62821 MONGOLIA The Economic Value of the Upper Tuul Ecosystem December 2009 THE WORLD BANK © 2009 The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street, NW Washington, DC 20433 USA December 2009 All rights reserved. This study was prepared by the Social, Environment and Rural Development Unit (EASER) of the East Asia and Pacific Region, and was funded by the World Bank’s Netherlands-Mongolia Trust Fund for Environmental Reform. Social, environment and rural development issues are an integral part of the development challenge in the East Asia and Pacific (EAP) Region. The World Bank’s Sustainable Development Strategy for the region provides the conceptual framework for setting priorities, strengthening the policy and institutional frameworks for sustainable development, and addressing key environmental, social and rural development challenges through projects, programs, policy dia- logue, non-lending services, and partnerships. The EASER Discussion Paper series provides a forum for discussion on good practices and policy issues within the development community and with client countries. The publication and primary data are available online at www.worldbank.org/mn and www.worldbank.org/nemo. Suggested citation: Emerton, L., N. Erdenesaikhan, B. De Veen, D. Tsogoo, L. Janchivdorj, P. Suvd, B. Enkhtsetseg, G. Gandolgor, Ch. Dorisuren, D. Sainbayar, and A. Enkhbaatar. 2009. The Economic Value of the Upper Tuul Ecosystem. Mongolia Discus- sion Papers, East Asia and Pacific Sustainable Development Department. Washington, D.C.: World Bank. Contact details for authors: Lucy Emerton, Environment Management Group, Colombo, Sri Lanka, lucy@environment-group.org Erdenesaikhan Naidansuren, Environ LLC, Ulaanbaatar, Mongolia, erdene@environ.mn, www.environ.mn Bastiaan de Veen c/o Acacia Water, Gouda, The Netherlands, info@acaciawater.com, www.acaciawater.com Dr. Tsogoo Damdin, Maral Ganga NGO, Ulaanbaatar, Mongolia, tsogoo_damdin@yahoo.com, Dr. Janchivdorj L., Geoecology Institute, Mongolian Academy of Sciences, Ulaanbaatar, Mongolia, janchivdorj_mn@yahoo.com Suvd Purevjav, Ulaanbaatar, Mongolia, suvd@gtz-mongolia.org Dr. Enkhtsetseg Bat-Ochir, Ulaanbaatar, Mongolia, batochir@gmx.de Gandolgor Gavaa, Sustainable Tourism Development Center, Ulaanbaatar, Mongolia, ganna_gavaa@yahoo.com Dr. Dorjsuren Chimednyam, Institute of Botany, Academy of Sciences, Ulaanbaatar, Mongolia, chdorj@yohoo.com Sainbayar Damdinsuren, Ulaanbaatar, Mongolia, oin_ireedui@yahoo.com Enkhbaatar Altangerel, Geoecology Institute, Mongolian Academy of Sciences, Ulaanbaatar, Mongolia, Enkh_a@yahoo.com This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. 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Table of Contents FOREWORD .............................................................................................................................................. vii ACRONYMS AND ABBREVIATIONS................................................................................................................ ix ACKNOWLEDGEMENTS ............................................................................................................................... xi EXECUTIVE SUMMARY .............................................................................................................................. xiii INTRODUCTION: ABOUT THE STUDY .........................................................................................................xix What the study aims to achieve ........................................................................................................xix Why the study took place .................................................................................................................xix What the study focuses on .................................................................................................................xx How the study was carried out ..........................................................................................................xx Data constraints and limitations ......................................................................................................xxii How the report is structured.............................................................................................................xix 1. BACKGROUND: THE ISSUES TO BE ADDRESSED ..................................................................................... 1 Ulaanbaatar—a growing city .............................................................................................................. 1 Water security is key to Ulaanbaatar’s economic future ....................................................................... 1 Investing in ecosystems as an economic part of water infrastructure.................................................... 2 Meeting the costs of ecosystem conservation....................................................................................... 2 2. THE STUDY AREA: AN OVERVIEW OF THE TUUL BASIN ........................................................................ 5 The Tuul River.................................................................................................................................... 5 The study area .................................................................................................................................... 6 The upper basin area ........................................................................................................................... 8 The downstream area ........................................................................................................................ 13 3. UPSTREAM VALUES: LAND AND RESOURCE USES IN THE UPPER TUUL ................................................. 17 Socio-economy and land use ............................................................................................................ 17 Tourism ............................................................................................................................................ 18 Herding ............................................................................................................................................ 23 Timber and firewood ........................................................................................................................ 30 Non-timber forest products .............................................................................................................. 35 iii Mongolia – The Economic Value of the Upper Tuul Ecosystem 4. DOWNSTREAM VALUES: WATER USE IN ULAANBAATAR ....................................................................... 41 The eco-hydrology of the Tuul watershed.......................................................................................... 41 Water supplies in Ulaanbaatar .......................................................................................................... 43 Urban water values ........................................................................................................................... 45 5. ECOSYSTEM WATER SERVICES: HYDROLOGICAL CONSEQUENCES OF LAND USE CHANGE IN THE UPPER TUUL ........................................................................................... 51 Changes in the ecology and hydrology of the Upper Tuul ................................................................. 51 Future management scenarios for the Upper Tuul............................................................................. 52 The hydrological effects of land use change ....................................................................................... 55 6. ECONOMIC RETURNS TO ECOSYSTEM CONSERVATION: THE VALUE OF INVESTING IN THE UPPER WATERSHED ............................................................................................................... 61 The present value of ecosystem conservation and sustainable use ...................................................... 61 Weighing up the costs and benefits of ecosystem conservation and sustainable use ........................... 63 The distribution of conservation costs and benefits between stakeholder groups ............................... 67 7. MOVING FORWARD: INVESTING IN THE UPPER TUUL ECOSYSTEM AS AN ECONOMIC PART OF WATER INFRASTRUCTURE ............................................................................. 69 Factoring the Upper Tuul ecosystem into water infrastructure planning............................................ 69 Stimulating private and public investment in ecosystem conservation............................................... 70 ANNEX: SUMMARY OF METHODS AND ASSUMPTIONS ................................................................................ 73 The eco-hydrological model .............................................................................................................. 73 Assumptions used for economic valuation and scenario modeling .................................................... 78 REFERENCES ............................................................................................................................................. 81 MAPS Map 1: Location of the Tuul Basin in Mongolia ............................................................................... 5 Map 2: Tuul Basin............................................................................................................................ 6 Map 3: Sub-basins of the Upper Tuul Basin ..................................................................................... 6 Map 4: Hydrology of the Upper Tuul Basin ..................................................................................... 7 Map 5: Study area ............................................................................................................................ 8 Map 6: Vegetation of the Upper Tuul Basin.................................................................................... 10 Map 7: Management and use zones in Gorkhi-Terelj National Park and Khan Khentii Strictly Protected Area ................................................................................. 11 Map 8: Topography and elevation of the Upper Tuul Basin ............................................................ 12 Map 9: Major zones of human influence and management in the Upper Tuul Basin ...................... 13 Map 10: Land cover and land use in the Upper Tuul ........................................................................ 19 Map 11: Tourist camps in the Upper Tuul........................................................................................ 20 Map 12: Location of tourist camps in the Upper Tuul ...................................................................... 21 Map 13: Pasture use in the Upper Tuul ............................................................................................ 25 Map 14: Timber use in the Upper Tuul ............................................................................................ 32 Map 15: NTFP use in the Upper Tuul ............................................................................................. 37 iv Table of Contents FIGURES Figure 1: Scope of the study ..............................................................................................................xxi Figure 2: New fences being constructed in the outskirts of Ulaanbaatar in anticipation of land privatization ................................................................................... 14 Figure 3: Dairy cattle being watered in the Gachuurt Tuul River ...................................................... 15 Figure 4: Land cover and land use in the Upper Tuul ........................................................................ 18 Figure 5: Number of tourist establishments by type and location in the Upper Tuul ......................... 21 Figure 6: Number of tourist beds by type and location in the Upper Tuul......................................... 21 Figure 7: Share of bednights by type of tourist establishment ............................................................ 22 Figure 8: Share of income by type of tourist establishment................................................................ 22 Figure 9: Tuul River and tourist camp............................................................................................... 24 Figure 10: Ger camp, Gorkhi-Terelj National Park ............................................................................. 24 Figure 11: Terelj town ......................................................................................................................... 24 Figure 12: Horse riding by Turtle Rock ............................................................................................... 24 Figure 13: Percentage of household participating in livestock product use and sale in the Upper Tuul ........................................................................................................ 27 Figure 14: Average annual value of household livestock production in the Upper Tuul ....................... 29 Figure 15: Share of livestock products in total herding income ........................................................... 29 Figure 16: Erdene herders’ homestead ................................................................................................. 29 Figure 17: Nalaikh herders’ settlement ................................................................................................ 29 Figure 18: Permanent grazing area, Tereljiin shugui ............................................................................ 30 Figure 19: Erdene winter grazing area ................................................................................................. 30 Figure 20: Composition of forest cover in the Upper Tuul .................................................................. 30 Figure 21: Siberian Larch (Larix sibirica) in Gorkhi-Terelj National Park— A timber species ................................................................................................................. 34 Figure 22: Willow (Salix mongolica) along the banks of the Tuul River— A firewood species .............................................................................................................. 34 Figure 23: Harvesting of dead trees in burnt-out forest in Bugatiin am ............................................... 34 Figure 24: Small truck used to transport timber and firewood to Ulaanbaatar and Nalaikh.................................................................................................... 34 Figure 25: Local household participation in NTFP harvesting in the Upper Tuul ............................... 36 Figure 26: Edible mushroom Agaricus silvaticus ................................................................................. 39 Figure 27: Siberian pine nuts .............................................................................................................. 39 Figure 28: Lingonberry or Cowberry Vaccinium vitis-idaea ................................................................ 39 Figure 29: NTFPs from the Upper Tuul marketed as medicinal plants ................................................ 39 Figure 30: Runoff components in Tuul River flow at Ulaanbaatar ....................................................... 41 Figure 31: Flood frequency analysis for the Tuul River at Zaisan ......................................................... 42 Figure 32: Low flow frequency analysis for the Tuul River at Zaisan ................................................... 42 Figure 33: Water supplied by USAG, 2007 ......................................................................................... 44 Figure 34: Water demand in Ulaanbaatar by user group, 2007............................................................ 45 Figure 35: Expanding zones of human influence in the Upper Tuul Basin........................................... 54 Figure 36: Changes in land cover under future Upper Tuul management scenarios ............................. 56 Figure 37: Predicted runoff parameters in the Upper Tuul over the next 25 years ................................ 57 Figure 38: Runoff scenario prediction for the Upper Tuul in 25 years time ......................................... 58 Figure 39: Water demand and availability in Ulaanbaatar under different future management scenarios........................................................................................................ 60 Figure 40: Upstream and downstream values under different future management scenarios........................................................................................................ 61 v Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 41: Present value of land, resource, and water benefits under different future management scenarios ............................................................................... 63 Figure 42: Conservation “value-added” or “cost-avoided” including land/resource use opportunity costs.................................................................................... 64 Figure 43: Conservation “value-added” or “cost-avoided” including protected area management costs .............................................................................................................. 65 Figure 44: Net present value of ecosystem conservation and sustainable use ........................................ 66 Figure 45: Distribution of stakeholder values under different future management scenarios........................................................................................................ 68 TABLES Table 1: Distribution of the human population in the Upper Tuul.................................................... 17 Table 2: Gross revenues from tourist enterprises in the Upper Tuul ................................................... 22 Table 3: Government revenues from tourism in the Upper Tuul ....................................................... 23 Table 4: Characteristics of herders in the Upper Tuul ........................................................................ 26 Table 5: Value of livestock production in the Upper Tuul.................................................................. 28 Table 6: Growing stock of natural forest in the Upper Tuul according to species and zone .................................................................................................................. 31 Table 7: Harvest of timber and firewood harvests in the Upper Tuul ................................................. 33 Table 8: Value of timber and firewood harvests in the Upper Tuul .................................................... 34 Table 9: Commonly harvested non-timber forest products and main harvest periods ........................ 35 Table 10: Value of NTFP harvests to local households in the Upper Tuul ........................................... 38 Table 11: Value of pine nut harvests to middlemen in the Upper Tuul ................................................ 38 Table 12: Summary of the current value of Upper Basin land and resource uses .................................. 40 Table 13: Water capacity in Ulaanbaatar City, 2007 ............................................................................ 44 Table 14: Water demand in Ulaanbaatar by user group, 2007 ............................................................. 45 Table 15: Water tariffs in Ulaanbaatar ................................................................................................. 46 Table 16: Value of domestic water use ................................................................................................. 47 Table 17: Value of industrial and commercial water use ...................................................................... 48 Table 18: Value of agricultural water use ............................................................................................. 49 Table 19: Water use values in Ulaanbaatar........................................................................................... 49 Table 20: Characterization of current status of zones of human influence in the Upper Tuul Basin........................................................................................................... 53 Table 21: Summary of possible future management scenarios for the Upper Tuul ............................... 55 Table 22: Predicted runoff parameters in the Upper Tuul over the next 25 years ................................. 57 Table 23: Impacts of hydrological and ecological change on groundwater availability after 25 years ...................................................................................................... 59 Table 24: Upstream and downstream values under different future management scenarios ......................................................................................................... 62 Table 25: Net present value of ecosystem conservation and sustainable use as compared to continuation of the status quo and scenario of no protection in the Upper Tuul ...................................................................................... 66 Table 26: Distribution of stakeholder values under different future management scenarios ................. 