At the Government’s urging, several major development organizations, including the World Bank and GTZ, the development arm of the German Government, joined by Mongolian institutions, including micro-finance lender Xac Bank, have launched a project to improve ger stove designs, in a bid to combat air pollution at its main source – the 150,000 suburban households in Ulaanbaatar, most living in traditional Mongolian gers or single-family homes that can resemble log cabins. These neighborhoods are not linked to the city’s central heating system and burn a combination of wood and coal for heating and cooking. The poorest burn tires, trash, and whatever else they can find to stay warm during Mongolia’s frigid winters.

Coal-fired ger stoves release high levels of ash and other particulate matter (PM). When inhaled, these particles can settle in the lungs and respiratory tract and cause health problems. At two to 10 times above Mongolian and international air quality standards, Ulaanbaatar’s PM rates are among the worst in the world, according to a December 2009 World Bank report. The Asian Development Bank (ADB) estimates that health costs related to this air pollution account for as much as 4 percent of Mongolia’s GDP.

The aim of the present program is to make new stoves widely available, thereby reducing fuel consumption and emissions. In the past, similar programs met with mixed success. Now GTZ has developed a new ger stove model, which includes insulating bricks to retain heat – and thus use less fuel – and two air intake channels to raise the combustion temperature and cut emissions. The stoves can burn all types of fuel, even high quality semi-coke coal. Last year, Xac Bank adopted the fifth generation of GTZ’s stove design for an eco-loan program. Xac Bank and GTZ claim that the stove cuts fuel use by more than 50 percent, although customer feedback puts it around 30%-40%. The stoves cost around USD110.

The bank’s sales pitch does not focus on the environmental benefits, but these nevertheless help the bank finance the program: Xac sells carbon credits based on stove sales on the voluntary carbon offset market via an American company called MicroEnergy Credits.

Only a few hundred families have obtained loans for the stoves, along with other eco-products, from Xac Bank since the lending program began last December. There is optimism that more progress can be made, in part because USD30 million in Mongolia’s Millennium Challenge Account is earmarked for clean energy initiatives over the next three years.