Mongolia?s natural resources are fragile and stressed by human activity, harsh winters, hot summers, and low rainfall. For over a decade, the country has been making the transition from a centrally planned to an open market economy. During this transition, its natural resources have been heavily exploited. For example, deforestation rates have risen since the mid 1990s from around 40,000 ha annually to around 60,000 ha. Now only 12.4 million ha of closed forest remain.

Urbanization has also accelerated rapidly, but environmental infrastructure, regulation and enforcement have not kept pace. The result is significant urban environmental degradation. Urban air quality is deteriorating due to increasing pollution from household heating, power generation, industry, and transport. High levels of particulates and other pollutants pose serious health risks, as indicated by the increasing number of young children with respiratory diseases. Sewerage coverage is one of the lowest in Asia, causing widespread contamination of surface and groundwater, both in Ulaan Bataar and secondary cities. Waste collection and management covers very little of the waste stream.

 The county?s deteriorating environmental situation is exacerbated by irresponsible vested interests, poor coordination among ministries and agencies, inadequate monitoring of natural resource conditions and weak enforcement of environmental regulations.

Air quality is poor due to pollution from a variety of sources including household heating, inefficient heat-only boilers which pump hot water through urban areas, power generation, industry, and increasingly, transport. High levels of particulates and other pollutants are responsible for increased health risks - indicated by the increasing number of children under the age of five suffering from respiratory diseases. Only 30 percent of the population have access to adequate sanitation, which is causing widespread contamination of surface and groundwater, both in Ulaanbataar and the secondary cities.

In the past two decades, increasing livestock numbers have degraded much of Mongolia?s grasslands, especially those around major settlements. This resulted from the decline of state enterprise employment in the 1990s, which doubled the number of herders. Natural factors, such as the harsh and dry climate, light and thin soils, and the short growing season have contributed. Livelihoods closely connected to the land have been adversely impacted.
 
The forestry sector is also rapidly approaching a crisis for which its custodians seem largely unprepared. Estimated harvesting levels average four times the sustainable annual allowable cut. Between 36 and 80 percent of the total harvest is illegal. Top-down enforcement of regulations has been ineffective and requires support from communities. If alternative sources of domestic fuel are not developed, serious fuel-wood shortages will emerge in urban areas by the end of this decade. In addition, the existing forestry industry is unable to attract the capital it needs to modernize for greater efficiency.