67 vi Foreword T he calculation of ecosystem values adjacent to Ulaanbaatar and its highest-value has been influential in decisions on resource—water—is something which more than the management of natural resources 1 million people use every day, the results and around the world. It is a well-estab- recommendations need the close attention of the lished approach which is used to inform a wide va- national and municipal governments, NGOs, riety of development initiatives. It has not however, academics and the citizens of Ulaanbaatar. until now, been undertaken in Mongolia. In an effort to translate the report’s find- The genesis of this innovative piece of work ings into action, we intend to support the full was the high-level environment meeting between dissemination not only of the Mongolian and the Government of Mongolia and its Donor English versions of the report, but also of the pri- Partners held in October 2006. This meeting mary data which will be made available through discussed the great values of Mongolia’s ecosystems the websites of the World Bank Mongolia office and natural resources, and the Deputy Minister (www.worldbank.org.mn) and NEMO (www. of Finance told the meeting that no valuation was worldbank.org/nemo). We hope this report will available to help assess the appropriate investment generate a renewed focus and enthusiasm for the needs for resource protection and management in active management and protection of the Upper Mongolia. Tuul Valley. The NEMO2* team took the above state- ment as a challenge. Despite limited availability Ede Ijjasz-Vasquez and quality of data, an attempt was launched to Sector Manager for Sustainable Development do such an economic valuation. The resulting The World Bank, Beijing report now shows that this was the right deci- sion. The work focused on the Upper Tuul valley, Arshad Sayed arguably the most important ecosystem in the Mongolia Resident Representative & country because it serves as the source of all of Country Manager Ulaanbaatar’s water and as a major domestic and The World Bank, Ulaanbaatar international tourism center. With a combination of household interviews, local government data, primary data collection, computer modeling, and good GIS analysis, a conservative yet considerable * The second phase of the Netherlands-Mongolia Trust Fund estimate of the value of the Upper Tuul ecosystem for Environmental Reform jointly executed by the Ministry of has resulted. Since the study area is immediately Nature, Environment and Tourism and the World Bank. vii Acronyms and Abbreviations FUT Flows under threshold GEF Global Environment Facility GIS Geographic Information System ha Hectare hh Household IDA International Development Association MFALI Ministry of Food, Agriculture and Light Industry NEMO Netherlands-Mongolia Trust Fund for Environmental Reform NPV Net present value NTFP Non-timber forest products OSNAAG Housing and Public Services Company POT Peaks over threshold PV Present value SEU Sheep equivalent unit (goat = 0.9 SEU, cow = 6 SEU, camel = 5 SEU, horse = 7 SEU) Tug Mongolian Tugrig (US$1 = Tug 1,500 used in study) USAG Ulaanbaatar Water Supply and Sewerage Company ix Acknowledgments E normous thanks are due to the entire National Project Director, D. Idevkhten, and the team for their diligence and for their in- help throughout from the NEMO2 Coordinator novative approaches to the questions and for World Bank-executed projects, B. Enkhtsetseg. problems encountered. Many government departments generously pro- vided data, comments and other expert advice to The study benefited from the assistance of the study. many people. Thanks are due to Mark Johnstaad who supported the tourism team, Albert Tuin- The work was managed by Tony Whitten, hof who supported the eco-hydrology team, and Environment Sector Coordinator (Mongolia), of Stefano Pagiola and Glenn-Marie Lange of the the Social, Environment and Rural Development World Bank who served as peer reviewers. Within Unit of the East Asia and Pacific Region assisted the Ministry of Nature, Environment and Tourism throughout by Judith Schleicher of the same Unit acknowledgment is made of the close interest and and Erdene-Ochir Badarch, Environment and Ru- encouragement of the Vice Minister and NEMO2 ral Development Officer in our Ulaanbaatar office. xi Executive Summary T he Economic Value of the Upper Tuul improved budget allocations for the conservation Ecosystem in Mongolia reports on a of the Upper Tuul. study carried out under the auspices of the World Bank and the Government of Integrating eco-hydrological and economic Mongolia. The goal of the study was to improve un- valuation techniques, the study traces through the derstanding about the economic value of the Upper biophysical effects and socioeconomic impacts of Tuul ecosystem for Ulaanbaatar’s water supplies and future land and resource degradation, and ecosys- how this might be affected by different land and tem conservation, in the upper watershed. resource management options in the future. The study also aims to develop and apply Water security is key to ecosystem valuation methods that can be used Ulaanbaatar’s economic future more widely in the country, to generate informa- tion about the contribution of the environment to More than one million people, 20,000 industries the Mongolian economy, and to make the case for and businesses, 400 hectares of irrigated farms, Results overview. The study found that the land and resources of the Upper Tuul currently contribute income and marketed products worth around Tug 28 billion per year in tourism, herding, and forest-based sectors. Meanwhile, the value of water use in Ulaanbaatar is estimated to be worth Tug 90 billion a year at the minimum. Conservation of the two protected areas that cover most of the upper watershed of the Tuul River, Gorhki-Terelj National Park and Khan Khentii Strictly Protected Area, has a high economic value because it helps to safeguard downstream water supplies to Ulaanbaatar. Overall, improved, conservation of the Upper Tuul ecosystem is estimated by the study to be worth some Tug 1,370 billion in present value terms, through the provision of water, tourism, herding, and forest products. In contrast, continuing ecosystem degradation and biodiversity loss will prove extremely costly in terms of water and other services lost. Even taking into account the costs of the additional protected area budgets and the losses in value that would be required to bring land and resource uses to ecologically sustainable levels, conservation would give rise to substantial economic gains over a situation where the ecosystem is further degraded. The study shows that if the Upper Tuul ecosystem continues to be degraded, the loss of water, pasture and forest products will cost the Mongolian economy a total of Tug 400 billion over the next 25 years. Conservation is estimated to generate an additional Tug 76 billion net present value over 25 years as compared to continuing gradual degradation of the watershed, and Tug 125 billion over and above a situation of no protection. As compared to the current situation, the study findings suggest that every Tug 1 invested in the conservation of the Upper Tuul ecosystem has the potential to generate an additional Tug 15 in water, land, and resource use benefits over the next 25 years. By the end of the period modelled, conservation will be generating ecosystem services worth Tug 55 billion a year more than would be the case than if the Upper Tuul was not protected. This figure will keep on rising, as land and resource uses and water availability are sustained (rather than degraded) into the future. xiii Mongolia – The Economic Value of the Upper Tuul Ecosystem 330,000 livestock, and 3 power plants in Ulaan- abrogate the need to develop additional water sup- baatar depend on water supplied from the Upper plies. The sustainable management of the Upper Tuul. Annual demand for water is in excess of 77 Tuul is however an essential (and economic) part million cubic meters, most of which is supplied of any water sector investment plan, whether it is by the Ulaanbaatar Water Supply and Sewerage based on groundwater or surface water or both. Company. The total value of water use is estimated at almost Tug 90 billion a year. Around two-thirds The Tuul River and its main tributary, the of this value accrues to domestic consumers. Terelj, as well as around 40 other smaller rivers, streams, and lakes are fed by rainfall, snowmelt, Groundwater tables in Ulaanbaatar have been and groundwater and drain the southern slopes showing a marked decline over the last 50 years. of the Baga Khentii to the northeast of Ulaan- Water is being abstracted faster than the rate of baatar. The Upper Tuul Basin, where these rivers recharge. As the city grows, and water demand rise, covers a total area of just over 5,000 square increases, this problem is intensifying. According kilometers. to government figures, water use is estimated at 212,000 cubic meters per day and is predicted to Ulaanbaatar’s current and future water sup- reach 286,000 cubic meters in 2010, 438,000 cubic ply options depend wholly on the Tuul River. To meters in 2020, and 708,000 cubic meters by 2050. date the city has been supplied via deep wells that draw on groundwater sourced from an unconfined Yet existing wells, even at full capacity, are aquifer that runs along the bed of the river. Future designed to supply only around 300,000 cubic possibilities for augmenting these supplies depend meters per day. Demand for water is beginning either on tapping the surface water of the river or to outstrip the supply of existing wells. Seasonal on exploiting additional alluvial-proluvial deposits water shortages are growing ever more common, from the Tuul’s tributaries. and various studies warn that sometime within the next 10 years the city will be facing a critical Ecological conditions in the upper watershed shortfall in water availability. have a direct link to the availability of surface water and groundwater downstream. Natural In response, measures are being set in place vegetation is particularly critical since it influences to manage water demand, improve water use interception, runoff, and discharge over the course efficiency, and deal with problems of leakage in of the year. The extent and quality of forests, the system. On the supply side, the options that grasslands, and soils affect the Tuul River’s mean are being considered include plans to tap into flow and flow duration, influence the timing and new groundwater supplies, develop surface water intensity of peak and low flows, and determine storage reservoirs, increase wastewater treatment the extent and rate of groundwater recharge. They and re-use, and apply artificial borehole recharge also impact on the silt and sediment loads that are techniques. carried downstream. Most basically, a healthy upstream ecosystem Downstream water availability is helps to ensure clean, regular, and adequate river linked to the status of the upper flow and groundwater resources for Ulaanbaatar. catchment ecosystem The planned actions to improve Ulaanbaatar’s Lands and resources in the Upper water supplies also emphasize the importance Tuul are subject to intense and of protecting the city’s watershed, and develop- growing pressures ing integrated water resource management in the Tuul River Basin. Watershed conservation alone is More than three-quarters of the Upper Tuul Basin going to neither ensure future water security nor have been officially designated as two conservation xiv Executive Summary areas: Khan Khentii Strictly Protected Area and settlements and tourist developments, are increas- Gorkhi-Terelj National Park. Although, at least in ingly moving northwards along the Tuul and Terelj principle, a variety of environmental regulations Rivers into Khan Khentii Strictly Protected Area. and land and resource use restrictions govern the The spread of humans into the upper watershed protected areas and the upper basin, in reality hu- is being accompanied by ever-greater exploitation mans heavily utilize large parts of the area. Around of timber and non-timber products as previously 2,600 people and 50,000 livestock live perma- unused areas become more accessible and resource nently in the Upper Tuul, and each year more demands grow. than 130,000 domestic and foreign tourists visit its 180 camps and hotels. The dependence and impact by all on the natural ecosystem is heavy. There are substantial economic Every year, almost one million tourist bednights values to be gained from conserving are spent in the Upper Tuul; around 170,000 hect- the Upper Tuul for downstream ares of land are used for grazing; just under 8,500 water supplies cubic meters of firewood and 3,300 cubic meters of timber are felled; and almost 20,000 kilograms The study modeled the hydrological effects of of fruits, berries, wild vegetables, pine nuts, and ecosystem change. Three scenarios were projected medicinal plants are harvested. for the next 25 years: (a) gradual ecosystem deterioration (a continuation of the status quo), Unsurprisingly, the value of these land and (b) rapid resource depletion and land degrada- resource uses is immense: it is estimated to gener- tion, and (c) conservation and sustainable use. ate gross income in excess of Tug 28 billion per These scenarios were based on different rates and year. The bulk of this value, 80 percent or more, trajectories in the expansion of human influence accrues to the companies and entrepreneurs who into the Upper Tuul. operate tourist establishments or who are engaged in the timber and non-timber forest products Results show that, as the Upper Tuul eco- (NTFP) trade. The Upper Tuul land and re- system is degraded and land cover is lost, average sources generate income and subsistence products runoff will increase and the river’s mean annual worth about Tug 4 billion per year for local com- maximum and low flows will be intensified. Di- munities, and contribute around Tug 500 million minished discharge will lead to a further lowering in revenues to the Erdene Soum and Nalaikh of the groundwater table. Daily water losses would District Administration, and to the protected area be registered in Ulaanbaatar over time. In contrast, authorities. under a scenario of conservation and sustainable use, there would be no appreciable distortion of Human influence is extending into the Upper the Tuul River’s base flow, and groundwater levels Tuul, transforming the landscape and exerting se- would not be affected significantly. vere pressure on the natural ecosystem—and thus on the water services it provides. As each wave of Weighing up the gains (sustained water land use change expands into the upper watershed, values in Ulaanbaatar) and losses (reductions in it is opening up the area (and displacing prior the value of land and resource use in the upper land uses) for further changes. Permanent hous- watershed, and increased investments in pro- ing and dense areas of settlement are spreading tected area management in the upper watershed) toward the southern buffers of the Gorkhi-Terelj implied by conserving and sustainably using the National Park from the direction of Gachuurt, Upper Tuul shows that this is the most economi- Ulaanbaatar, and Nalaikh. This in turn is pushing cally beneficial of the three future management tourist development further and further toward scenarios. the north of Gorkhi-Terelj National Park and into southern parts of Khan Khentii Strictly Protected The conservation and sustainable use scenario Area. Herders, losing their permanent pastures to is estimated to yield a present value (PV) of Tug xv Mongolia – The Economic Value of the Upper Tuul Ecosystem 1,370 billion over 25 years. This is appreciably Although it is clearly in the broader public higher than the present values generated under interest to conserve the Upper Tuul ecosystem either a continuation of the status quo (Tug 1,293 and to the benefit of water users in Ulaanbaatar, billion) or a scenario of rapid ecosystem degrada- it is not in the immediate financial interest of tion (Tug 1,243 billion). Looking at the additional the people who use its land and resources. It is water values generated, the study findings suggest neither realistic nor equitable to expect people that every Tug 1 invested in conserving the Upper in the upper watershed to subsidize the provi- Tuul ecosystem would generate economic benefits sion of water benefits for the inhabitants of of more than Tug 15. Ulaanbaatar. Clearly, ecosystem conservation generates the A key challenge emerges: to generate funds to greatest economic gains for the Upper Tuul Basin ensure adequate public investment in ecosystem as a whole—the value of water benefits generated conservation and protected area management and outweighs the costs of any reduction in land and to set in place sufficient financial incentives to per- resource uses or additional management expendi- suade land and resource users in the Upper Tuul tures that are required to maintain the ecosystem to limit their land and resource uses to sustainable in a healthy state. levels. Financing watershed conservation Summary of management remains a key challenge to be recommendations and key addressed messages While the study underlines the substantial Recognize the strong economic rationale economic values that the Upper Tuul ecosystem to investing in the Upper Tuul ecosystem generates for downstream water supplies and pro- as a productive and cost-effective part of vides a strong economic rationale for its conserva- Ulaanbaatar’s water infrastructure. tion and sustainable use, this is not the end of the story. There are costs to conservation, and these Alongside measures to construct and operate the must be covered. physical infrastructure that is required to manage water demand and supplement water supply in One element of these conservation costs is the Ulaanbaatar, the study makes it clear that there is additional direct expenditures that government an urgent need—and a strong economic justifica- must make on running Khan Khentii Strictly tion—to invest in conserving and maintaining the Protected Area and Gorkhi-Terelj National Park. “natural” water infrastructure that is the Upper These have a present value of just under Tug 1 bil- Tuul ecosystem. To not do so would be extremely lion and Tug 3 billion, respectively, as compared to shortsighted and may ultimately undermine the the scenarios of continuation of the status quo and urban water security goals that so much time, no protection. effort and funding are currently being given to achieving. Another element is the opportunity costs that local land and resource users must bear through limiting their activities to ecologically sustain- Pay attention to increasing awareness and able levels. The study shows that there is a gap in understanding of ecosystem values among land and resource use values of an estimated Tug planners and decision-makers in both 4.5 billion present value between the scenarios of conservation and development sectors. conservation and a continuation of the status quo, and a difference of almost Tug 9 billion as com- Ecosystem conservation is persistently accorded a pared to a scenario of no protection. lower priority in policies, planning, and budgets xvi Executive Summary as compared to other sectors that are perceived to more income from continuing their activities as is, be more valuable in economic terms or to yield even if they are unsustainable in ecological terms. more immediate development benefits. This study Action is required to address the economic causes presents important information to show that of ecosystem degradation in the Upper Tuul and ecosystem conservation is not just a biological or to balance the opportunity costs of conservation, ecological concern but also yields high economic alongside measures to enforce more strictly the and development returns. There is a need to ensure penalties and restrictions against illegal activi- that this information and a broader understanding ties. There is a need to ensure sufficient financial of ecosystem values is shared with and understood incentives for land and resource users in the Upper by the planners and policymakers who control Tuul to carry out their activities in an ecologically budgets and make decisions about future land sustainable manner. and resource use, water infrastructure, and urban development in the Upper Tuul Basin. Identify, scope, and pilot new and additional ways of generating funding that make Ensure sufficient public budget allocations to a direct link between water services in enable effective protected area management Ulaanbaatar and ecosystem conservation in in the upper watershed. the Upper Tuul. Khan Khentii Strictly Protected Area and Gorkhi- The additional funding to cover the direct and Terelj National Park receive budget allocations that opportunity costs of conserving the Upper Tuul are far too low to enable even basic conservation will no doubt be substantial although the eco- and management activities and are dispropor- nomic benefits are also immense. There is a need to tionately small when compared with the benefits investigate extra-budgetary mechanisms for raising that they generate. There is a need to carry out a funds. The high value of water benefits gener- realistic budgeting and financial planning exercise ated—and the fact that water use in Ulaanbaatar is for these two protected areas, which should form already priced, paid for, and generates revenues— the basis of future budget allocations to upper provides opportunities for capturing these values. watershed conservation. A variety of methods have been used successfully in other parts of the world. These methods are based on some form of payment being made by water us- Identify and implement measures to cover ers to the groups who manage natural ecosystems. the local opportunity costs of conservation, There is undoubtedly potential to raise significant and provide financial incentives for and substantial funding for upper watershed sustainable land and resource use in the conservation by transferring a portion of water Upper Tuul. revenues earned, or other water-related charges and levies, to the conservation of the Upper Tuul, as a At least over the short term, most land and compensation or reward for the economic services resource users in the Upper Tuul can generate generated. xvii Introduction: About the Study What the study aims to achieve ways in which the natural environment contrib- utes to the economy. At the November 2006 Tech- The Economic Value of the Upper Tuul Eco- nical Meeting of the Government of Mongolia system in Mongolia investigates the economic and its External Partners, the Ministry of Finance consequences of different watershed management highlighted the need to articulate the broader scenarios in terms of their impacts on the provision economic values of natural resources, especially of ecosystem water services. forests, for their watershed and recreation value and how these might be affected by alternative The study’s primary objective is: land and resource uses. ■ Improve understanding of the economic value During 2007 the Government of Mongolia of the Upper Tuul ecosystem for Ulaanbaatar’s and the World Bank cooperated on an environ- water supplies and how different land and mental section of the Public Expenditure Review, resource management scenarios might affect and the Bank’s Country Economic Memorandum these values. includes innovative work on the natural “wealth” of Mongolia. Together these documents reveal a The study also aims to achieve the following: disparity between the contributions of the envi- ronment and natural resources to the economy ■ Develop and apply a practical and policy-rele- and budget allocations for their management. vant methodology for the economic valuation Clearly, there is both a need and an interest in of ecosystems for Mongolia, which could be finding ways to better incorporate environmental replicated in other watersheds of the country; values into economic and financial planning and ■ Generate information on the contribution of to reflect the economic importance of the environ- the environment to the Mongolian economy; ment in public investment. and ■ Make the case for improved budget allocations The Upper Tuul ecosystem was chosen as a and other support for the conservation of the study topic for several reasons. The current and Upper Tuul ecosystem, in recognition of the growing water shortages facing Ulaanbaatar are an economically important services it provides. urgent priority in public investment and decision- making, and a matter of great concern to most sectors of the population. In addition, the World Why the study took place Bank has long been involved in efforts to improve water supplies and sanitation in Ulaanbaatar, most The Government of Mongolia and the World notably through the First and Second Ulaanbaatar Bank initiated the study to better understand the Services Improvement Projects. At the same xix Mongolia – The Economic Value of the Upper Tuul Ecosystem time, the Government of Mongolia has requested ■ What are the economic linkages and impacts the World Bank to prepare an IDA- and GEF- of changes in the Upper Tuul? financed project on Forest Landscape Develop- ■ How do people in the upper watershed and ment and Conservation. At least some of the focus in downstream areas use and benefit from the of this project will be on the central forest block Upper Tuul ecosystem under different man- surrounding Ulaanbaatar, including parts of the agement scenarios? Upper Tuul ecosystem. The bottom line is to articulate the economic The study responds to this interest. It also ad- importance of the Upper Tuul ecosystem in terms dresses the paucity of information on environmen- of its contribution to water supplies in Ulaan- tal values in Mongolia and the lack of tried-and- baatar and through the provision of other develop- tested methodologies for calculating them. A key ment benefits. aim of the study (as stated above) is therefore not only to generate information about the economic value of the Upper Tuul ecosystem but also to How the study was carried out develop and pilot environmental valuation tech- niques that are appropriate to the specific needs Between September 2008 and March 2009, a team and conditions of Mongolia and could be applied of Mongolian experts carried out the study on more widely in other parts of the country. natural resources management, hydrology, pasture and herding, tourism and hunting, timber and fire- wood, non-timber forest products, and GIS. Two What the study focuses on international experts in environmental economics and eco-hydrology assisted them. The study calculates the economic value of the Upper Tuul ecosystem under different land and The study was carried out under the auspices resource management scenarios. It models 3 pos- of the Government of Mongolia/World Bank sible future management scenarios for the Upper NEMO II project. The Netherlands-Mongolia Tuul over the next 25 years: (a) gradual ecosys- Trust Fund for Environmental Reform (NEMO) tem deterioration (a continuation of the status was first established in April 2005, and a second quo), (b) rapid resource depletion and land phase was initiated in 2007 with funding from degradation, and (c) conservation and sustain- the Governments of Mongolia and the Nether- able use. lands and the World Bank. The overall expected outcome of NEMO II is strengthening of envi- On the eco-hydrological side, the study ascer- ronmental governance and advancing the environ- tains how the resulting changes in watershed ecol- ment and natural resources agenda in Mongolia. ogy and hydrological processes might impact on downstream water supplies to Ulaanbaatar. On the economic valuation side, it calculates the costs and Data sources benefits of these 3 management scenarios overall and for different groups of upper watershed land The study draws on government economic indica- and resource users and downstream water users. tors, water use statistics and hydrological/meteoro- logical records, data from peer-reviewed publica- As illustrated in Figure 1, the study involves tions and “grey literature”, as well as information answering four questions: gathered through consultation with government officers and other experts. Data sources are cited ■ What are the current and future management throughout the study. scenarios for the Upper Tuul? ■ What are the eco-hydrological linkages and Primary data were collected from questionnaire- impacts of changes in the Upper Tuul? based and participatory field surveys carried out xx Introduction: About the Study Figure 1: Scope of the study How will people in the upper watershed and What are