from the use of water, forests, wildlife, plants and land are collected through local budgets, with a proportion required to be reinvested in environmental protection and natural resource rehabilitation.

But having a financing mechanism in place does not automatically mean that its full potential is realized.

For years, gaps in planning, budgeting, reporting, and implementation limited the extent to which natural resource revenues were effectively directed towards environmental priorities. Between 2016 and 2021, local environmental expenditure averaged approximately US$4.4 million per year.

Since 2022, Mongolia has been working to change that.

Strengthening the system

In 2022, with technical support from UNDP BIOFIN, the implementing Bylaw of the NRUF Law was comprehensively revised.

The reform introduced standardized planning and reporting formats, strengthened alignment with the national budget cycle and established clearer procedures for applying the minimum environmental expenditure requirements under Article 18.1 of the Law.

Importantly, the revision also expanded the use of land-fee revenues for desertification prevention, land degradation control and restoration, strengthening the connection between domestic environmental finance and Mongolia’s efforts to protect and restore its landscapes.

Another important step was the establishment of the Environmental Budget and Expenditure Database, providing a centralized system for environmental budget planning, expenditure monitoring and reporting.

But regulatory change alone was not enough.

Nationwide capacity-building and technical assistance, together with closer cooperation between the Ministry of Environment and Climate Change and the Ministry of Finance, helped translate the revised rules into local budget processes and institutionalize dedicated environmental allocations.

Photo: Capacity-building workshops for local government officials on the implementation of Mongolia’s Natural Resource Use Fee Law.

Nearly US$28 million in additional environmental expenditure

The change can now be seen in Mongolia’s environmental expenditure.

Between 2016 and 2021, average annual local environmental expenditure stood at approximately US$4.41 million.

Following the 2022 reform and subsequent technical assistance, capacity-building and improvements in planning, budgeting and reporting, average annual expenditure increased to approximately US$11.4 million between 2022 and 2025.

Over those four years, environmental expenditure reached:

• US$7.8 million in 2022
• US$11.92 million in 2023
• US$13.98 million in 2024
• US$11.84 million in 2025

Compared with the historical 2016–2021 average, this represents nearly US$28 million in cumulative additional environmental expenditure between 2022 and 2025.

The result demonstrates how strengthening an existing domestic financing mechanism can generate significantly more resources for environmental action without creating an entirely new source of finance.

Maintaining environmental finance under fiscal pressure

The mechanism was tested in 2025 amid severe fiscal pressures.

The implementation rate declined to 45.15 percent, while actual environmental expenditure fell from US$13.98 million in 2024 to US$11.84 million in 2025.

Yet expenditure remained US$7.43 million above the 2016–2021 annual average, approximately 2.7 times the historical baseline.

Natural resource use fee collection also remained strong, reaching US$80.78 million in 2025, equivalent to 95.4 percent of the annual revenue plan.

The figures suggest that despite a challenging fiscal environment, environmental expenditure remained substantially above levels recorded before the 2022 reforms.

The outlook for 2026 is also significant. The Ministry of Finance initially approved US$23.78 million for environmental protection and natural resource rehabilitation for the 2026 financial year. Following approval by local governments, the total budget allocation reached approximately US$24.95 million.

These figures represent budget allocations rather than actual expenditure, but they indicate the growing scale of domestic resources being planned for environmental action.

Turning implementation experience into further reform

The first reform was not the end of the process.

Four years of nationwide implementation between 2022 and 2025 provided valuable lessons about what was working and where further improvements were needed.

Experience highlighted the need to simplify procedures, improve expenditure classification and reporting, reduce manual data entry, connect relevant government information systems and link expenditure more clearly to the results of Mongolia’s National Biodiversity Strategy and Action Plan (NBSAP).

Drawing on these lessons, UNDP BIOFIN supported a further revision of the Bylaw implementation in 2026.

The process included extensive consultations with national ministries, provincial and local governments and other stakeholders, helping translate implementation experience into the next generation of the regulatory framework.

The revised Bylaw was approved by the Cabinet of Mongolia on 8 July 2026 and will enter into force on 1 January 2027.

From spending more to financing results

The latest reform marks an important evolution in Mongolia’s approach.

While the 2022 changes helped strengthen implementation and increase environmental expenditure, the next stage will place greater emphasis on how effectively those resources translate into biodiversity and ecosystem outcomes.

The revised framework is expected to simplify implementation, strengthen results-based planning, automate budget reporting and enable greater data exchange between tax, fiscal, Treasury and sectoral systems.

It is also expected to improve transparency and accountability and establish clearer connections between environmental expenditure and national biodiversity priorities.

The evolution reflects a broader lesson from Mongolia’s experience: mobilizing finance for nature is not only about finding new sources of money. It can also mean making existing financing mechanisms work better.

By strengthening regulation, budgeting, transparency, institutional coordination and local capacity, Mongolia has demonstrated how revenues already generated from natural resources can be more effectively channeled back into their protection and sustainable management.

With nearly US$28 million in additional environmental expenditure mobilized above historical levels since 2022, and a new regulatory framework set to take effect in 2027, Mongolia is now moving towards the next challenge: ensuring that increased domestic finance delivers measurable results for biodiversity, ecosystems and the people who depend on them.