the current What are the ecohydrological What are the economic in downstream areas use and benefit from and future management linkages and impacts linkages and impacts the Upper Tuul ecosystem under different scenarios for the of changes in the of changes in the management scenarios? Upper Tuul? Upper Tuul? Upper Tuul? local residents Industries What is the economic value of businesses these land and resource uses to Changes in upper government different groups? watershed land use timber and cover, resource What are the areas under different use and ecology NTFP vegetation & land uses? firewood tourism pasture Upper Tuul hunting How do changes in How do changes in upper ecosystem upper watershed land watershed land use and use and cover, resource cover, resource use and use and ecology ecology affect upstream affect downstream and downstream Ulaanbaatar hydrology? economic values? domestic water supply industrial business agricultural What is the seasonal livestock water demand and use? Changes in households downstream industries What is the economic value water availability businesses of water to different users? government by the study team. These dealt with pasture and factors influencing land and resource use in the herding, tourism and hunting, timber and non- Upper Tuul. Measurements were made of pasture timber forest products, and fuelwood in the Upper yields in order to draw conclusions on carrying Tuul ecosystem. They focused on the levels, types, capacity. Herding areas and pasture conditions and value of land and resource uses; on the people were mapped. who are carrying them out; on their environmental sustainability; and on relevant laws and custom- The tourism and hunting field study involved ary practices governing land and resource use. The a review of published and unpublished literature GIS-based maps were rendered with information and a collation of relevant government statistics collected in the field, as well as from existing data and maps, as well as meetings with the local sets for the Tuul Basin. A rapid survey was also car- administration in the Upper Tuul Basin. A list of ried out on water use in Ulaanbaatar. all tourist operators was compiled, and basic data about the operations of 104 of these enterprises was collected. Interviews were held with selected Field surveys operators to gather detailed information about tourist demand, facilities and activities offered, The pasture and herding field study involved a size and composition of the market, and prices review of published and unpublished literature and charged. The locations of tourist camps of differ- a collation of relevant government statistics and ent types were mapped. maps, as well as meetings with the local adminis- tration in the Upper Tuul Basin. Interviews with The non-timber forest products field study 27 herders, selected randomly, elicited informa- involved a review of published and unpublished tion about livestock production, sales, prices, and literature and a collation of relevant government markets, as well as a better understanding of the statistics and maps, as well as meetings with the xxi Mongolia – The Economic Value of the Upper Tuul Ecosystem local administration in the Upper Tuul Basin. ■ The eco-hydrological methodology is based Based on field observation and interviews with on a HBV model developed by the Swedish households, detailed information was gathered on Meteorological and Hydrological Institute. It species utilized, amount of products harvested, carries out 25-year daily discharge simulations home consumption and sales, types of markets, of the Upper Tuul watershed using inputs of and prices. The locations and conditions of har- rainfall, temperature, and potential evapora- vested non-timber forest products were mapped. tion. Hydrograph analysis is used to assess the impact of land use change on surface and The timber and fuelwood field study in- groundwater quantity over time. volved a review of published and unpublished ■ The ecosystem valuation methodology ap- literature and a collation of relevant government plies revealed preference, stated preference, statistics and maps, as well as meetings with the and cost-based techniques to value ecosystem local administration in the Upper Tuul Basin. land and resource uses and downstream water Based on field observation and interviews with use. The exercise calculates marginal or incre- households, detailed information was collected mental values: in other words, it looks at the on the levels and types of timber and fuelwood changes in economic value arising from dif- exploitation, species utilized, home consumption ferent watershed management scenarios over and sales, types of markets, and prices. The loca- and above the current situation. Values are tions and conditions of different forest types and modeled over a 25-year period and expressed utilization areas were mapped. as present values using a 10 percent discount rate (based on the Central Bank’s prevailing The water user in Ulaanbaatar study in- discount rate). volved a review of government statistics on current water use by different types of consumers, volume of water supplied, projected future demand, tariffs Data constraints and limitations and revenues, and water sector projects. Individual interviews were held with water users to discuss The development of appropriate hydro-ecological demand, water problems, and responses. The in- and economic valuation methodologies for the terviews covered domestic, commercial, industrial, Upper Tuul posed something of a challenge in and institutional consumers. conducting the study. There is no prior experience in carrying out ecosystem valuation in Mongolia, and both socioeconomic and biophysical data on Data analysis the Upper Tuul are extremely patchy and often inconsistent between different sources. There was The study integrates economic valuation and also limited time, funding, and other resources eco-hydrological analysis. In other words it looks with which to carry out the valuation study. at both the biophysical effects of changes in upper watershed management and their socioeconomic These constraints, combined with the urgent impacts. Key elements include: need to generate practical and policy-relevant in- formation for planning and management purpos- ■ Future ecosystem management scenarios es, meant that it was necessary to strike a balance model the changes in land cover associated between (a) putting together rapid, integrated with different levels and combinations of valuation techniques that were realistic and fea- human land and resource uses and settlement sible to carry out in practice (and which would be patterns over a 25-year period. These scenarios able to be easily adapted and replicated elsewhere and the assumptions about changes in key in Mongolia in the future), and (b) applying a parameters have been constructed based on methodology that could yield rigorous and cred- actual changes and trends observed in the Up- ible information to withstand scrutiny and that per Tuul Basin. could also point with some degree of certainty to xxii Introduction: About the Study conclusions and recommendations that would be ers’ stated willingness to pay for water, were of utility to planners and decisionmakers. therefore used as an inflator on current water tariffs. It is worth noting here that if short- The resulting methodology should be techni- ages persist, the marginal value of additional cally coherent and yield credible information. But water will also increase substantially. The water at the same time the results should be relatively values presented in the study should therefore straightforward and easily applied in situations be taken as minimum estimates. where data, capacity, time, and funds are limited ■ Valuation does not look at the stock or asset and where there is a need to generate rapid, practi- value of the ecosystem, land, and resources cal information that can be used to inform real- of the Upper Tuul. It looks at the flow of ben- world management decisions. Summaries of the efits yielded by the Upper Tuul ecosystem: the eco-hydrological model used in the study and the value of water supplies; tourism earnings; live- assumptions used in economic valuation and sce- stock production; and income from timber, nario modeling are provided in the study’s Annex. firewood, and non-forest product harvesting. ■ Economic values are expressed as gross The study ultimately represents a first attempt figures. They do not net out the costs of labor, to develop and apply ecosystem valuation methods or other inputs and factors of production used in Mongolia. Of necessity the study makes many to generate a final product or income source. assumptions and simplifications that are often In particular, the value of land and resource based on incomplete or unreliable data sets. The uses (tourism, livestock, timber, firewood, and values expressed are broad indicative estimates non-timber forest products) in the Upper Tuul based on the best information available at the look at the total flow of income and other time of the study and should not be seen as marketed products gained from the Upper exact figures. It is however hoped that as more ac- Tuul ecosystem—not at net value-added, curate and comprehensive data become available, consumer surplus, or producer surplus. Data and as capacity and understanding of ecosystem constraints and the relatively short time avail- valuation advances, the study can be updated and able to undertake the study precluded more extended accordingly. detailed calculations. ■ The ecosystem valuation exercise is a partial Particular attention is drawn to the following one. It does not cover each and every element recognized limitations: of the total economic value of the Upper Tuul ecosystem or consider all the goods and ■ Calculations of the returns to water use in services it supplies. Notable omissions include Ulaanbaatar are based on the water charges those associated with biodiversity and non-wa- levied on consumption. Currently, there ter ecosystem services. Analysis of ecosystem are insufficient data to enable a more accu- water services focuses only on water flow and rate valuation of water. There is little or no supply; it does not consider the water quality information on either the costs of water provi- and flood attenuation services that are also sion or the returns to water use in different provided by the ecosystem. activities (e.g., industry, farming and livestock production). Current tariffs are known to be highly subsidized and thus may be inaccurate How the report is structured indicators of either the marginal value of water to users or the marginal costs of its provision. ■ This Introduction looks at why, how and to In the absence of data that would permit more what ends the study was carried out. It sum- accurate estimates of water value being cal- marizes the aims of the study and provides an culated, the findings of a recent World Bank/ overview of the questions it aims to answer. Public-Private Infrastructure Advisory Facil- ■ Chapter 1 lays out the issues being addressed ity (2007) study, which looked at consum- in the study: the emerging water problems xxiii Mongolia – The Economic Value of the Upper Tuul Ecosystem in Ulaanbaatar, the importance of ecosystem ■ Chapter 6 looks at the changes in economic conservation for downstream water supplies, value that would result—overall and for dif- and the need to use economic and financial in- ferent stakeholder groups in upstream and struments to support the sustainable manage- downstream areas—from different future ment of land and resources in the Upper Tuul. management scenarios of ecosystem conserva- ■ Chapter 2 describes the Tuul Basin and the tion and degradation. Upper Tuul ecosystem and defines the bound- ■ Chapter 7 draws conclusions on the need aries of the study area. for adequate investments for conserving the ■ Chapter 3 details and quantifies the economic Upper Tuul ecosystem as an economic part of value of land and resource uses in the Upper Ulaanbaatar’s water infrastructure, and high- Tuul, including tourism, herding, timber, lights the necessity of ensuring that adequate firewood and non-timber forest products. financial and economic incentives are provided ■ Chapter 4 details and quantifies the economic in support of conservation. value of water supplies in Ulaanbaatar, includ- ■ The Annex summarizes the eco-hydrological ing domestic, industrial and commercial, and and economic methodologies used in the agricultural uses. study and lists the assumptions upon which ■ Chapter 5 models future management sce- the scenario modeling is based. narios for the Upper Tuul. It describes the ■ References and notes are found at the end of impacts of land and resource use change on the study. downstream hydrology and water availability in Ulaanbaatar. xxiv 1. Background: The Issues to be Addressed Ulaanbaatar—a growing city The Government of Mongolia has initi- ated a range of actions to ensure the city’s future By far the largest city in Mongolia, Ulaanbaatar water security. Substantial amounts of public and is the primary hub for commerce and indus- donor funds have been earmarked for address- try and generates nearly 70 percent of national ing Ulaanbaatar’s water problems. Programs are production.1 Around 40 percent of the country’s being set in place to expand urban water sup- population lives in Ulaanbaatar,2 and the number plies and manage water demand. Although the of inhabitants has shown unprecedented rates of major focus of these planned interventions is on growth—rising from just 30,000 in the mid-1940s engineering and technological solutions such as to 650,000 in 1998, to more than one million in sinking new wells and boreholes, expanding the 2009. Between 1990 and 2003, the average an- capacity of groundwater extraction systems, and nual population growth rate was almost 5 percent constructing larger water storage facilities, there (around 3 times the national average).3 The Master is also mention of the need to better manage the Plan for Ulaanbaatar City predicts that by 2020 water source itself. the number of city dwellers will have reached 1.62 million. Ulaanbaatar’s water supplies depend wholly on groundwater drawn from an alluvial aqui- fer extending along the bed of the Tuul River. Water security is key to The Master Plan for Ulaanbaatar City to 2020 Ulaanbaatar’s economic future articulates a vision for urban development, which includes protecting the city’s upper watershed,6 It is obvious that clean and regular water supplies while the National Water Program’s Water Action are absolutely critical for the health and well-being Plan for 2002–2006 details plans to develop in- of the city’s residents, as well as underpinning tegrated water resources management in the Tuul future urban growth and development. There is River Basin.7 however broad consensus that, as Ulaanbaatar continues to grow and as water demand increases, 1 Zandaryaa, and others (2003). the city’s water supply will be placed under severe 2 According to government figures released January 2009, the stress.4 The water distribution network is now population of Mongolia is 2.7 million, of whom 1,080,000 live more than 50 years old, and the existing system in Ulaanbaatar. 3 Basandorj and Davaa (2005). of wells and boreholes is being stretched beyond 4 JICA and Government of Mongolia (2007). its limits. Seasonal water shortages have already 5 For example, among others, Zandaryaa and others (2003), and become a regular occurrence. According to recent Basandorj and Davaa (2005) 6 JICA and Government of Mongolia (2007) estimates, the city will be facing severe water short- 7 Appendix to the Resolution No. 236 (2002), Government of falls by 2020, if not earlier.5 Mongolia. 1 Mongolia – The Economic Value of the Upper Tuul Ecosystem Investing in ecosystems as Meeting the costs of ecosystem an economic part of water conservation infrastructure This study shows that there is a net economic gain The Government-promoted integrated approaches from conserving the Upper Tuul ecosystem: that to water management require paying adequate at- the value of water benefits generated outweighs the tention and allocating sufficient funds for manag- costs of conservation. From an economic perspec- ing the source of Ulaanbaatar’s water supplies. This tive—one that seeks to maximize positive effects is in addition to investing in the physical infra- for society as a whole—there is a clear rationale to structure, which is required to abstract, store, treat, ensuring that the watershed is conserved and man- and distribute water to the city, and in managing aged sustainably, in the interests of downstream water demand. They are based on a recognition of water availability. This (together with the many the key role that natural ecosystems—in this case other important biodiversity and ecosystem values the forests, grasslands, and mountains of the Upper of the Upper Tuul) provides the basic economic Tuul—play in ensuring secure, clean, and regular justification for public sector investment in the two water supplies downstream. protected areas, Gorkhi-Terelj National Park and Khan Khentii Strictly Protected Area that shelters Experiences from other parts of the world the source of the Tuul River. Although ecosystem show that investing in these “natural” compo- conservation will not singly solve Ulaanbaatar’s nents of water infrastructure can yield substantial water problems, it is an essential part of future pay-offs in economic terms and save considerable water investments. costs. For example in Portland, Oregon; Portland, Maine; and Seattle, Washington, it has been found The Government is however not the only that every US$1 invested in watershed protec- group that must bear the costs of conserving the tion can save anywhere from US$7.50 to nearly Upper Tuul. In addition to the direct physical US$200 in costs for new water treatment and expenditures required to manage the protected filtration facilities.8 Through conserving upstream areas and enforce environmental regulations, forests in the Catskills range, New York City hopes there is an opportunity cost to ecosystem con- to have avoided investing an extra US$4–6 billion servation. This comprises the foregone income on infrastructure to maintain the quality of urban and revenues from land and resource use activi- water supplies.9 ties that must be reduced or stopped in order to ensure that the ecosystem continues to generate Little or no information is available on the downstream water benefits. As the study de- economic rationale to investing in natural ecosys- scribes, conservation incurs opportunity costs to tems as part of Ulaanbaatar’s future water sector the current users of Upper Tuul: those engaged development. It is against this backdrop that this in tourist development, herding, timber and fire- study was carried out, aiming to assess the value wood harvesting, and non-timber forest products of the Upper Tuul ecosystem for downstream collection. water supplies. Intentions for the study were to contribute to ongoing efforts to find cost-effective, A paradox arises. Although it is clearly in the sustainable solutions to Ulaanbaatar’s water supply broader public interest to conserve the Upper Tuul problems. It also responds to a more general inter- ecosystem, it is not in the immediate financial in- est shown by the Government of Mongolia and the World Bank in better understanding the way in which the natural environment contributes to 1 Reid (2001). the economy. 2 Isakson (2002). 2 Background: The Issues to be Addressed terests of the people who use its land and resourc- alternative sources of livelihoods and may simply es. At least over the short term, they can generate be economically unable to change their current more income and other material benefits from production and consumption patterns. continuing their activities, even if these are un- sustainable in ecological terms. In addition to an Demonstrating the economic value of the unclear financial rationale, there is little immediate Upper Tuul for downstream water supplies is gain to the land and water users for limiting their therefore not the end of the story. The study find- livelihoods or compromising their business profits ings raise an important question: How is funding in order to generate gains for water users in Ulaan- generated to enable adequate public investment in baatar. Although command and control measures ecosystem conservation and to set in place sufficient such as regulations and penalties are a core part of financial incentives for land and resource users in the any conservation strategy in the Upper Tuul and Upper Tuul to shift to a more ecologically sustainable can go some distance toward addressing illegal and mode of production? Having recognized the eco- unsustainable land and resource use, enforcement nomic rationale for investing in the Upper Tuul has proved to be difficult and costly in practice. ecosystem, a key challenge facing the Government This is one important reason why ecosystem deg- is to find ways of balancing the costs and benefits radation continues largely unchecked in the water- of conservation so as to ensure that this productive shed area. It is also the case that some community and valuable natural asset can continue to generate members who live in the Upper Tuul lack access to downstream water benefits in the future. 3 2. The Study Area: An Overview of the Tuul Basin The Tuul River the Selenge River, and ultimately feeds into Lake Baikal in Russia.11 Although the Tuul River Basin covers only 3 per- cent of Mongolia’s land area (Map 1), it contains The Tuul Basin can be divided into 9 sub- more than half of its human population. Rising basins: the Tuul-Bosgo, Terelj, Kholiin gol, Ulia- in the Khentii Mountains in the northeast of the stai, Selbe, Turgen, Middle Tuul, Lower Tuul and country (Map 2), the river has a total length of 704 Kharuukh. This study focuses on two of these kilometers and a catchment area of some 49,840 sub-basins, the Tuul-Bosgo and Terelj, the conflu- square kilometers.10 As illustrated in Map 2, the Tuul River flows south-west through Ulaanbaatar, 3 Basandorj and Davaa (2005), and Zandaryaa and others changing its direction several times before merg- (2003). ing with the Orkhon River, which then drains to 4 Zandaryaa and others (2003). Map 1: Location of the Tuul Basin in Mongolia 5 Mongolia – The Economic Value of the Upper Tuul Ecosystem Map 2: Tuul Basin Source: Basandori and Davaa (2005). ence of which forms the Tuul River (Map 3) The Map 3: Sub-basins of the Upper Tuul Basin Terelj is the largest tributary of the Tuul River, draining from a catchment area of 1,380 square kilometers on the southern slopes of the Baga Khentii range. Around 40 other rivers, streams, freshwater lakes, and ponds also feed into the Upper Tuul. Map 4 shows the hydrology of the Upper Tuul Basin. The study area The study looks at both the Upper Tuul Basin (the water source) as well as the downstream 6 The Study Area: An Overview of the Tuul Basin Map 4: Hydrology of the Upper Tuul Basin area (the water users). There are several different ment of 7,312 square kilometers.12 Sugiura and interpretations of the boundaries and area of the others (2005) delineate 5,512 square kilometers. Upper Tuul Basin in the literature. Zandaryaa and others (2003) for example cite an upper catch- 5 The Terelj, Upper Tuul, Middle Tuul and Lower Tuul. 7 Mongolia – The Economic Value of the Upper Tuul Ecosystem And both Basandorj and Davaa (2005) and Davaa Downstream area and Erdenetuya (2005) give an area of 6,300 square kilometers for the portion of the Tuul The study designates the downstream area as the strip Basin from its source to Ulaanbaatar. This study of land that stretches along the north bank of the bases its definition on these last two estimates and Tuul River from Gachuurt to the western boundary takes an area of 6,300 kilometers for the upper of Ulaanbaatar municipality. It covers 1,290 square basin and downstream area. These are defined in kilometers and includes households, businesses, and Map 5. industries that are located in Ulaanbaatar Munici- pality and peri-urban parts of Gachuurt Khoroo (a built-up area of some 225 square kilometers).13 Upper basin The Upper Tuul Basin covers 5,010 square kilome- The upper basin area ters, encompassing: The elevation of the Upper Tuul Basin ranges ■ All of Gorkhi-Terelj National Park; from 1,200 to 2,700 meters above sea level. This ■ Most of Khan Khentii Strictly Protected Area; ■ West-central portion of Erdene Soum. 6 Basandorj and Davaa (2005). Map 5: Study area The outer red line denotes the boundary of Khan Khentii Strictly Protected Area and the blue and red shapes of the Limited Use Zone and Tourism Zone denote the Gorkhi-Terelj National Park. 8 The Study Area: An Overview of the Tuul Basin altitudinal variation has led to the development of Hawk Owl Surnia ulula, Eurasian Pygmy-owl diverse habitat types,14 including high mountain Glaucidium passerinum, and Rufous-tailed Robin tundra, high mountain meadow pasture, boreal Luscinia sibilans. In excess of 50 species of mam- forest (taiga), mountain steppe, forest steppe, and mal, 5 reptiles, 4 amphibians, and 30 fish have steppe, interspersed with lakes, rivers, streams, been recorded at the site, as well as more than 200 mountains, hills, and rocky outcrops (Map 6).15 species of insect. Rare and threatened mammal More than 30 percent of Mongolia’s forest re- species found at the site include Siberian Musk sources are found in the Khentii Mountains16 with Deer Moschus moschiferus (VU), European Elk dominant species, including the Siberian Larch Alces alces, Red Deer Cervus elaphus, Brown Bear (Larix sibirica) and Siberian Pine (Pinus sibirica), Ursus arctos, Wolverine Gulo gulo (NT), Eurasian which are also rich in mosses and lichens.17 At Lynx Lynx lynx, Pallas’s Cat Felis manul (NT), Eur- lower elevations, where taiga forest meets the asian Otter Lutra lutra (NT), and Taimen Hucho steppe, mixed conifer and broadleaf forests are taimen. intermingled with grasslands. In addition to the Tuul and Terelj, two other major river systems The protected area landscape has been zoned have their sources in the area: the Onon and for management and use purposes (as shown in Kherlen, which flow east to join the Amur before Map 7), with the southern part of Gorkhi-Terelj emptying into the Pacific Ocean. National Park and surrounding buffer zone de- veloped for tourism. These areas are now densely Most of the Upper Tuul Basin has been of- populated with restaurants, souvenir shops, horses ficially designated as protected areas since the early and camels for rent, and tourist ger camps. North- 1990s. Two protected areas together account for ern portions have been designated as limited use some 80 percent of the Upper Tuul Basin. Khan zones, protection zones, and core areas. Most of Khentii Strictly Protected Area covers a total area Khan Khentii Strictly Protected Area, in contrast, of around 1.2 million hectares of the northern is zoned for protection and limited use and is as portion of the watershed and beyond, and the yet relatively undisturbed. There are few camps contiguous Gorkhi-Terelj National Park stretches in these areas, which are used sparsely for hiking, over approximately 293,000 hectares to the south trekking and horse riding. The Khentii Mountains between the Terelj and Tuul Rivers.18 According to form an effective natural barrier on the east side the 1994 Law on Specially Protected Areas, most of Gorkhi-Terelj and also hinder access from the extractive activities and construction are forbid- National Park into the south-west part of Khan den in Khan Khentii, while controlled tourism Khentii Strictly Protected Area above the Terelj and limited traditional land and resource uses are River. permitted in parts of Gorkhi-Terelj. Human influence in the Upper Tuul Basin More than 1,150 species of plants, character- is therefore largely circumscribed by the natural istic of both taiga and steppe, have been identified in the protected areas, and over 50 mammal spe- 7 Birdlife International. Directory of Important Bird Areas in cies, 253 species of birds, and 34 species of fish are Mongolia. IBA CODE: MN05 – Khan Khentii Strictly Pro- listed.19 Globally threatened species [endangered tected Area. 8 (EN), vulnerable (VU), near threatened (NT)] of Basandorj and Davaa (2005). 9 Birdlife International. Directory of Important Bird Areas in Mon- birds found at the site include the Saker Falcon golia. IBA CODE: MN05 – Khan Khentii Strictly Protected Area. Falco cherrug (EN), Lesser Kestrel F. naumanni 10 World Wildlife Fund Ecoregions Report. 11 (VU) and Yellow-breasted Bunting Emberiza au- Varying figures are cited for the areas of Khan Khentii Strictly Protected Area and Gorkhi-Terelj National Park. These data reola (VU). Cinereous Vulture Aegypius monachus were provided by Staff of Gorkhi-Terelj National Park and (NT) also occurs. The site supports an assemblage Khan Khentii Strictly Protected Area: Mr Dugersuren (Deputy of species restricted to the boreal forest (taiga) Director Administration), Mr Khandmaa (Enforcement Of- ficer), and Ms Betmuuk (Director HR). biome, including Black-billed Capercaillie Tetrao 12 Birdlife International. Directory of Important Bird Areas in parvirostris, Ural Owl Strix uralensis, Northern Mongolia. IBA CODE: MN056 – Gorkhi-Terelj National Park. 9 Mongolia – The Economic Value of the Upper Tuul Ecosystem Map 6: Vegetation of the Upper Tuul Basin 10 The Study Area: An Overview of the Tuul Basin Map 7: Management and use zones in Gorkhi-Terelj National Park and Khan Khentii Strictly Protected Area The outer red line denotes the boundary of Khan Khentii SPA and the blue line Gorkhi-Terelj National Park landscape and topography (Map 8). It is possible is evidence of increasing human influence, to delineate 4 broad zones of human influence and with grazing and resource exploitation start- management in the upper watershed, which are ing to expand northwards along the Terelj illustrated in Map 9, and will be referred to exten- and Tuul Rivers. sively in Chapter 5: Gorkhi-Terelj National Park: the Terelj River to the Tuul River Khan-Khentii Strictly Protected Area: the northern boundary of the Upper Basin to the ■ Zone III: most of Gorkhi-Terelj National Park Terelj River is accessible, and parts are showing signs of intense use and degradation. There are high ■ Zone I: the north and north-western parts of concentrations of herder settlements in eastern the Upper Basin, comprising the central por- areas, and tourist camps in the central and tion of Khan Khentii Strictly Protected Area, western areas, as well as the small commercial remain largely inaccessible due to steep slopes centers of Terelj and Bosgo. and hills and the absence of tracks or roads. There is little evidence of human influence. South-west Erdene Soum and Nalaikh: ■ Zone II: most of the south and south- Gorkhi-Terelj National Park buffers eastern portion of Khan Khentii Strictly Protected Area and a strip to the far west ■ Zone IV: the strip of land skirting the eastern, part of Erdene Soum down to the Terelj southern, and western boundaries of Gorkhi- River; although in principle accessible from Terelj National Park is comprised of a mosaic Gorkhi-Terelj National Park, it has shown of settlements and permanent pasture, with relatively few signs of disturbance. There several mines in the far south-east. This zone 11 Mongolia – The Economic Value of the Upper Tuul Ecosystem Map 8: Topography and elevation of the Upper Tuul Basin is showing signs of severe degradation, and tion of Gachuurt, Ulaanbaatar, and Nalaikh. the landscape is being rapidly transformed. Permanent grazing is carried out throughout Permanent houses and denser areas of settle- this zone, and pasturelands are heavily stocked ment are spreading toward the southern and degraded in the south-west toward Ga- buffers of the National Park, from the direc- chuurt. 12 The Study Area: An Overview of the Tuul Basin Map 9: Major zones of human influence and management in the Upper Tuul Basin The downstream area later, apartment dwellers and ger residents access and use water in very different ways. After the Tuul River leaves Gorkhi-Terelj National Park, it flows north-west and then westwards Geographically, ger settlements make up for some 50 kilometers to Ulaanbaatar. The city’s wa- 70 percent of Ulaanbaatar’s residential area.20 They ter supply depends wholly on groundwater drawn also constitute one of the most rapidly growing from the alluvial aquifer, which extends along sectors of the urban population: according to Na- the bed of the Tuul. There are 3 main categories tional Statistical Office data, the registered popula- of water user in this downstream area: domestic tion in ger settlements grew by 10 percent from user, industries and businesses, and agricultural 2000 to 2002 while the number of apartment enterprises. dwellers remained more or less stable. Current population data indicate that 60 percent of Ulaan- baatar’s inhabitants live in ger settlements. Nearly Domestic users 40 percent of the city’s residents are registered as living in apartment blocks. The population of Ulaanbaatar is estimated at 1.031 million, having grown steadily from only The de facto boundaries of Ulaanbaatar are 30,000 people in the mid-1940s, to 650,000 in extending steadily outwards as the urban popula- 1998 to just under 900,000 in 2003. The city’s tion grows and formerly unsettled areas transform residents can be differentiated between those who into suburbs and satellites of the city. In particular, live in apartments and those who reside in ger residential and commercial zones are spreading settlements. Less than 1 percent of the population lives in individual houses. As will be described 13 Herro and others (2003). 13 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 2: New fences being constructed in the outskirts of Ulaanbaatar in anticipation of land privatization rapidly along the Tuul River toward Gachuurt21 manufacturing. Over the past 4 years, the num- and along the road toward Nalaikh Town. The ber of businesses in Ulaanbaatar has increased by ongoing process of land allocation and subdivision 26 percent, and this rate of growth looks set to is hastening this process, and effecting permanent continue or even escalate.24 As well as being major changes to the landscape with fences going up, ger water users, industries contribute to the growing settlements being created, and more permanent problem of urban water pollution—the Tuul River dwellings being built (Figure 2). Basin is now characterized as the most pressured and polluted river basin in the country.25 Industries and businesses Farmers and herders Ulaanbaatar is an important hub for commerce and industry. Nearly 70 percent of national pro- The peri-urban belt around Ulaanbaatar is being duction comes from the city,22 which accounts for progressively transformed by the growth of agri- 48 percent of industrial output, 52 percent of con- culture, including both livestock and crops. These struction, 41 percent of trade, 75 percent of hotels farms provide important supplies of milk, meat, and restaurants, and 56 percent of transportation and vegetables to the city. According to official sta- and communication services.23 Official statistics tistics there are 133 farms in Ulaanbaatar covering show a total of 20,327 registered industries and 372 hectares (more than double the number that businesses in Ulaanbaatar, including major manu- existed in 2004), and almost 7,800 herders keep- facturing enterprises, which produce textiles and ing more than 330,000 livestock (Figure 3). related goods, leather and footwear, soap, paper, iron castings, cement, glassware, beer and spirits, Irrigated agriculture, in particular, is spread- and processed foods. Also located in the city are 3 ing, with implications for both water use and thermal power stations that supply electricity and hot water to its residents. 14 Zandaryaa and others (2003). 15 Zandaryaa and others (2003). 16 Herro and others (2003). Commerce is expanding, with some parts of 17 Sharav (2007). the city gradually being given over to industry and 18 Basandorj and Davaa (2005). 14 The Study Area: An Overview of the Tuul Basin Figure 3: Dairy cattle being watered in the Gachuurt Tuul River water quality. The area under irrigated crops now emphasis on expanding these farms, with ambi- accounts for around 78 percent of all urban and tious plans to construct new small-scale irrigation peri-urban farmland and has risen almost fourfold systems over coming years. Most of these will be over the last 5 years. The Government is putting sited along the Tuul River. 15 3. Upstream Values: Land and Resource Uses in the Upper Tuul Socio-economy and land use bined population of Erdene Soum (3,067 people) and Nalaikh District (28,152 people). Administratively, the Upper Tuul Basin is located mainly in Erdene Soum (85 percent of the total Herders comprise the vast majority of the Up- area), also includes several Khoroos of Nalaikh per Tuul’s human population at around 80 percent. District to the south-west (14 percent), and touches on neighboring Batsumber and Mungun- morit Soums. As shown in Table 1, just under 700 19 Excluding temporary tourist populations, tourist industry households or 2,600 people live in the Upper Tuul workers and mining labor. As no published data exist on the population of the Upper Tuul, these figures are estimates based and depend in some way on its natural resources.26 on the study-conducted survey, compared with estimates given This is approximately 8 percent of the total com- by local government officials. Table 1: Distribution of the human population in the Upper Tuul No. of households Gorkhi 120 Bulnain 20 Galtain 24 Beside the Tuul River 26 Other parts of Erdene Soum 273 Other parts of Nalaikh District 219 Total 682 Of which: Herders 545 Other residents of Terelj, Bosgo and tourist camps 137 From study data. Excludes populations of temporary populations of tourists, tourist industry workers and mining labor. 17 Mongolia – The Economic Value of the Upper Tuul Ecosystem The remaining population groups comprise busi- ness people and residents of the main centers of Figure 4: Land cover and land use in area settlement, Terelj and Bosgo, both located the Upper Tuul within the protected area complex. The town of Forests & shrub Erdene lies to the south-east of the Upper Tuul Grassland 63% 23% Basin, Nalaikh is close to the southern boundary, and Gachuurt abuts the Basin to the south-west. Although these settlements are not part of the study area, their populations and local economies both depend and impact on the Upper Tuul. As shown in Figure 4 and Map 10, forest and Water bodies, built-up areas shrubland dominate the landscape, and there are & bare lands also large areas of grasslands. Most of the Upper 14% Tuul (3,970 square kilometers or 79 percent) is From study data. Delineation of the major land cover types in the watershed comprised of Gorkhi-Terelj National Park and established by joint application of remote sensing, GIS maximum likelihood Khan Khentii Strictly Protected Area. Although tool, ground truth, and triangulation with data of government departments. private land title cannot be given and there are restrictions on the exploitation of natural resources in Gorkhi-Terelj and Khan Khentii (and on tour- ism in the Strictly Protected Area), a wide variety ticularly famous ones, Turtle Rock (Melkhii Khad) of economic activities are carried out in the Upper and Praying Lama Rock. Basin, including in the National Park and Strictly Protected Area. Major land and resource uses Use of the National Park has increased include tourism, herding, collection of wood, and hugely over recent years. Between 1996 and 2007 non-timber forest products. These activities are domestic visitor numbers more than quadrupled described in subsequent sections of this chapter. from 25,000 to 106,300, and international tourist entries rose from 6,000 to 27,000. Many of the domestic visitors are day-trippers or weekenders Tourism from Ulaanbaatar, while international tourists can be categorized into 3 main categories: East Asian How land and resources are used visitors (mainly from Korea and China), Western package tourists, and Western backpackers. While The part of Gorkhi-Terelj National Park that the first 2 groups remain for the most part in lies between the Tuul and Terelj Rivers is one of the tourist zone of Gorkhi-Terelj and its buffers, Mongolia’s most popular tourist destinations, for backpackers often travel further afield and move foreign and domestic visitors alike. It is an area into northern areas of the National Park and even of outstanding natural beauty that also contains into Khan Khentii Strictly Protected Area, staying important historical and cultural sites. The Na- with local families. tional Park is famous for its unique granite rock formations and pristine alpine scenery and offers The number and density of tourist establish- activities such as golfing, hiking, river rafting, ments in and around the National Park has grown horse riding, and rock climbing. Other attractions accordingly (Map 11). Until 2003 there were only include Khagiin Khar Lake, a glacial lake some 30 tourist ger camps. Now, more than 150 land 80 kilometers from the tourist camps, and Yestii permits to run tourism activities in the National Hot Water Springs further upstream. There is also Park have been issued. A total of 180 tourists a Buddhist monastery in Gorkhi-Terelj National establishments operate in Gorkhi-Terelj National Park, which is open to visitors. There are many Park and its buffers, offering an estimated 6,000 rock formations for climbers, including two par- beds. The range of tourist accommodation is di- 18 Upstream Values: Land and Resource Uses in the Upper Tuul Map 10: Land cover and land use in the Upper Tuul verse, including up-market hotels, more basic ger As illustrated in Figure 5, Figure 6, and Map 12, camps (including several run by local residents and most tourist establishments are concentrated in communities), guesthouses and wooden houses, as the Terelj and Southern Gorkhi areas (around 80 well as resorts, sanatoria, and children’s camps for percent), and ger camps account for the major- both government and company employees. ity of establishments and beds offered (around 19 Mongolia – The Economic Value of the Upper Tuul Ecosystem Map 11: Tourist camps in the Upper Tuul 75 percent). Tourist numbers are highest in the down during the winter season. Only hotels and summer season of June to October (around 97 a limited number of ger camps are equipped to percent of annual bednights are purchased at this function year-round, on average operating half of time), with peak weekend capacity estimated at their bed capacity at an occupancy rate of less than 80 to 90 percent. Most tourist operations close 30 percent. 20 Upstream Values: Land and Resource Uses in the Upper Tuul Figure 5: Number of tourist establishments by type and location in the Upper Tuul Southern part Ger camps of Tuul River North of Hotels Terelj river Guest houses Terelj area Wooden houses Southern Gorkhi Children’s camps Tuul River above Tuul bridge Government resorts Tuul River bridge Sanatoria 0 40 80 120 160 0 40 80 120 160 From study data Figure 6: Number of tourist beds by type and location in the Upper Tuul Southern part Ger camps of Tuul River North of Hotels Terelj river Guest houses Terelj area Wooden houses Southern Gorkhi Children’s camps Tuul River above Tuul bridge Government resorts Tuul River bridge 0 1,000 2,000 3,000 4,000 0 1,000 2,000 3,000 4,000 From study data Map 12: Location of tourist camps in the Upper Tuul 21 Mongolia – The Economic Value of the Upper Tuul Ecosystem Table 2: Gross revenues from tourist enterprises in the Upper Tuul No establishments Bednights Gross revenues (Tug mill) Ger camps 156 683,575 17,570.38 Hotels 6 67,111 5,972.91 Guest houses 1 9,302 130.23 Wooden houses 2 11,783 312.25 Children’s camps 5 94,055 611.36 Government resorts 5 20,263 — Sanatoria 5 43,399 — All tourist establishments 180 929,488 24,597.13 From study data The value of land and resource use just 5 community-run ger camps and 80 small ger camps owned by the residents of Terelj town, earn- The tourist establishments operating in the Up- ing around Tug 433 million a year or 1.8 percent per Tuul are estimated to generate gross annual of total income. Local participation and benefits revenues of Tug 24.6 billion a year (Table 2), most from the tourism industry remain extremely of which is contributed by ger camps (Figures 7 limited. Some seasonal income can be earned from and 8). selling food, renting horses, and acting as guides; the few longer-term employment opportunities Most tourism income accrues to companies or that exist tend to be restricted to unskilled casual entrepreneurs from outside the area as owners and labor (such as cleaning and security staff). Tourist managers of the larger camps and hotels. There are establishments’ semi-skilled, skilled, and manage- Figure 7: Share of bednights by type Figure 8: Share of income by type of tourist establishment of tourist establishment Children’s camps Children’s camps 10% 2% Hotels 7% Guest Hotels houses 1% 24% Wooden Guest houses 1% houses Government 1% Ger camps resorts 2% Ger camps 74% 72% Wooden houses 2% Sanatoria 5% From study data From study data 22 Upstream Values: Land and Resource Uses in the Upper Tuul Table 3: Government revenues from tourism in the Upper Tuul Tug million 2006 2007 2008 to Oct Entrance fees 98.4 112.9 94.2 National Park land fees to PA administration 3.7 30.4 21.4 National Park land fees to Nalaikh District 12.3 101.3 71.3 Buffer zone land fees paid by tourist camps to Erdene Soum 7.2 16.0 18.9 Buffer zone land fees paid by tourist camps to Nalaikh District 1.6 5.8 0.7 Income tax to Nalaikh District from tourist activities nd nd 2.0 Total 123.2 266.4 208.5 From study data rial staff are sourced mainly from Ulaanbaatar and, The northern part of Gorkhi-Terelj National for some of the high-end resorts, from outside Park and Khan Khentii Strictly Protected Area Mongolia. show few signs of human influence as a result of tourist activities. Over the last year several com- Tourism in the Upper Tuul also generates rev- panies have however entered the area and started enue for the Government through park entry fees, to build permanent camps and run in electricity land fees, and income taxes. As illustrated in Table lines. This indicates that tourist developments 3, Some Tug 266 million was earned in 2007 for may be spreading outwards, further into the the Protected Area administration, and Erdene Upper Tuul, and it is likely that additional camps and Nalaikh authorities. will soon follow into these relatively untouched areas. Land and resources use impacts Herding The southern part of Gorkhi-Terelj National Park is densely settled with tourist establishments, and How land and resources are used is showing clear signs of degradation, includ- ing unsightly and crowded developments, land Around one-third of the land area of the Upper degradation, erosion around tracks and roads, and Tuul is used for herding by an estimated 545 herd- improper disposal of solid waste and sewage. Car- ing families (or 2,057 people) from the surround- rying capacity is thought to have been exceeded ing areas of Erdene Soum and Nalaikh District. in the zone between the Tuul River Bridge and Herders traditionally breed and raise 5 types of the Terelj River where there are more than 80 livestock (sheep, goats, cattle, horses, and camels) camps in a relatively small area some 25 kilome- according to particular ratios and herd structure, ters in length and 5–10 kilometers in width. Areas consistent with their lifestyle, migration, labor, around the Tuul Bridge, Turtle Rock, East Gorkhi, and demand for products. Livestock census figures Terelj, and Shiree’s meadow are particularly inten- put the number of animals at just over 50,000, sively used. about 75 percent of which are goats and sheep, 20 23 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 9: Tuul River and tourist camp Figure 10: Ger camp, Gorkhi-Terelj National Park Figure 11: Terelj town Figure 12: Horse riding by Turtle Rock percent cattle, and the remainder horses and cam- using seasonal pasture areas that are only a few els. Camels do not now form a major part of herds kilometers apart from each other. Three reasons in the Upper Tuul, primarily because herders’ explain this change: a reduced area of pasture movement patterns have decreased (lessening the available to graze animals, increasing integration need for camels for transport), and also because into the market economy and concentration of pasture conditions are no longer suitable. settlements around commercial areas, and a shift toward a more sedentary lifestyle. Traditionally, herders move between different pasture areas during summer, autumn, winter, and The lands suitable for pasture are distrib- spring months. Although around 40 percent of uted unevenly across the Upper Tuul. As shown the herders in the Upper Tuul have become more in Map 10 and Map 13, the main year-round or less settled in one place, more than half still pasture lands are located within and outside follow some form of seasonal transhumance. Rota- eastern, southern, and western parts of Gorkhi- tions are however decreasing, with most herders Terelj National Park, with summer pastures moving between only winter (November-April) also stretching northwards along the Tuul River and summer (May-October) pastures and many (and to a lesser extent the Terelj River) into 24 Upstream Values: Land and Resource Uses in the Upper Tuul Map 13: Pasture use in the Upper Tuul Khan Khentii Strictly Protected Area. A strip The herder families who use the Upper of land in the south-central part of Gorkhi- Tuul can be divided into two main groups, based Terelj National Park provides important winter on the location of their settlements and pasture grazing. lands, the type of animal husbandry they 25 Mongolia – The Economic Value of the Upper Tuul Ecosystem practice, and the kinds of products they gener- animals. Only families with larger herds move ate and sell: the Nalaikh and Erdene groups. As between winter and summer pastures, includ- shown in Table 4, whereas each of these two ing areas outside the Upper Tuul in the south of groups include similar numbers of families, Erdene Soum. Erdene herders utilize a wider pasture area and manage a herd that is almost twice as large as that Erdene herders reside over a wide area of of the Nalaikh herders. the north and north-east of Terelj River Shugui, covering areas of Mongon Mority and Bayan Nalaikh herders tend to live close to tourist Delger Soums of Tov Province. Their settlements camps and paved roads in areas around the Tuul are for the most part in remote areas, far from River Bridge, Bolor, Melkhii, Khad, Ogoomor, other population centers and paved roads. Almost and Terelj. Their main pastures are located in 80 percent of families move their livestock over Gorkhi-Terelj, Ikh baga dendiin am, Shiljrengin the course of the year, shifting between summer am, Saikhanii Saravch, and Ovor Gorkhi. Many and winter pastures. Their main pastures are herders are retirees, each owning a relatively located in Baruun Zuun Bayan, Kharztai, Seruun small number of livestock and focusing mainly bulag, Shokhoi tsagaan bulag, Bumbat, Khalu- on dairy production. A relatively high propor- iriin tokhoi, Sandrakh dov, and Galtai, Zamt. tion of Nalaikh herders tend to live in the same Since pasturelands are relatively abundant in areas year-round, meaning that the pastures these areas, livestock numbers tend to be quite they use cannot sustain large numbers of high. Table 4: Characteristics of herders in the Upper Tuul Nalaikh group Erdene group All herders Pasture Area used for grazing (ha) 78,100 91,800 169,900 Human population No of herders 909 1,148 2,057 No of herder families 274 271 545 Livestock population Sheep 6,220 15,034 21,254 Goats 6,715 10,417 17,132 Cows 3,686 5,849 9,535 Horses 1,450 2,531 3,981 Camels 7 11 18 All stock 18,078 33,842 51,920 Sheep equivalent units (SEU) 44,565 77,275 121,840 From study data: Note: SEU is the standard measure used to express stock numbers, compare the feed requirements of different classes of stock, and assess the carrying capacity and potential productivity of a given area of grazing land. Goat = 0.9 SEU, cow = 6 SEU, camel = 5 SEU, horse = 7 SEU. 26 Upstream Values: Land and Resource Uses in the Upper Tuul The value of land and resource use proportion of their production. On average, Erdene households produce a greater diversity of Herders utilize and sell a wide range of livestock livestock products than Nalaikh households, each products. Wool and hair are used to make felt, at a higher value and volume (Figure 14). Whereas ropes and garments; hides and skins are processed meat and live animals contribute to the bulk of to produce bridles, halters, and hobbles; and livestock value for Nalaikh herders, milk provides dung is used for fuel. Meat and milk are central the mainstay of livestock income among Erdene to herders’ diets and are also an important source herders (Figure 15). of income. Livestock products are mainly sold locally, directly to urban centers and tourist camps or through middlemen, with most of the cashmere Land and resources use impacts eventually being exported to China. Overgrazing is becoming a serious problem in As shown in Figure 13 herders from Erdene parts of Upper Tuul. It is estimated that available tend to produce a wider variety of livestock prod- pasture is sufficient for between 55,000 and ucts than those from Nalaikh and also rely more 141,000 sheep equivalent units (SEUs), and car- on livestock products for home consumption. rying capacity has been exceeded in many areas. Between 60 to 80 percent of Erdene herders are As shown in Map 12, permanent pasture areas in estimated to meet all their food needs from their the north-west of Gorkhi-Terelj National Park, own herds. Gachuurt, and the south-west of the Upper Tuul are showing signs of severe degradation. Indica- In total, livestock are estimated to be worth tors of pasture degradation include the disappear- some Tug 3.4 billion a year in the Upper Tuul, ance of fodder and other plant species, reduced around three-quarters of which is generated by the plant growth, shorter and scarcer vegetation, and Erdene herder group (Table 5). Erdene herders increased bare soil areas. The use of land for herd- earn considerably higher returns from livestock ing remains high around much of the buffers and than Nalaikh herders per household and per unit in the eastern part of Gorkhi-Terelj National Park, of land and livestock; and—due to a larger surplus raising concerns that these areas are also deterio- over own needs—they are able to sell a higher rating fast. Figure 13: Percentage of household participating in livestock product use and sale in the Upper Tuul Nalaikh households = 274 Erdene households = 271 100% 100% 80% 80% % herders % herders 60% 60% 40% 40% 20% 20% 0% 0% Milk – own use Milk – sale Wool – own use Wool – sale Cashmere – own use Cashmere – sale Airag – own use Airag – sale Hides – own use Hides – sale Large stock – own Large stock – sale Smallstock – own use Smallstock – sale Hay Milk – own use Milk – sale Wool – own use Wool – sale Cashmere – own use Cashmere – sale Airag – own use Airag – sale Hides – own use Hides – sale Large stock – own Large stock – sale Smallstock – own use Smallstock – sale Hay From study data 27 Mongolia – The Economic Value of the Upper Tuul Ecosystem Table 5: Value of livestock production in the Upper Tuul Nalaikh group Erdene group All herders Total value of livestock production (Tug mill/year) Milk 100.21 1,026.99 1,127.19 Wool 0.98 9.71 10.69 Cashmere 109.54 294.97 404.51 Airag — 29.29 29.29 Hides 77.21 — 77.21 Hay 53.95 313.24 367.19 Large stock (meat and sales) 223.39 472.61 696.01 Small stock (meat and sales) 266.66 382.32 648.98 All production 831.94 2,529.13 3,361.07 % own use 57% 41% 45% % sale 43% 59% 55% Returns across all households (Tug mill/hh/year) Total for own use 1.72 3.84 2.77 Total for sale 1.31 5.49 3.39 Total all production 3.03 9.33 6.16 Returns to production (Tug/unit/year) Returns to land (Tug/ha) 10,652 27,550 19,783 Returns to stock (Tug/SEU) 18,668 32,729 27,586 From study data Ongoing land use changes are hastening Nalaikh herders, whose settlements tend to be and exacerbating the problem of over-stocking. concentrated in tourist areas. As more and more land is being fenced in for tourist development, grazing pressure is intensify- Land use pressure has given rise to conflicts. ing. This has had two effects: to force herders to In several cases, serious land disputes have arisen reduce their livestock numbers because of lack of between herders and land developers. For ex- pasture and to increase pressure on the areas of ample, 120 hectares of land were recently fenced land that remain open for use. At the same time, off for a golf course in Ogoomor Am. Area herders a reduction in water availability (thought to be opposed the action, and the fenced land was re- linked to climate change as well as increased water duced to 30 hectares. For Erdene herders, pasture use by tourist camps) has also placed limitations is becoming insufficient to sustain the increased on herding. This poses a particular problem for number of livestock in the area, especially during 28 Upstream Values: Land and Resource Uses in the Upper Tuul Figure 14: Average annual value of household livestock production in the Upper Tuul Nalaikh livestock products Tug 3.036 mill/year Erdene livestock products Tug 9.333 mill/year 3,000 3,000 2,500 2,500 Tug '000/hh/yr Tug '000/hh/yr 2,000 2,000 1,500 1,500 1,000 1,000 500 500 0 0 Milk – own use Milk – sale Wool – sale Cashmere – sale Hides - sale Large stock – own use Smallstock – own use Smallstock – sale Hay Milk – own use Milk – sale Wool – own use Wool – sale Cashmere – sale Airag – own use Airag – sale Large stock – own use Large stock – sale Smallstock – own use Smallstock – sale Hay From study data. Note: figures for individual products indicate average annual value for households participating in these households; value for all livestock products calculated as average across all herder households and is therefore not the sum of average values of individual products. Figure 15: Share of livestock products in total herding income Nailaikh group total Erdene group total 831.94 Tug mill 2,529.13 Tug mill Hides 9% Cashmere 13% Wool 0.4% Milk 41% Hay 6% Wool 0.1% Cashmere 12% Milk 12% Airag 1% Hay 12% Smallstock Smallstock 33% Large stock 19% 15% Large stock 27% From study data Figure 16: Erdene herders’ homestead Figure 17: Nalaikh herders’ settlement 29 Mongolia – The Economic Value of the Upper Tuul Ecosystem winter months when settlements are more con- centrated and herders from outside Erdene Soum Figure 18: Permanent grazing area, Tereljiin move their livestock into the area. Herding settle- shugui ments tend to be located relatively close to each other, meaning that multiple families use the same pasture area. While in some cases these overlaps do not cause problems, in other cases herding families have made efforts to exclude others from the pas- ture areas they use. Timber and firewood How land and resources are used Approximately 113,672 hectares of the Upper Tuul Basin is forested.27 More than 95 percent of forest is located inside Gorkhi-Terelj National Figure 19: Erdene winter grazing area Park and Khan Khentii Strictly Protected Area. As illustrated in Figure 20 the majority is closed natu- ral forest (79,512 hectares), dominated by Siberian Larch (Larix sibirica) and Siberian Pine (Pinus sibirica). Together the two species account for 93.5 percent of natural forest area. The remainder is comprised of small patches of Scotch pine, Birch, Spruce, Poplar, Willow, and Aspen. There are also an estimated 18,802 hectares of open, logged, and fire-damaged forest, and a very small area of plantation (less than 200 hectares). According to Forest and Water Research Cen- ter figures, the total growing stock of all coniferous and deciduous forest in the Upper Tuul is esti- mated at just over 10 million cubic meters, around half of that in a mature forest (Table 6). General Figure 20: Composition of forest cover in the indicators show a growing density of 0.52, the Upper Tuul mean annual increment is 1.02 cubic meters per Closed forest 94,870 ha Cleared and open forest 18,802 ha hectare, and the mean ages of coniferous trees Shrubland Fire damaged are between 100–140 years and deciduous trees forest 4% 14% 42–74 years. Open forest 8% Intensive timber harvesting in the Upper Tuul Logged commenced in the 1940s, with timber being raft- forest 2% Natural ed to Ulaanbaatar along the Tuul River. Timber forest Expansion 71% areas 1% 20 Plantations There is some variation between estimates. These figures are 0.2% taken from a forest inventory carried out in 2007 by the Forest and Water Research Centre of the Ministry of Nature and From 2007 Forest Inventory, Forest and Water Research Center of the Ministry Environment. of Nature and Environment. 30 Upstream Values: Land and Resource Uses in the Upper Tuul Table 6: Growing stock of natural forest in the Upper Tuul according to species and zone All natural forest Mature natural forest Species Area (ha) Growing stock (m3) Area (ha) Growing stock (m3) Siberian Larch 60,763 7,895,420 30,422 4,557,200 Siberian Pine 16,016 2,097,580 2,378 389,410 Spruce 105 11,280 — — Birch 1,304 53,470 55 2,760 Poplar 575 31,360 282 21,000 Aspen 72 6,280 10 900 Willow 677 9,630 — — Total 79,512 10,105,020 33,147 4,971,270 Of which: Protected Forest of special zones of Gorkhi-Terelj National Park (16.1 % of natural forest area) Siberian Larch 6,988 958,870 4,647 686,190 Siberian Pine 5,791 804,790 1,219 202,960 Protected Forest of limited zones of Khan Khentii Strictly Protected Area (6.1 % of natural forest area) Siberian Larch 1,332 147,740 1,268 140,990 Siberian Pine 3,542 406,280 537 77,930 Protected Forest of travel, tourism and limited zone of Gorkhi-Terelj National Park (73.0% of natural forest area) Siberian Larch 48,671 6,409,380 23,779 3,617,540 Siberian Pine 6,638 885,610 622 108,520 Spruce 105 11,280 — — Birch 1,304 53,470 55 2,760 Poplar 575 31,360 282 21,000 Aspen 72 6,280 10 900 Willow 677 9,630 — — Utilization Forest zone (4.8 % of natural forest area) Siberian Larch 3,772 379,430 728 112,480 Siberian Pine 45 900 — — From 2007 Forest Inventory, Forest and Water Research Center of the Ministry of Nature and Environment. In practice, not all of this growing stock is utilizable, due to restrictions on wood harvesting in the protected areas. 31 Mongolia – The Economic Value of the Upper Tuul Ecosystem exploitation was stopped in 1952. Firewood Today, legal utilization of forest resources in the harvesting (for both domestic and commercial Upper Tuul is lower since the majority of trees are purposes) continued up to 1990 in order to sup- within the protected areas. Forests are managed ply the demand in Ulaanbaatar, accounting for an primarily for biodiversity and watershed conserva- estimated 50,000 to 70,000 cubic meters per year. tion purposes, not for extractive use (Map 14). Map 14: Timber use in the Upper Tuul 32 Upstream Values: Land and Resource Uses in the Upper Tuul Most of the households living in the Up- of timber and 8,500 cubic meters of firewood, just per Tuul source all of their domestic energy and under half of which is licensed. construction needs from local forests, consum- ing an estimated 8 cubic meters of firewood per year and around 30 cubic meters of timber per The value of land and resource use decade for construction needs. Some of this use is licensed. Of the 5,000 cubic meters of logging Wood products extracted from the Upper Tuul are and firewood licenses that were issued in 2007, estimated to be worth around Tug 308 million a most were allocated for domestic consumption year (Table 8). Local household use accounts for the and institutions such as cooperatives, schools, and majority of this, in terms of both volume and value. hospitals. Forest industries were however engaged in salvage operations, involving at least 5 commer- cial operators. Land and resources use impacts Actual levels of wood exploitation are far Although over time timber and firewood ex- higher than the licensed volume. In all of Mon- ploitation have had an impact on the forests of golia between 36 to 80 percent of wood harvest the Upper Tuul, their effects tend to be highly is thought to be illegal,28 and illegal timber and localized. Unsurprisingly, firewood harvesting firewood extraction remains a problem in the Up- levels are particularly high around Terelj and the per Tuul. Local households are involved in timber buffers of Gorkhi-Terelj National Park, particu- and firewood harvesting without a license, and larly for Siberian Larch, Willow, and Poplar. Fires commercial forestry operations from Nalaikh Dis- have also been a recurrent problem over the last trict and Ulaanbaatar also operate outside the law. decade, affecting large areas of forest in Artsat uul, Local people estimate that between 8–10 small Ar matakh, Ulaan khadnii uul, Dakhad uul, Ar trucks with loads of between 4–5 cubic meters of Minj, Khalzangiin davaa, Ikh Chuluut, Nenekhiin timber are illegally brought out of the Upper Tuul gol, Khogoriin gol, Khar yamaat, Shinest, and each week by more than 25 commercial opera- Shorlogtoi (Figures 21–24). tors, supplying urban demand and mining needs. As shown in Table 7, the current harvest from the Upper Tuul is estimated to be 3,300 cubic meters 21 Crisp and others (2004). Table 7: Harvest of timber and firewood harvests in the Upper Tuul Harvest (m3/year) Timber Firewood Legal cutting 643 4,384 Illegal cutting 606 4,114 Additional use for household structures 2,046 — Total 3,295 8,498 From study data. Harvest refers to timber round logs and useable firewood; standing volume of timber felled is greater than this. Household use included in overall firewood estimates, but timber use (all assumed unlicensed) is in addition to these. There is (until May 2010) a prohibition on timber and firewood harvesting, thinning, salvage, and sanitation cuttings in the Tuul watershed by the order of the Minister for Nature and Environment in 2008, No 186/234 – data on licensed use therefore refer to previous year. 33 Mongolia – The Economic Value of the Upper Tuul Ecosystem Table 8: Value of timber and firewood harvests in the Upper Tuul Harvest (m3/year) Market value (Tug million/year) Timber Firewood Timber Firewood Total Legal cutting 643 4,384 38.58 87.68 126.26 Illegal cutting 606 4,114 22.73 82.28 105.01 Additional use for household structures 2,046 — 76.73 — 76.73 Total 3,295 8,498 138.03 169.96 307.99 Local households 2,046 5,456 76.73 109.12 185.85 Commercial operators 1,249 3,042 61.31 60.84 122.15 Government royalties 9.65 19.48 29.13 From study data. Government royalties earned only from legal cutting. Value figures for different groups are not added in total. Figure 21: Siberian Larch (Larix sibirica) in Figure 22: Willow (Salix mongolica) along the Gorkhi-Terelj National Park—a timber species banks of the Tuul River—a firewood species Figure 23: Harvesting of dead trees in burnt- Figure 24: Small truck used to transport timber out forest in Bugatiin am and firewood to Ulaanbaatar and Nalaikh 34 Upstream Values: Land and Resource Uses in the Upper Tuul Non-timber forest products and is concentrated in more accessible areas around the Tuul and Terelj Rivers (Map 15). How land and resources are used Although there are limitations on use, much A wide range of non-timber forest products are of the exploitation takes place without licenses. found in the Upper Tuul, including fruits and Collection of non-timber forest products for home berries, pine nuts, wild vegetables, fungi, and use only is permitted in restricted zones of the medicinal plants (Table 9). Non-timber forest protected areas, and all harvesting of pine nuts in products are distributed fairly widely to the south the Upper Tuul is currently prohibited. Just under of the Terelj River in the western part of Khan half of households harvest fruits, berries, wild Khentii Strictly Protected Area as well as in central vegetables, and pine nuts, while a relatively small and northern parts and (for wild berries and fruits) proportion (5 percent) of the population collects along the Tuul River in the south-eastern portion medicinal plants (Figure 25). of the Strictly Protected Area (Map 14). Resources are collected both by local households and by With the exception of pine nuts, the bulk people from Nalaikh and Baganuur Districts. Har- of non-timber forest products are collected for vesting takes place throughout the summer months home use—where they provide an important Table 9: Commonly harvested non-timber forest products and main harvest periods vegetables Siberian Hawthorn Crataegus sanguinea Wild Onion Allium altaicum May–Jun Wild Wild Strawberry Fragaria orientalis Alpine Leek Allium citorialis Crabapple Malus baccata — Adonis sibiricus mid Aug–end Sep Asiatic Bird-Cherry Padus asiatica Wormwood Artemisia Fruits & berries macrocephala Alpine Blackcurrant Ribes altissimum Elephant Ears Bergenia crassifolia Blackcurrant Ribes nigrum Shrubby Cinquefoil Dasiphora fruticosa Northern Bilberry Vaccinium uliginosum — Gentiana macrophylla Lingonberry or Vaccinium vitis-idaea Wild Daisy Leontopodium spp. Cowberry Medicinal plants May–Oct Pine nut Pinus sibirica Plantain Plantago spp. Sep–Oct Nuts — Rhodiola quadrifida — Agaricus spp. Siberian Currant Ribes diacanthum — Lactarius sp. Prickly Wild Rose Rosa acicularis — Leccinum sp. Great Burnet Sanguisorba officinalis Jun–Jul Fungi — Russula sp. Stinging Nettle Urtica dioica — Suillus sp. Lingonberry Vaccinium vitis-idaea Tricholoma mongolicum Valerian Valeriana officinalis From study data. 35 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 25: Local household participation in NTFP harvesting in the Upper Tuul Total 682 households 100% 80% 60% 40% 20% 0% Fruits & berries Wild vegetables Pine Nuts Medicinal plants % holds selling NTFP % hholds harvesting NTFP From study data. source of fruits, vegetables, and medicines, which nation periods (or “big-bang” harvests), which are unavailable or unaffordable elsewhere to occur every 4–6 years. Big-bang harvests poten- many members of the local population. Although tially produce 1,662 tons of cones, yielding 332.4 there is a high-market demand for fruits, nuts, tons of nuts. The majority of the pine nut harvest wild vegetables, fungi, and medicinal plants, leaves the area unprocessed; there is only one especially in Ulaanbaatar, the relatively short small processing factory in Mungunmorti Soum harvest period of individual products combined of Tov Province. with inaccessibility of many of the most pro- ductive areas for harvesting in the central and northern parts of Khan Khentii Strictly Protected The value of land and resource use Area mean that labor and transport costs are high. Although 77.5 percent of local households In total, local exploitation of non-timber for- (or 528 households) collect various non-timber est products are estimated to be worth some Tug forest products, two-thirds harvest them only for 37.24 million a year, with fruits, berries, and pine use at home. Just 15 percent of households sell a nuts contributing the majority of this value (Table portion of the non-timber forest products they 10). Most of the harvest is consumed at home: collect, and 7.5 percent harvest only to sell (153 only 15 percent of this value is accounted for by households in total). With the exception of pine sales of non-timber forest products. An estimated nuts, sales tend to take place at a relatively small 40–50 persons are engaged in harvesting pine nuts, scale and on an informal basis, with portions of working under the direction of middlemen who the harvest occasionally being sold on to local come in from Ulaanbaatar. Commercial utiliza- shops and traders. tion of pine nuts, including those bought from local households for onward sale, are estimated to Pine nuts from Siberian Pine (Pinus sibirica) have an average annual value of Tug 43.16 million are the most important commercial non-timber (Table 11). forest product in the Upper Tuul, and the only one that is sold at any scale or for which there is a well-organized and regular marketing system. Land and resources use impacts There are more than 16,000 hectares of Siberian Pine in the Upper Tuul, which provide regular Little information is available on the sustainability yields of cones and nuts as well as peak germi- of non-timber forest product utilization, although 36 Upstream Values: Land and Resource Uses in the Upper Tuul Map 15: NTFP use in the Upper Tuul Location of pine nuts Location of wild fruits Location of fungi NTFP harvesting impacts 37 Mongolia – The Economic Value of the Upper Tuul Ecosystem Table 10: Value of NTFP harvests to local households in the Upper Tuul Average value for users Average (Tug/hh/year) Total value (Tug mill/yr) harvest (kg/ Average price hh/year) (Tug/kg) Home Sale Home Sale Total Fruits & berries 25 2,750 60,470 45,783 17.05 2.33 19.39 Wild vegetables 7.5 1,500 11,250 — 3.17 3.17 Pine nuts 47.5 1,500 55,355 47,447 11.07 3.18 14.25 Medicinal plants 2.5 5,000 12,500 — 0.43 0.43 Total 31.72 5.51 37.24 From study data. Table 11: Value of pine nut harvests to middlemen in the Upper Tuul Value (Tug million/yr) Non-peak harvest years 6.36 Additional value in “big bang” years 36.80 Total 43.16 From study data. Figures not additive to household values. “Big-bang” assumed to occur once every 6 years, and 25% of available yield currently harvested, so additional markup converted to annualized value. it is known that some areas of the Upper Tuul are products had decreased in availability over time. used intensively and that resources appear to be In some places where they were found previously, dwindling on the west bank of the Tuul-Bosgo and they are no longer available. A particular problem, around the Terelj River in the west of the study area said to be caused mainly by people coming in from (Map 14). Surveys in 1998 found that local house- outside, is indiscriminate harvesting, where whole holds perceived that all types of non-timber forest areas of vegetation or whole plants are destroyed. 38 Upstream Values: Land and Resource Uses in the Upper Tuul Figure 26: Edible mushroom Agaricus silvaticus Figure 27: Siberian pine nuts Figure 28: Lingonberry or Cowberry Figure 29: NTFPs from the Upper Tuul Vaccinium vitis-idaea marketed as medicinal plants 39 Mongolia – The Economic Value of the Upper Tuul Ecosystem Summary of the current value of upper basin land and resource uses Table 12: Summary of the current value of Upper Basin land and resource uses Local users Total value Value to Value to (Tug mill/ Average value Total value outsiders government Land/resource use year) No. hh (Tug/hh/year) (Tug mill/year) (Tug mill/year) (Tug mill/year) Tourism 24,597.13 83 5,216,892.86 433.00 24,164.12 268.44 Herding 3,361.07 545 6,167,107.79 3,361.07 — 221.25 Timber 138.03 682 112,500.00 76.73 61.31 9.65 Firewood 169.96 682 160,000.00 109.12 60.84 19.48 Non-timber forest products 77.22 528 70,523.20 37.24 43.16 — Total 28,343.40 682 4,017.16 24,329.43 518.82 From study data. Local tourism values refer to ger camps only, and exclude income from employment, sales of food, hire of horses, etc. 2008 figures for income tax from tourism used, as none before. Values for different groups do not sum to total, as this would result in double-counting. 40 4. Downstream Values: Water Use in Ulaanbaatar The eco-hydrology of the Tuul Average annual river flow of the Terelj at the watershed confluence with the Tuul is estimated to be 9.12 cubic meters per second (m3/sec) and annual river A brief description of the natural features of the flow of the Tuul is 13.6 m3/sec at the Bosgo Bridge Upper Tuul Basin has been provided in Chapter 2. and 26.6 m3/sec at Ulaanbaatar. The river’s flow The Tuul watershed has a continental climate, with varies considerably over the course of the year, a long cold winter and a short summer. Average depending on climatic and other conditions in the annual precipitation is estimated at 403 millime- upper watershed (Figures 30, 31, and 32). Dis- ters, almost three-quarters of which occurs in sum- charge usually increases toward the end of April mer between June and August. The area is covered and continues up to mid-May, when the maxi- by snow in winter, from October until as late as mum spring flood occurs due to snowmelt from May, with snow depth reaching 15 centimeters. the high mountains. Flow then decreases through The upper basin is divided into 3 permafrost zones, the second half of May, settling to a stable drought which also affect the temporal runoff response of period in late May and June. In July and August, the watershed. Just over two-thirds of the runoff to and occasionally also in September, the river again the Tuul River is composed of rainfall, 6 percent is from snowfall and snowmelt, and one-quarter is sustained from groundwater (Figure 30).29 22 Basandorj and Davaa (2005). Figure 30: Runoff components in Tuul River flow at Ulaanbaatar 120,00 100,00 80,00 Q, cub. m/c 60,00 40,00 20,00 0,00 1.11.98 9.2.99 20.5.99 28.8.99 6.12.99 date Snowfall and snowmelt Rainfall Groundwater From Basandorj and Davaa (2005). 41 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 31: Flood frequency analysis for the Tuul River at Zaisan Discharge (m3/s) 1000 100 Statistics of the logs of flow Mean (log) = 2.12 Standard deviation = 1.57 Skewness coeff. = 0.20 10 1 10 100 1000 Return period (years) Pearson III distribution LPIII fitted distribution 5% and 95% confidence limits From study data. Flood frequency analysis using average mean daily streamflow values (2000–2006); low flow frequency analysis using mean daily minimum streamflow values from June-September (2000–2006). Figure 32: Low flow frequency analysis for the Tuul River at Zaisan 1000 Statistics of the logs of flow Mean (log) = 1.01 Discharge (m3/s) Standard deviation = 1.01 Skewness coeff. = 0.03 100 10 1 10 100 1000 Return period (wet seasons) Pearson III distribution LPIII fitted distribution 5% and 95% confidence limits From study data. Flood frequency analysis using average mean daily streamflow values (2000–2006); low flow frequency analysis using mean daily minimum streamflow values from June-September (2000–2006). floods due to rainfall in the upper watershed. At 2 to 75 meters.31 The Tuul River interacts with this time the maximum discharge is usually be- groundwater in upper parts of the basin by being tween 1.5 to 3 times higher than the peak flow of a “losing stream”: it recharges the surrounding the spring flood. In winter, between October and unconfined aquifer (the upper water source for March, the river freezes. The observed maximum Ulaanbaatar (as described in the next section). discharge reaches 1,580 m3/sec in the Tuul River The bulk of groundwater recharge occurs from at Ulaanbaatar and 564 m3/sec at Terelj, while the Tuul River and runoff from the surrounding during low flow periods the river’s 30-day mini- hills—recharge through precipitation is negligible mum flow drops to 1.86 m3/sec and 0.44 m3/sec, when weighed up against the yearly groundwater respectively.30 extraction. Measurements of the groundwater Both unconfined and artesian aquifers underlie the area from the upper watershed to 23 Basandorj and Davaa (2005). Ulaanbaatar, with water occurring to a depth of 24 Zandaryaa and others (2003). 42 Downstream Values: Water Use in Ulaanbaatar table in production wells have shown that the Different data sources provide varying esti- groundwater table declines in winter and spring mates of both the total number of wells and those months (when precipitation is at the lowest) and that are actually in use.34 This study uses figures returns to its average during spring thaws and the presented in the 2007 Ulaanbaatar City Master- first rains. In spring, when ground defrosts, the plan for USAG-operated wells and figures from recharge rate increases, causing the surface water Basandorj and Davaa (2005) for wells operated by table in the Tuul River to decline and in some to power plants since these seem to provide the most dry up seasonally.32 up-to-date figures as well as give the most compre- hensive information on their capacity. As shown in This unconfined aquifer provides the source Table 13, the 120 large wells currently in opera- of Ulaanbaatar’s water. The groundwater table tion pump a maximum of just over 195,000 thou- fluctuates depending on natural conditions (such sand cubic meters per day. In addition to these as seasonal changes in atmospheric precipita- major water sources, an estimated 297 private tion, evaporation, elevation of the surface water wells have been dug, which serve something over table, and atmospheric pressure), as well as levels 600 businesses and industries and supply around and rates of water abstraction, but is also heav- 3,000 cubic meters of water per day. ily influenced by the ecological and hydrological conditions in the upper watershed. Land use, Some 56.26 million cubic meters of water land cover, and soil condition in the Upper Tuul were recorded as being supplied to users in Ulaan- govern the contact time and water pathway baatar by USAG/OSNAAG in 2007 (Figure 33). through which the various soil-water interactions The amount of water supplied decreases between occur. Vegetative cover in the upper watershed is February and May, when the Tuul River is in low particularly critical as it impacts on interception, flow and groundwater levels drop. This is however runoff, and discharge patterns. The quality and also the time of the year when demand peaks, and extent of forest, grassland, and other vegetation shortages frequently occur in the city. In addition, in the Upper Tuul affect mean flow, flow dura- leakage is a major problem. It is estimated that un- tion, intensity and timing of peak and low flows accounted water accounts for around 30 percent downstream, soil moisture, groundwater recharge, of total water abstractions in Ulaanbaatar City.35 and sediment loads. Water is pumped from the wells via distribu- tion pipelines to industries and some government Water supplies in Ulaanbaatar offices, to central distribution points for onward supply to apartment blocks, and to a pipeline and Ulaanbaatar’s water supplies are extracted from water tanker operation delivering to water kiosks in deep wells, located in 4 sites: the “upper source” ger settlements. Apartment dwellers are by far the just below the confluence of the Terelj and Tuul largest consumers of water, accounting for over half Rivers in the upper basin, and 3 sources in the of the total supplied by USAG/OSNAAG (Figure city itself (“central”, “industrial”, and “meat fac- 34). This is because of the large number of users, tory”). Ulaanbaatar Water Supply and Sewerage as well as their high per capita water consumption Company (USAG) manages most of the city’s rates. Ger settlements, although contributing 60 water supplies, supplying in bulk to the Housing percent of Ulaanbaatar’s population, account for and Public Services Company (OSNAAG) that is responsible for distributing water to apartment buildings and institutions in the core area of 25 Zandaryaa and others (2003). 26 the city. The Ministry of Food, Agriculture and Basandorj and Davaa (2005). 27 Staff of Ulaanbaatar Water Supply and Sewerage System Light Industry (MFALI) is responsible for irriga- Company estimate that 100 of 175 wells are in use, Davaa tion water; wells are also operated by the Ulaan- and Basandorj (2005) cite figures of 163 wells in use, and the baatar’s 3 power plants and used by surrounding Ulaanbaatar City Masterplan 2007 refers to 180 wells of which 90 are in use. factories.33 28 JICA and Government of Mongolia (2007). 43 Mongolia – The Economic Value of the Upper Tuul Ecosystem Table 13: Water capacity in Ulaanbaatar City, 2007 Number of wells Capacity (m3/day) Water source Total Operating Design Working Upper 56 19 72,000 47,307 Central 97 55 114,000 64,150 Industrial 16 11 40,000 22,200 Meat factory 11 5 15,000 11,160 USAG water sources 180 90 241,000 144,817 Power plant no. 2 (Central) — 5 — 4,800 Power plant no. 3 (Central) — 13 — 29,300 Power plant no. 4 (Industrial) — 12 — 16,200 Other water sources — 30 — 50,300 Private wells — 297 — 3,000 Total — 417 294,300 198,117 From JICA and Government of Mongolia (2007); Basandorj and Davaa (2005). Figure 33: Water supplied by USAG, 2007 Total 56.26 million m3 5.00 4.75 m3 million 4.50 4.25 J F M A M J J A S O N D From USAG data. just over 2 percent of total demand. Estimates for recent data, which indicate that industrial water use total water demand (Table 14) show that domestic is between 85,000 and 100,000 cubic meters per demand for water accounts for some 117,000 cubic day and that total demand is between 200,000 and meters per day, and industrial and commercial 250,000 cubic meters per day.36 demand (including power plants) for some 95,000 cubic meters per day. The estimates provided by 29 Presentation made by Tuul Songino Water Resource Joint Stock this study are consistent with those provided by Company 2007. 44 Downstream Values: Water Use in Ulaanbaatar Table 14: Water demand in Ulaanbaatar by user group, 200737 USAG/OSNAAG water supply Estimated total demand Volume Volume No. users (m3 mill/year) No. users (m3 mill/year) Type of user Ger settlements using water kiosks supplied 300,000 people 0.73 620,950 people 1.70 by tanker using water kiosks supplied 31,782 people 0.41 by pipeline Apartment dwellers 269,569 people 27.32 403,260 people 40.87 Individual houses domestic 953 connections 4.47 6,990 people 0.22 non-domestic 18,333 businesses 4.25 Industries 304 connections 2.30 304 industries 2.3 Power plants 3 plants + factories 18.36 Business and commercial users 1,379 connections 4.04 1,379 businesses 4.04 Other institutions 311 connections 2.67 311 institutions 2.67 Agricultural Crops 367 farmers 1.50 Livestock 7,797 herders 1.37 Total 41.94 77.28 Water kiosks supplied by tanker 296 kiosks 0.73 296 kiosks 0.73 Water kiosks supplied by pipeline 163 kiosks 0.41 163 kiosks 0.41 Water tankers 61 tankers — 61 tankers — Figure 34: Water demand in Ulaanbaatar by Urban water values user group, 2007 Tariffs for water use in Ulaanbaatar vary according Power plants + Industry 3% to the type of user and the means by which water factories 24% Businesses 30 11% USAG data on water supply do not concur with the popula- tion figures presented in official statistics, or with estimates of Institutions per capita water demand provided by other studies. Records 3% of water supplied via kiosks indicate a user population that is Individual only around one-half of ger settlement dwellers. Figures for houses Agriculture individual household connections cover only around two-thirds 0.2% 4% of apartment dwellers, as well as showing extremely high daily consumption rates per user as compared to other estimates. Es- Ger timates for total demand take census estimates of the population settlements Apartments 2% living in ger settlements, apartments, and individual houses and 53% apply average per capita consumption figures from other studies of 7.5 liters per capita per day for ger dwellers and 87 liters per 45 Mongolia – The Economic Value of the Upper Tuul Ecosystem Table 15: Water tariffs in Ulaanbaatar Water tariff (Tug/m3) User group 1999 2002 2005 2007 Piped water to industries and businesses 200 200 315 329 Piped water to budget organizations 200 200 315 329 Piped water to households 95 181 160 167 Piped water to metered apartments 40 112 160 167 Tanker water to industries within 10 km 885 2,435 2,435 2,435 Tanker water to industries above 10 km 1,328 2,609 2,609 2,609 Tanker water to summer houses 885 1,500 2,000 2,727 Water sold from kiosks 442 442 500 909 Other tanker water 885 885 1,000 1,818 Irrigation water 200 500 3,000 From USAG and MFALI data. is supplied. The USAG collects revenues from city tariff, and is closer to its real value—although, it water supplies while the MFALI charges for ir- should be noted, is still a considerable underesti- rigation water. As shown in Table 15, water tariffs mate. It is also worth noting that as shortages per- have been subject to several revisions over recent sist, the marginal value of additional water is likely years. The relatively high tariff for water supplied to increase substantially. For all these reasons, the to ger settlements from kiosks is notable, especially water values presented in the study should be taken given that these contain some of poorest sectors of as an absolute minimum preliminary estimate. the urban population. Despite these increases, the price of water Domestic remains highly subsidized. It is estimated that cur- rent tariffs cover only about 30 percent of the unit From the data provided by the USAG, MFALI, cost of supply. The actual value of water to users and other sources, it is possible to build up a is far higher than the price they pay. However, as data are lacking that would enable more accurate capita per day for domestic users living in individual houses. calculations (for example, the returns to water in The average consumption rate for apartment dwellers of 278 different productive uses or detailed and disaggre- liters per capita per day implied by USAG data is taken. The balance of water supplied through USAG to individual houses gated water user surveys), this study bases its valua- is assumed to be used for non-domestic purposes (small-scale tion of water on the current tariffs paid. In order to business or commercial purposes) by establishments that are not compensate at least partially for the fact that water recorded under the industrial, business, and commercial user category of water connections, using numbers of enterprises tariffs are so much lower than real water values, an taken from the census. This gives an average daily consumption inflator is applied to these figures (this is described for business establishments of 635 liters per day. Data for agri- cultural (crop and livestock) water demand are taken from Min- below). The inflator represents consumers’ actual istry of Agriculture figures, and estimates for power plants and willingness to pay for water, which exceeds the surrounding factories are from Basandorj and Davaa (2005). 46 Downstream Values: Water Use in Ulaanbaatar picture of the ways in which water is accessed for It is far harder to value accurately the use of domestic use in Ulaanbaatar: water for domestic purposes. Although data are available for the amount of money people pay for ■ The majority of the 620,950 people, or water use, the prices set by authorities present an 141,125 households, living in ger settlements underestimate of the actual value of water. Water obtain their water from kiosks. A propor- tariffs in Ulaanbaatar remain low44 and continue tion of ger dwellers still access their daily to be heavily subsidized.45 Consumer willingness water needs from shallow wells, open springs, to pay provides a more generally accepted estimate streams, and rivers. Of the 459 kiosks, 163 of water values. There are no private or informal are connected by pipeline to the main water water markets in Ulaanbaatar, but surveys have network. A fleet of 61 tankers, each carrying however been carried out on water affordability 5 tons of water, supplies the remainder. For and consumer willingness to pay in ger settle- most people in ger settlements, water con- ments of the city, as part of a 2007 study by the sumption is less than 10 liters per capita per World Bank and the Public-Private Infrastructure day,38 with an average of 7.5 liters:39 figures Advisory Facility.46 This study found that ger which are far lower than for any other cat- dwellers’ willingness to pay for water was signifi- egory of water users. cantly higher than prevailing tariffs, on average 1.5 ■ Most of the 403,260 apartment dwellers, or times as much as the actual charges levied. This 91,650 households, receive their water via a study applies the same inflation factor (1.5 times central supply to the entire block. Although the current water tariff for ger dwellers) in order water meters were introduced several years to impute a minimum value of water in domestic ago, they have only been installed in a small use, giving a total value of water of Tug 58.35 bil- proportion of apartments—an estimated lion a year (Table 16). 15,000 meters covering around 20,000 house- holds.40 Average water consumption for apart- ment dwellers is 290 liters per capita per day 31 World Bank and PPIAF (2007). for those without a meter and 230 for those 32 JICA and Government of Mongolia (2007), and Zandaryaa with a meter,41 or an average overall of 278 and others (2003). 33 liters per capita per day.42 Basandorj and Davaa (2005). 34 ■ JICA and Government of Mongolia (2007), and Zandaryaa Almost all of the 6,900 people living in 1,968 and others (2003). individual houses have their water supplied 35 From USAG figures. 36 via pipelines or private wells. Average daily JICA and Government of Mongolia (2007). 37 Basandorj and Davaa (2005). water consumption is estimated at 87 liters per 38 World Bank and PPIAF (2007). capita.43 39 World Bank and PPIAF (2007). Table 16: Value of domestic water use Volume Tariff Imputed willingness to pay Value No. people (m3 mill/year) (Tug/m3) (Tug/m3) (Tug mill/year) Ger settlements 620,950 1.70 909.09 2,317.98 Apartment dwellers 403,260 40.87 167.27 1,364 55,730.64 Individual houses 6,990 0.22 302.68 Total 1,031,200 42.79 58,351.30 From study data and USAG figures. 47 Mongolia – The Economic Value of the Upper Tuul Ecosystem Industrial and commercial and applying a willingness to pay inflator of 1.5. As illustrated in Table 17, this gives an annual Official statistics show a total of 20,327 regis- value of commercial and industrial water use of tered businesses, industries, and other enterprises Tug 15.6 billion. Again, this is an underestimate and institutions in Ulaanbaatar. These include of the actual value of water since available data do major manufacturing enterprises that produce not permit more accurate indicators to be calculat- textiles and related goods, leather and footwear, ed, such as the marginal value of water in different soap, paper, iron castings, cement, glassware, production uses or the value-added to production beer and spirits, bottled water, and processed per unit of water input. foods. Three thermal power stations are also lo- cated in the city, each with its own water supply. All of these enterprises depend in some way on Agricultural water. While some industrial processes require water as a direct input into the products being There are currently an estimated 121 irrigated manufactured, others require water for cooling farms in Ulaanbaatar involving 367 families and and cleaning purposes.47 covering 290 hectares. These farms are irrigated from the Tuul River and from shallow wells using The power plants and a few other large an estimated 1.5 million cubic meters of water factories consume the major proportion of per year. They mainly produce potato, cabbage, water used by all industries and businesses in turnip, spinach, cucumber, tomato, and other Ulaanbaatar.48 Water use is increasing rapidly as vegetables for sale in the city. Around 8,000 the number of factories and other production herder families also live in the peri-urban areas facilities increases. In 2003, total industrial and that surround Ulaanbaatar, managing more than commercial consumption was put at 50,000 to 330,000 camels, horses, sheep, and goats or 60,000 cubic meters per day or 18.25 to 21.90 724,000 SEUs. million cubic meters per year.49 Current demand for water is estimated at just over 30 million As for other types of water use, the value of cubic meters. water used for agriculture has been calculated As for domestic users, the value of this water 40 Sharav (2007). has been calculated by taking the prevailing 41 Zandaryaa and others (2003). USAG-charged industrial and commercial tariff 42 Zandaryaa and others (2003). Table 17: Value of industrial and commercial water use Volume Tariff Imputed willingness to pay Value No. users (m3 mill/year) (Tug/m3) (Tug/m3) (Tug mill/year) Industries 304 2.30 1,136.15 Business & commercial 19,712 8.29 329.32 4,094.12 494 Other institutions 311 2.67 1,318.93 Power plants 3 18.36 — 9,069.23 Total 20,330 31.62 15,618.43 From study data and USAG figures. No charge is levied for power plants’ use of water, and so the prevailing industrial tariff has been applied. 48 Downstream Values: Water Use in Ulaanbaatar Table 18: Value of agricultural water use Imputed Volume willingness to pay Value Production (m3 mill/year) Tariff (Tug/m3) (Tug/m3) (Tug mill/year) Irrigated farms 413 ha 1.50 3,000 6,755.40 Livestock production 331,224 stock 1.37 — 4,500 6,180.36 or 724,341 SEUs Total 2.87 12,935.76 From study data and MFALI figures. Production area for irrigated farms takes account of double cropping. No charge is levied for livestock use of water, and so the prevailing irrigation tariff has been applied. by taking the prevailing MFALI-charged irriga- Summary of the current value of tion water fee and applying a willingness-to-pay downstream water use inflator of 1.5 (and as mentioned, this represents very much a minimum estimate of the value of As shown in Table 19, the total value of water use in water in these uses). As shown in Table 18, this Ulaanbaatar is some Tug 86.9 billion per year. Actu- gives an annual value of Tug 12.94 billion for al revenues earned by USAG are in the region of Tug the 2.87 million cubic meters of water used for 9.3 billion a year (63 percent of their total revenues) agriculture. and an estimated Tug 4.5 billion for MFALI. Table 19: Water use values in Ulaanbaatar Value to users Revenues collected by government Volume (m3 mill/year) (Tug mill/year) (Tug mill/year) Ger settlements 1.70 2,317.98 Apartment dwellers 40.87 55,730.64 Individual houses 0.22 302.68 9,276.70 Industries 2.30 1,136.15 Business & commercial 18.36 9,069.23 Other institutions 8.29 4,094.12 Power plants 2.67 1,318.93 Irrigated farms 1.50 6,755.40 4,503.60 Livestock production 1.37 6,180.36 Total 77.28 86,905.49 13,780.30 49 5. Ecosystem Water Services: Hydrological Consequences of Land Use Change in the Upper Tuul Changes in the ecology and The current water demand of Ulaanbaatar is hydrology of the Upper Tuul estimated by this study to be some 212 thousand cubic meters per day (as outlined in Table 14, Ecological and hydrological changes have been Chapter 4), which is consistent with the figures taking place in the Upper Tuul Basin over the last presented in other documents. According to date decades with impact on downstream water flows provided by the National Statistical Office, USAG, and groundwater levels. Groundwater tables in and the Ulaanbaatar City Masterplan prepared the unconfined aquifer underlying Ulaanbaatar by the Japan International Cooperation Agency, show a marked decline: a fall of some 3.1 meters Ministry of Construction and Urban Develop- over the last 50 years in the central water source, ment, Ministry of Roads, Transport and Tourism, and a lowering of up to 8.5 meters in the aquifers and Ulaanbaatar City Government, future water of the Tuul River tributaries.50 Depression cones demand for the city is predicted to reach 286,000 (the areas of influence of the wells) are indicat- cubic meters in 2010, 438,000 cubic meters in ing groundwater shortage, and in some areas have 2020, and 708,000 cubic meters in 2050. The reached critical levels. Presently there is less cause projections for future water demand made in this for concern about water abstractions during sum- study follow these estimates. mer months—it is estimated that an amount of water equal to half of the summer recharge can The design capacity of all existing wells be abstracted annually without causing a negative (USAG and others) is about 300,000 cubic meters impact on the groundwater regime, and this limit per day, and their current operating capacity is does not yet appear to have been reached.51 How- something over 200,000 cubic meters. The total ever, in the winter months (when the groundwater groundwater development capacity from the table is at its lowest level), abstraction exceeds the unconfined aquifer is estimated to be in the vicin- recharge rate, and the water table in the produc- ity of 348,000 cubic meters per day,54 of which tion wells drops—drawdown of the groundwater 215,000 to 220,000 cubic meters are of adequate table of between 7 and 13 meters has been ob- served within a radius of 0.5–1.3 meters surround- ing the wells.52 43 Zandaryaa and others (2003), and Basandorj and Davaa (2005). 44 One reason for the lowering of groundwater Zandaryaa and others (2003). 45 Zandaryaa and others (2003). levels is the rapid rate of withdrawal. Water is 46 Basandorj and Davaa (2005). being abstracted faster than the rate of recharge.53 47 Basandorj and Davaa (2005). 51 Mongolia – The Economic Value of the Upper Tuul Ecosystem quality for human consumption.55 As a compari- a decrease in both the duration and the depth son of these figures shows and as several authors of snow cover, altered the timing and length of have noted, it seems clear that under current snowmelt periods, and impacted on downstream conditions and likely future trends Ulaanbaatar flooding regimes. Meanwhile, water temperature will be facing severe water shortfalls within the in the Tuul River is recorded to have increased by next 10 years.56 1.9ºC over the same period, and there has been a decrease in the number of days with ice cover as Supply-side factors are also critical in deter- well as changes in the thickness of ice cover and mining the water balance in Ulaanbaatar. The timing of ice formation and break-up.61 Although city’s groundwater resources are being severely their exact impact in the Upper Tuul remains un- compromised due to changes in the ecology and known, there is little doubt that climate variability hydrology of the Upper Tuul, which have been and change pose a substantial risk—and give rise caused by human land and resource use pressures. to considerable uncertainty—for the future water Most notable is the loss of vegetative cover and security of Ulaanbaatar. soil degradation resulting from deforestation, over- grazing, and the conversion of natural areas to housing and tourism developments.57 The results Future management scenarios for of hydrological analysis show a serious deteriora- the Upper Tuul tion, including increased runoff, maximum flows and flow variability, and decreased regulation of Chapter 2 delineates 4 zones of human influence seasonal flows (lower dry-season flows and more in the Upper Tuul Basin, marked out by both serious flood peaks, as well as changes in their physical and human features. Summarized in Table timing and duration).58 The proportion of direct 20, zones I to IV (from the north to the south runoff (or overland flow) in the annual flow of the of the watershed area) are characterized by rising Tuul River has increased over the last 6 decades. population and settlement, growing human influ- The runoff coefficient for the Upper Tuul (the ence, and increasing ecosystem disturbance, with ratio of annual runoff to average precipitation in land and resource uses becoming more intensive the upper watershed) increased from 0.49 in the and exerting a progressively greater influence on period 1945–74 to 0.57 in 1975–2000. While the natural landscape. average annual precipitation has remained steady or fallen slightly (from 255 to 250 millimeters per A review of historical records shows that these year), discharge has increased (from 126 to 149 zones of human influence have been expanding millimeters per year) and there has been a drastic steadily outwards into the Upper Tuul Basin. This decrease in evapotranspiration (a change of 22 is driven by a wide range of factors, including a percent, from 129 to 101 millimeters per year). growing human population, increasing urbaniza- There has, in turn, been a significant reduction tion, intensifying land and resource demands, in water storage and groundwater recharge in the progressive market integration, and shifting unconfined aquifer that supplies Ulaanbaatar.59 lifestyles and aspirations. Figure 35 indicates current pressure points and expanding zones of Climate change is a third factor that is un- doubtedly influencing the ecology and hydrology of the Upper Tuul—although as yet there are few 48 Zandaryaa and others (2003). quantitative data and little detailed analysis to 49 Zandaryaa and others (2003). 50 draw on. Evidence of increasing temperatures in Basandorj and Davaa (2005), and Davaa and Erdenetuya (2005). the Upper Tuul shows that over the last 60 years 51 Davaa and others (2006: 55–68). annual mean air temperature increased by 1.56ºC 52 Basandorj and Davaa (2005), and Davaa and Erdenetuya (2005). (particularly in winter months, to a lesser extent 53 Natsagdorj and Batima (2003) , and Basandorj and Davaa in the spring and autumn, and showing unclear (2005). 54 trends in the summer season).60 This has led to Basandorj and Davaa (2005). 52 Ecosystem Water Services: Hydrological Consequences of Land Use Change in the Upper Tuul Table 20: Characterization of current status of zones of human influence in the Upper Tuul Basin Zone of influence Zone I Zone II Zone III Zone IV Area of watershed North Central and east South-central South Description Central Khan Khentii South and south-eastern Gorkhi-Terelj National Park Eastern, southern and Strictly Protected Area Khan Khentii Strictly western buffers of Gorkhi- Protected Area Terelj National Park Accessibility Largely inaccessible except Some accessibility from Accessible from west, Easily accessible for far south and west west, south and east south and east around Terelj River Human population Little or none Small population of sum- Large seasonal influx of Permanent resident mer season herder camps tourists, camp workers population of business and occasional tourists and herders; permanent people and herders, large resident population in seasonal influx of tourists Terelj and Bosgo and camp workers Main land cover Forest, rocky areas Forest, grassland in Grassland, built-up areas Pasture and small patches riverine areas and small patches of forest of forest Main land and Occasional pine nut High levels of NTFP col- Tourism, seasonal and per- Permanent grazing, resource uses collection, small amount lection (wild fruits, fungi, manent herding, centers of tourism of summer grazing along pine nuts) summer grazing settlement river, burnt and logged along river, burnt and forest logged forest Impacts of human use Minor Minor but growing: patch- Significant changes in Major changes in vegeta- es of forest beginning to vegetation: conversion to tion: conversion to settle- show signs of intensive settlement and tourism, ment and tourism, severe use for NTFP, increasing some land and pasture pasture degradation grazing degradation human influence into the Upper Tuul. It shows linked: as each wave of land use change expands the spread of peri-urban settlements and industry into the upper watershed, it opens up the area from Ulaanbaatar, Gachuurt, and Nalaikh into the (and displaces prior land uses) for further changes. protected area buffer zone (zone IV), the expan- Over time, if current trends remain unchecked, sion of housing and tourism developments into zone IV is likely to evolve progressively into a the area abutting and immediately inside Gorkhi- more densely settled area. This is already hap- Terelj National Park (zones IV and III), and the pening as peri-urban zones push outwards from growing incursion of herding, forest resource use, Ulaanbaatar and Gachuurt, land privatization and and tourism into Khan Khentii Strictly Protected sub-division take place, infrastructure and roads Area (zone II). are extended, and more and more city-dwellers build weekend homes. In turn, tourism is being There is little doubt that these land and pushed further into zones IV and III and toward resource use pressures will continue and intensify the north of Gorkhi-Terelj National Park and in the future. To a large extent, they are inter- south of Khan Khentii Strictly Protected Area. 53 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 35: Expanding zones of human influence in the Upper Tuul Basin Herders, losing their permanent grazing lands to marizes each of these scenarios for the future settlement and tourism development, are increas- management of the Upper Tuul, and the land ingly moving along the Tuul and Terelj Rivers into and resource use changes that are projected to zone II. As pasture areas and herding expand, the accompany them. forest resources surrounding the riverine area are becoming more intensively used. It is only zone I, The study models changes in land cover and the central area of Khan Khentii Strictly Protected ecology according to these future management Area, which is likely to remain relatively un- scenarios for the Upper Tuul. It should be noted touched—due to the mountain range that presents that fairly conservative estimates of change are a physical barrier to further human incursion and used, based on observed current and recorded land use change. historical patterns. This is to avoid over-estimating the level of land and resource degradation that The pace at which the boundaries of human might occur in the Upper Tuul in the future. In influence expand into the Upper Tuul and the line with these projected changes in population, resulting levels of ecosystem change will depend land, and resource use and allowing for possible largely on how the watershed is managed in the climate variability, the proportion of bare, built- future. The study models three possible future up, and grassland land cover will increase over management scenarios for the Upper Tuul over time while forest cover will decrease. As illustrated the next 25 years: gradual ecosystem deteriora- in Figure 36 the rate of these changes is most rapid tion (a continuation of current trends), rapid under the scenario of no protection, and slows resource depletion and land degradation, and considerably under the conservation and sustain- conservation and sustainable use. Table 21 sum- able use scenario. 54 Ecosystem Water Services: Hydrological Consequences of Land Use Change in the Upper Tuul Table 21: Summary of possible future management scenarios for the Upper Tuul No protection: rapid land & Continuation of status quo: Conservation: sustainable land & Scenario resource degradation gradual deterioration resource utilization Summary Current population growth rates in Ulaanbaatar, Gachuurt and Nalaikh are maintained, and land privatization and sub-division continues. Tourism, both domestic and international, continues to grow, and tourist establishments increase to supply this demand. There is a continuing demand, and market, for timber and non-timber forest products. Livestock and herder family numbers continue to grow at current rates, and immigration from other parts of the country continues. Ecosystem Insufficient budgets and other Protected area management is Effective protected area management management resources mean that protected area constrained by low budgets and other means that biodiversity and ecosystems are management remains weak, and it resources, but efforts are made to conserved according to the PA management is difficult to enforce environmental enforce environmental regulations and plan and zoning. Environmental regulations regulations and laws. There are management/use zoning. Unlicensed are well-enforced, and future developments few checks on unlicensed land and land and resource uses continue to comply with sustainability requirements. resource uses in the Upper Tuul. some extent. Continuing changes in Land and resource uses are kept at sustain- The integrity of the protected area population and land use exert some able levels, and are carried out so as to boundaries and management zones pressure on the boundaries of the minimize environmental impacts. is challenged by the spread of settle- protected areas. ment, tourism and herding. Zone IV By year 25, zone IV has become a By year 25, zone IV has become By year 25, zone IV has an increased density largely peri-urban area, compris- densely settled and intensively used of settlement and herding, both of which are ing the outskirts of Ulaanbaatar, for permanent grazing. however managed sustainably. Gachuurt and Nalaikh. Zone III By year 25, zone III is dominated by By year 25, tourism in zone III has By year 25, zone III has shown a slight dense tourism developments and more than doubled, largely displacing increase in tourism, but land use impacts are summer houses. herding. managed effectively. Zone II By year 25, zone II has become a mo- By year 25, parts of zone II are used in- By year 25, zone II contains a few summer saic of tourist camps and permanent tensively for grazing and tourism, and pastures in which carrying capacity is not herder settlements, and NTFP and NTFP and timber use has increased in exceeded, scattered tourist camps which timber exploitation is widespread. line with population increase. are run to minimize environmental impact, and NTFP and timber use is maintained at sustainable levels. Zone I By year 25, zone I remains largely untouched. The hydrological effects The analysis indicates that ecosystem degra- of land use change dation in the Upper Tuul causes an increase in mean flow, a shifting upwards of the flow dura- Eco-hydrological modeling provides estimates tion curve, higher annual minimum series, and of the response of the basin to changes in land a decrease in the storage needed to maintain a cover in the Upper Tuul and the effects of differ- given yield. This translates into lower soil moisture ent scenarios on surface water and groundwater. recharge, earlier and higher intensity spring floods, Calculations focus on the water cycle processes in lower recharge capacity in the valley aquifer, high- the watershed, in particular on the generation of er return periods of extreme flows (both high and surface and sub-surface runoff. Variation in land low), and a lower relative groundwater contribu- cover in the basin is accounted for by using differ- tion (base flow) to the total runoff volume. Loss of ent interception and transpiration rates. land cover would impair the storage soil moisture. 55 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 36: Changes in land cover under future Upper Tuul management scenarios 100% 14% 21% 100% 14% 18% 100% 14% 16% 80% 80% 80% 23% 23% 23% 25% Land cover Land cover Land cover 28% 60% 33% 60% 60% 63% 63% 63% 40% 40% 54% 40% 59% 46% 20% 20% 20% No protection: rapid land Continuation of status quo: Conservation: sustainable & resource degradation gradual deterioration land & resource utilisation 0% 0% 0% 0 5 15 25 0 5 15 25 0 5 15 25 Year Year Year Forest Grassland Bare & built-up No protection: rapid land & Continuation of status quo: Conservation: sustainable land resource degradation gradual deterioration & resource utilization Bare & Bare & Bare & Forest Grassland built-up Forest Grassland built-up Forest Grassland built-up Year (ha) (ha) (ha) (ha) (ha) (ha) (ha) (ha) (ha) 0 3,969 1,449 882 3,969 1,449 882 3,969 1,449 882 1–5 3,654 1,638 1,008 3,717 1,606 976 3,874 1,512 913 6–15 3,150 1,953 1,197 3,528 1,701 1,071 3,811 1,543 945 16–25 2,886 2,079 1,323 3,402 1,764 1,134 3,717 1,575 1,008 From study data. A clear consequence would be an increase in sedi- in Table 22 and Figure 37 and Figure 38 shows ment loads in the Tuul River, involving reduced the projected discharge under each management storage capacity, higher maintenance, and a scenario in 25 years time. shorter lifespan for eventual reservoirs. Under the most extreme scenario, soil moisture may become The impacts of the hydrological and ecologi- low enough in some years to affect transpiration cal changes resulting from different management of the vegetation, meaning that patches of forested scenarios in the Upper Tuul on groundwater land in the upper watershed could show signs of availability in the deep well areas for Ulaanbaatar water stress. are calculated by modeling the physical and temporal aquifer-river interaction processes at the The model suggests that average runoff upper water source. The contribution of precipita- increases as land cover is lost, while mean annual tion to groundwater recharge is negligible when maximum and low flows—and subsequent peaks weighed up against annual abstractions; therefore over threshold (POT) and flows under threshold analysis focuses on recharge occurring from the (FUT)—clearly increase as forest and grassland Tuul River and runoff from the surrounding hills. areas are degraded. The predicted changes in run- Even though progressive degradation of the up- off parameters over a 25-year period are illustrated per watershed will induce a higher mean annual 56 Ecosystem Water Services: Hydrological Consequences of Land Use Change in the Upper Tuul Table 22: Predicted runoff parameters in the Upper Tuul over the next 25 years Mean of annual Average runoff maximum floods Mean of annual POT 200 m3/s FUT 5.0m m3/s Year (m3/s) (m3/s) 3 low flows (Jun-Sep) (m /s) (25 yr-) (Jun-Sep) (25 yr-) 0 18.7 123.6 9.2 — — No protection: rapid land & resource degradation 1–5 19.2 124.7 3.2 — 1 6–15 20.4 144.0 7.4 2 2 16–25 19.7 136.2 4.5 2 3 Continuation of status quo: gradual deterioration 1–5 19.0 119.8 5.7 — — 6–15 19.9 111.3 6.8 — 1 16–25 19.7 121.4 8.4 1 2 Conservation: sustainable land & resource utilization 1–5 18.9 99.3 13.4 — — 6–15 19.2 108.7 12.1 — — 16–25 19.1 101.2 11.6 — 2 From study data. Figure 37: Predicted runoff parameters in the Upper Tuul over the next 25 years Average runoff Mean of annual maximum floods Mean of annual low flows 20.5 145 14 135 12 20.0 10 125 m3/s m3/s m3/s 19.5 8 115 6 19.0 105 4 18.5 95 2 0 5 15 25 0 5 15 25 0 5 15 25 Year Year Year No protection: rapid land Continuation of status quo: Conservation: sustainable land & resource degradation gradual deterioration & resource utilisation From study data. The changes in runoff parameters year on year are unlikely in reality to follow a straight line; the model however only generates 5 yearly figures. 57 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 38: Runoff scenario prediction for the Upper Tuul in 25 years time 160 No protection: rapid land Continuation of status quo: Conservation: sustainable land & resource degradation gradual deterioration & resource utilisation 140 120 Discharge (m3/s) 100 80 60 40 20 0 02–2030 09–2030 02–2030 09–2030 02–2030 09–2030 From study data. streamflow, the highly indented runoff pattern flow, so that groundwater levels at the upper water and lower base flows prevents this from becom- source would not be affected significantly and ing a positive influence on groundwater levels. therefore water abstraction could be maintained at A decrease in base flow affects the infiltration of similar rates and quantities as at present. water, limits the maximal amount of groundwater extraction, and increases existing water shortages. Extrapolating these projections to all of Ulaanbaatar’s production wells, according to their The study modeled a crude water balance cal- design capacity, indicates that by 2030 annual wa- culation of the diminished extractable volume of ter availability from existing large and small wells water from currently utilized groundwater reserves would have declined to 55.91 million cubic me- at the upper source. For central and lower sources, ters per year under the scenario of no protection, historical records of groundwater table lowering and 76.51 million cubic meters per year under a were extrapolated to the future.62 As shown in continuation of the status quo Figure 39. Under a Table 23, under the scenarios of no protection and scenario of conservation and sustainable use, water continuation of the status quo, the groundwater availability would remain at 107.42 million cubic tables at all water sources would be lowered due to meters per year.. diminished discharge. Assuming that each well is pumped to a similar base level in both scenarios, this gives a reduction in extractable volume for each well. After 25 years, the amount of ground- water available for extraction under a scenario 55 Zandaryaa and others (2003), and Basandorj and Davaa (2005) of no protection would have diminished by 48 cite that groundwater levels in the alluvial deposits supply- percent or 141,130 cubic meters per day as com- ing Ulaanbaatar have fallen by between 2 and 8.5 meters over the last 50 years. This study takes the mid-point of these two pared to the current design capacity of wells; and estimates, and extrapolates the average annual decrease in the under a continuation of the status quo it would water table over the next 25 years. It attributes only one-half have diminished by 29 percent or 84,678 cubic of the fall in groundwater tables to changes in upper watershed ecology; the remainder is assumed to be accounted for by other meters per day. The conservation scenario implies factors and by drawdown occurring from water abstraction for no appreciable distortion in the Tuul River’s base use in Ulaanbaatar. 58 Ecosystem Water Services: Hydrological Consequences of Land Use Change in the Upper Tuul Table 23: Impacts of hydrological and ecological change on groundwater availability after 25 years No protection: rapid Continuation of Conservation: land & resource status quo: gradual sustainable land & degradation deterioration resource utilization Average runoff (m3/second) 19.7 19.7 19.1 Upper source Total number of wells (design capacity) 56 Lowering of groundwater table (meters) 0.40 0.24 No appreciable change Decrease in groundwater withdrawals per well (m3/day) 251 151 No appreciable change Decrease in groundwater withdrawals all wells (m3/day) 14,080 8,448 No appreciable change Total available groundwater extraction at upper source as 57,920 63,552 72,000 per design capacity of wells (m3/day) Central source Total number of wells (design capacity) 97 Lowering of groundwater table (meters) 1.31 0.79 No appreciable change Decrease in groundwater withdrawals per well (m3/day) 825 495 No appreciable change Decrease in groundwater withdrawals all wells (m3/day) 80,025 48,015 No appreciable change Total available groundwater extraction at upper source as 33,975 65,985 114,000 per design capacity of wells (m3/day) Industrial, meat factory and power plants Total number of wells (design capacity) 57 Lowering of groundwater table (meters) 1.31 0.79 No appreciable change Decrease in groundwater withdrawals per well (m3/day) 825 495 No appreciable change Decrease in groundwater withdrawals all wells (m3/day) 47,025 28,215 No appreciable change Total available groundwater extraction at upper source as 58,275 77,085 105,300 per design capacity of wells (m3/day) Total decrease in groundwater withdrawals (m3/day) 141,130 84,678 — Lowering of groundwater table in Upper Source taken from study data, for central and lower water sources uses estimates based on those presented in Zandaryaa and others (2003) and, Basandorj and Davaa (2005). Table refers to large wells only, and excludes small private wells. 59 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 39: Water demand and availability in Ulaanbaatar under different future management scenarios 105 95 m3 million/year 85 75 65 55 2005 2010 2015 2020 2025 2030 Available groundwater extraction: No protection: rapid land Continuation of status quo: Conservation: sustainable land & resource degradation gradual deterioration & resource utilisation From study data. The decrease in water availability is unlikely in reality to follow a straight line; the downward trend between 2005 and 2030 has been regularized for the purpose of the model 60 6. Economic Returns to Ecosystem Conservation: The Value of Investing in the Upper Watershed ■ Under all of the scenarios, the value of land The present value of ecosystem conservation and sustainable use and resource uses in the Upper Tuul will grad- ually increase over time as the human popula- Based on the data presented in the previous chap- tion grows and as human influence expands ter, the study looks at the economic implications of into the watershed. Under the conservation changes in upstream ecology and downstream wa- scenario, land and resource uses are main- ter availability. It begins by showing how different tained at sustainable levels, and the lowest management scenarios influence the value of land growth in value is recorded. Under a continu- and resource uses in the Upper Tuul and the value ation of the status quo and the scenario of no of water availability in Ulaanbaatar. The changes in protection, land and resource uses will rise at a these values over time are illustrated in Figure 40: more rapid pace, and continue to grow as the Figure 40: Upstream and downstream values under different future management scenarios No protection: rapid land Continuation of status quo: Conservation: sustainable land & resource degradation gradual deterioration & resource utilisation 105 105 105 85 85 85 Tug billion Tug billion Tug billion 65 65 65 45 45 45 25 25 25 2005 10 15 20 25 2030 2005 10 15 20 25 2030 2005 10 15 20 25 2030 Available water in Ulaanbaatar Land & resource use in Upper Tuul From study data. 61 Mongolia – The Economic Value of the Upper Tuul Ecosystem watershed population increases. However, as a scenario of conservation (Tug 275.11 billion). use rates exceed ecologically sustainable levels, The increased value of water availability under a the per capita value of land and resource uses scenario of conservation (estimated at Tug 1,095 will decline (even though the total value will billion as compared to Tug 1,014 billion under a continue to rise, as more and more people continuation of the status quo and Tug 959 billion utilize the land and resources in the upper under a scenario of no protection) outweighs the watershed). lower value for land and resource uses in the Up- ■ The value of water in Ulaanbaatar shows a per Tuul. different trend. As the Upper Tuul ecosystem becomes more degraded and impacts on the This analysis therefore shows that conserva- supply of water downstream, available water tion and sustainable use is the most economi- in Ulaanbaatar diminishes over time. This cally desirable future management scenario for decrease is most marked under a scenario of the Upper Tuul as a whole—it gives the highest no protection. In contrast, under the scenario overall value for the 25-year study period (Figure of conservation, current water availability can 41). Conservation and sustainable use generates be sustained. an estimated present value of Tug 1,370 billion, which is 6 percent or Tug 77 billion more than In order to compare these streams of benefits would be gained under a continuation of the over the 25 years covered in the scenario model- ing, the study team discounted future values in order to express the value of each scenario as a 56 Present value provides a single measure of the current value of single figure—their present value63 or value in the sum of a stream of future costs or benefits. It brings each today’s terms. As shown in Table 24, the present future cost or benefit to today’s value using a discount rate value of land and resource uses in the Upper Tuul (10% in the case of this study) and adds them together. Dis- counting (essentially the opposite of a compound interest rate) is highest under a scenario of no protection (es- is based on the principle that the further into the future a cost timated at Tug 283.96 billion), and lowest under or benefit accrues, the less it is worth at the current time. Table 24: Upstream and downstream values under different future management scenarios PV (Tug billion) No protection: rapid land Continuation of status quo: Conservation: sustainable & resource degradation gradual deterioration land & resource utilization Tourism 246.16 242.26 238.47 Pasture 32.64 32.37 32.34 Non-timber forest products 1.04 0.91 0.89 Timber 1.34 1.34 1.24 Firewood 2.78 2.78 2.17 Upper Tuul land & resource uses 283.96 279.68 275.11 Ulaanbaatar water availability 959.01 1,013.53 1,095.31 Total upstream & downstream value 1,242.97 1,293.21 1,370.42 From study data. PV calculated over 25-year scenario period using 10% discount rate. 62 Economic Returns to Ecosystem Conservation: The Value of Investing in the Upper Watershed Figure 41: Present value of land, resource, and water benefits under different future management scenarios Upper Tuul land & resource use Ulaanbaatar water availability Tug Conservation 1,370 bill Tug Status quo 1,293 bill Tug No protection 1,243 bill 0 250 500 750 1,000 1,250 1,500 Present Value (Tug bill) From study data. PV calculated over 25-year scenario period using 10% discount rate. status quo (present value of Tug 1,293 billion) and of Upper Tuul land and resource uses between 10 percent or Tug 128 billion more than under a different scenarios. It shows that there is an op- scenario of no protection (Tug 1,243 billion). portunity cost with a present value of around Tug 5 billion associated with conserving the Upper Tuul ecosystem instead of continuing the status Weighing up the costs and benefits quo, and around Tug 8 billion as compared to a of ecosystem conservation and scenario of no protection. sustainable use As shown in Figure 42 the annual value of Although the most economically desirable option these opportunity costs rises progressively over overall and from a public viewpoint, future man- time. This is because land and resource use levels agement scenario of ecosystem conservation and in the Upper Tuul are assumed to increase as hu- sustainable use will give rise to a range of costs. It man population grows and anthropogenic influ- is important to factor these costs into the analysis. ences in the watershed expand. However, these opportunity costs are more than compensated by the additional water values generated by ecosystem Factoring in the opportunity costs conservation. Figure 42 also shows that, even tak- of conservation ing opportunity costs into account, the scenario of conservation and sustainable use consistently Opportunity costs are reflected in the calculations generates a net “value added” or “cost avoided” of Table 24 and Figure 41. Opportunity costs are over the 25-year study period, as compared to the reductions in land and resource uses that must a continuation of the status quo and a scenario take place in order to conserve the watershed eco- of no protection. By the year 2030, the annual system—basically any loss in values that is implied value added or cost avoided from conservation by keeping activities at ecologically sustainable is estimated between Tug 33 billion (compared levels. Current and future land and resource users to a continuation of the status quo) and Tug 54 in the Upper Tuul ecosystem incur these costs. billion (compared to a scenario of no protection). Overall, conservation has an estimated net present Table 24 indicates the opportunity costs of value of Tug 77 billion (compared to a con- conservation—basically the difference in the value tinuation of the status quo) and Tug 128 billion 63 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 42: Conservation “value-added” or “cost-avoided” including land/resource use opportunity costs Increase in land and resource use opportunity costs 4.0 Tug billion/year 3.0 2.0 1.0 0.0 2005 2010 2015 2020 2025 2030 Over status quo Over no protection “Value-added” or “cost-avoided” from conservation less opportunity costs 60 NPV 128 bill Tug 50 Tug billion/year 40 30 NPV 77 bill Tug 20 10 0 2005 2010 2015 2020 2025 2030 Over status quo Over no protection From study data. PV calculated over 25-year scenario period using 10% discount rate. (compared to a scenario of no protection), taking This study therefore uses the budget projections for opportunity costs into account. these two protected areas as an estimate of the di- rect management costs of ecosystem conservation. Factoring in conservation management costs Gorkhi-Terelj National Park and Khan Khen- tii Strictly Protected Area management authorities A second important cost element, which is not receive an average annual conservation budget of included in the previous sections of this chapter, is around Tug 170 million. Although this budget is the direct physical expenditures that are required insufficient to manage the protected areas ef- to conserve the Upper Tuul ecosystem. These fectively and does not cover any capital costs, it management costs include items such as capital, represents conservation management costs under equipment, infrastructure, staffing and operating a continuation of the status quo. For effective costs, as well as expenditures on such activities conservation, protected area authorities estimate as awareness raising, education, outreach, polic- that an annual budget of at least Tug 250 million ing, and promoting sustainable land and resource is required. This represents conservation manage- uses. The Government of Mongolia incurs these ment costs under a situation of conservation and costs. Although the boundaries of the Upper Tuul sustainable use. Under the scenario of no protec- watershed do not correspond exactly with those tion, there is a zero budget for ecosystem con- of Gorkhi-Terelj National Park and Khan Khentii servation. The study assumes that protected area Strictly Protected Area, there is a large overlap. management costs will rise in real terms over the 64 Economic Returns to Ecosystem Conservation: The Value of Investing in the Upper Watershed Figure 43: Conservation “value-added” or “cost-avoided” including protected area management costs Increase in protected area management costs 1.0 Tug billion/year 0.8 0.6 0.4 0.2 0.0 2005 2010 2015 2020 2025 2030 Year Over status quo Over no protection ”Value-added“ or “cost-avoided” from conservation less opportunity costs and management costs 60 NPV 125 bill Tug 50 Tug billion/year 40 30 NPV 76 bill Tug 20 10 0 2005 2010 2015 2020 2025 2030 Year Over status quo Over no protection From study data. PV calculated over 25-year scenario period using 10% discount rate. study period at a rate of 5 percent per year (over over both a continuation of the status quo (an and above inflation). This responds to the grow- estimated net present value of Tug 76 billion) and ing human pressures on the ecosystem, which will a scenario of no protection (a net present value of necessitate rising expenditures on management Tug 125 billion). planning and conservation interventions. Figure 43 shows the rising additional man- The net present value of ecosystem agement costs implied under a scenario of con- conservation servation and sustainable use as compared to a continuation of the status quo and scenario of The ecosystem conservation and sustainable use re- no protection. Again, these additional costs are mains the most economically preferable option for outweighed by the economic gains from conserva- the Upper Tuul even when the opportunity costs tion. The present value of additional management and management costs of conservation are taken costs under a scenario of conservation and sustain- into account. As shown in Figure 44 and Table 25, able use is only 0.5 percent of the present value ecosystem conservation—because it sustains water of increased water availability. Figure 43 therefore availability in Ulaanbaatar—generates additional also shows that even when both management and benefits that are worth an estimated Tug 76 billion opportunity costs are considered, conservation and in today’s terms as compared to a continuation of sustainable use of the Upper Tuul ecosystem still the status quo and Tug 125 billion over a scenario generates significant value added or costs avoided of no protection. 65 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 44: Net present value of ecosystem conservation and sustainable use Over status quo 60 50 40 Tug billion NPV above 30 management 20 and opportunity costs Tug 76 bill 10 0 2005 2010 2015 2020 2025 2030 Year Additional water availability Additional costs Over no protection 60 50 40 Tug billion NPV above 30 management 20 and opportunity costs Tug 125 bill 10 0 2005 2010 2015 2020 2025 2030 Year Additional water availability Additional costs From study data Table 25: Net present value of ecosystem conservation and sustainable use as compared to continuation of the status quo and scenario of no protection in the Upper Tuul Increase in PV (Tug billion) implied by conservation scenario as compared to: Continuation of status quo: No protection: rapid land gradual deterioration & resource degradation Management costs 0.89 2.78 Opportunity costs 4.47 8.76 Total costs 5.36 11.54 Ulaanbaatar water availability 81.78 136.29 Net present value 76.421 124.75 From study data. PV calculated over 25-year scenario period using 10% discount rate. 66 Economic Returns to Ecosystem Conservation: The Value of Investing in the Upper Watershed The distribution of conservation Further illustrated in Figure 45, local com- costs and benefits between munities, businesses, and private sector groups in stakeholder groups the Upper Tuul will all face some level of reduc- tion in the values they receive under a scenario The preceding sections have shown that there is a of conservation and sustainable use as land and tangible—and substantial—economic gain from resource use values (at least initially) decrease. It conservation and sustainable use of the Upper Tuul is not in their immediate financial interests to ecosystem as compared to either a continuation of effect a shift to conservation and sustainable land the status quo or a scenario of no protection. The and resource use—at least in the short term while groups who benefit from ecosystem conservation unsustainable levels of land and resource uses can are however not the same as those who must bear its be maintained. This then becomes an important costs. As shown in Table 26, it is Ulaanbaatar water challenge: how to cover these costs and convince users who stand to benefit the most from a shift the Upper Tuul land and resource users, who to ecosystem conservation and sustainable use and lose out in financial terms from conservation and who will suffer the greatest costs if the watershed is sustainable use of the water shed, to adjust their further degraded. In contrast, the major cost-bearers land and resource activities to ensure the con- under a scenario of ecosystem conservation and sus- tinued provision of downstream economic water tainable use are the Upper Tuul land and resource benefits. The next chapter of the report discusses users who must bear the main opportunity costs of these issues further. conservation and the protected area authorities who must meet the direct management costs. Table 26: Distribution of stakeholder values under different future management scenarios Change in PV (Tug billion) Change from status quo to conservation Change from status quo to no protection Ulaanbaatar water users +81.78 –54.52 Upper Tuul land & resource users –4.56 +4.29 Local communities –0.07 –0.01 Business and private sector –4.37 +4.29 Ulaanbaatar government revenues +12.97 –8.64 Upper Tuul government revenues +0.01 +0.13 Protected Area administration –1.89 +0.89 All stakeholders +75.33 –49.34 From study data. PV calculated over 25-year scenario period using 10% discount rate. Note: figures for different stakeholder groups cannot be summed to give total figure, as would give rise to double-counting. 67 Mongolia – The Economic Value of the Upper Tuul Ecosystem Figure 45: Distribution of stakeholder values under different future management scenarios 80 60 NPV (Tug billion) 40 20 0 –20 –40 –60 All Ulaanbaatar Upper Tuul Upper Tuul Ulaanbaatar Upper Tuul Protected Area stakeholders w ater local business & government government administration users communities private sector revenues revenues Shift to conservation: sustainable Shift to no protection: rapid land land& resource utilisation & resource degradation From study data. PV calculated over 25-year scenario period using 10% discount rate. Note figures for different stakeholder groups can- not be summed to give total figure, as would give rise to double-counting. 68 7. Moving Forward: Investing in the Upper Tuul Ecosystem as an Economic Part of Water Infrastructure Factoring the Upper Tuul ecosystem the alluvial-proluvial deposits of the Tuul River into water infrastructure planning tributaries.66 This study underlines the recent and widespread concern that urgent actions are needed to address Developing surface water storage Ulaanbaatar’s water security in the future. It also presents the economic rationale for investing in Since the time of the USSR, various options have the conservation of the Upper Tuul ecosystem as been proposed for developing surface water sup- part of these actions. In addition to demand-side plies to Ulaanbaatar through constructing a dam measures (targeting both consumers and distribu- across the Tuul River drainage area and creating a tion losses), four approaches are currently being reservoir that would store the flow of the river.67 proposed to improve and expand Ulaanbaatar’s Three potential water storage reservoirs have been water supply infrastructure: identified for future development, located up- stream of the city. Little information is available about the proposed capacity or design of these Tapping into additional reservoirs, although it is estimated that a single groundwater reserves multi-purpose dam on the Tuul River could have a construction cost of US$60–70 million.68 As well as increasing the operating capacity of existing wells in line with their full design capacity,64 there is some potential for develop- Treating and re-using wastewater ing new groundwater resources in the vicinity of Ulaanbaatar.65 The development potential of Retreatment of the wastewater released from the existing alluvial groundwater deposits of the the central drainage facility of Ulaanbaatar Tuul River is estimated at 350,000 cubic meters has been proposed as a way of generating per day, of which around 215,000 cubic meters water for use by the thermal power plants are suitable for human consumption. According to studies performed in the late 1970s by Rus- sian hydrogeologists, this can be augmented up 57 World Bank (1997). 58 Basandorj and Davaa (2005). to 441,000 cubic meters per day (an additional 59 Zandaryaa and others (2003). 93,000 cubic meters) by adding the potential 60 Basandorj and Davaa (2005). 61 groundwater reserve that can be extracted from Davaasuren and Basandorj (2008). 69 Mongolia – The Economic Value of the Upper Tuul Ecosystem and manufacturing industries in the city. This Stimulating private and public alternative to the direct use of groundwater is investment in ecosystem intended to free up additional groundwater conservation for domestic use. It is estimated that current facilities could enable the production of an Alongside measures to construct and operate the additional 165,000 cubic meters of retreated physical infrastructure that is required to de- water per day for use by industry (about half liver adequate water in Ulaanbaatar, this report’s of which would be sold) and make available an analysis clearly presents a strong case for investing additional 100,000 cubic meters of groundwa- in conserving and maintaining the “natural” water ter per day for domestic use.69 infrastructure that shapes the Upper Tuul eco- system. The study shows the economic rationale for a scenario of conservation and sustainable Supplementing groundwater recharge use (yielding higher values to society than either gradual deterioration of the upper watershed or An important characteristic of the extraction rapid degradation of its land and resources) as well bores is that they have a non-stationary pattern as the economic returns that can be gained from of extraction: when the cone of depression has such investments (the value of water added for reached a critical level, the pump is turned out downstream use). and the water table is given time to go back to its static level. Under these conditions, it is unwise to One component is public investment in increase production since higher abstraction will the protected areas that lie at the source of likely result in faster-dropping groundwater levels. the Tuul River. This has many aspects, rang- The maximum sustainable volume of abstrac- ing from effective planning and management tion for wells has been reached and no added (through awareness and outreach) to enforce- volume can be extracted. However, if measures ment of restrictions and penalties against illegal can be taken to supplement groundwater recharge land and resource activities. The structures and around running and unused wells by artificial mechanisms to effect these actions are already recharge techniques, the capacity of the current in place via the 5-year management plan for extraction fields might be improved significantly. Gorkhi Terelj National Park and Khan Khentii This allows wells to recharge as well as withdraw Strictly Protected Area, the management and water from the aquifer: to inject water directly use zoning that has been carried out for the area, into the aquifer during high flow periods, increase and the host of laws and regulations that govern groundwater volumes, and create storage for low environmental management across Mongolia. A flow periods.70 pressing problem however remains. Public bud- gets at present levels are insufficient to manage In reality, the most likely future course of the protected areas effectively: there is no capital action will involve some combination of these budget and only scarce funds available to fund approaches.71 Land and resource management recurrent costs. in the Upper Tuul will however impact on the ability of all of these types of infrastructure to A second—and equally critical—component deliver water to Ulaanbaatar. Although watershed of ecosystem investment is addressing the current conservation alone is neither going to guarantee lack of financial incentives for land and resource water security nor abrogate the need to develop users in the Upper Tuul to carry out their activities additional water supplies, this study has made in an ecologically sustainable manner. It is neither it clear that the sustainable management of the Upper Tuul is an essential (and economic) part of any future water sector development, whether 62 Tuul Songino Water Resource Joint Stock Company. they are based on groundwater or surface water 63 Acacia Institute and IGRAC. 2008. or both. 64 Basandorj and Davaa (2005). 70 Moving Forward: Investing in the Upper Tuul Ecosystem as an Economic Part of Water Infrastructure realistic nor equitable to expect them to subsidize There are now many examples of payment for the provision of water services for the benefit ecosystem services being used as a mechanism for of downstream urban dwellers. In practice, it is funding watershed management. These services likely that a package of mutually reinforcing fiscal, range from applications that are based solely on financial, and economic measures will be required revenue transfers between different government to redress these imbalances, generate additional fi- departments to those that involve agreements nance for protected area management, and provide between private parties. In Ecuador, the munici- sufficient conservation incentives to upstream land pal water companies of Quito and Pimampiro and resource users. have created water funds by charging levies on drinking water. These funds are used to invest in Payment for ecosystem services is a widely upland watershed conservation and to make direct used mechanism for ecosystem conservation for payment to forest owners. In Colombia, agro- downstream water supplies and would seem to industrial water user associations have entered have potential in Upper Tuul. At a basic level, the into voluntary contracts with farmers in their mechanism addresses the problem with regard to upper watersheds. In China, Beijing municipality groups who use and manage economically valu- compensates farmers in Miyun County, the source able ecosystems (for example government pro- of Beijing’s water supplies, with cash payments tected area authorities and local land and resource for planting trees on their land. In Vietnam, a users) but do not typically gain in financial terms wide range of payment for ecosystem services with from conservation. In many cases, they are also protected area authorities and local landholders faced with opportunities to generate substantial are being developed in Ho Chi Minh City’s Dong profits from unsustainable land and resource uses. Nai watershed, involving the municipal council, At the same time, although other off-site groups a hydropower producer, water bottling company, benefit from ecosystem services that are generated and agro-industries. as a result of conservation (for example, adequate and regular water supplies), they typically receive It is beyond the scope of this study to inves- these benefits at low or zero cost. In order to make tigate such mechanisms in detail. The analysis sustainable land and resource use options more of economic values that has been carried out financially attractive, payment for ecosystem ser- indicates clearly that, however great the value of vices involves efforts to develop systems in which the Upper Tuul ecosystem is demonstrated to be land users are paid for the ecosystem services in theory, these figures will have little impact or they generate. The core principles of payment for meaning unless translated into concrete incentives ecosystem services are that those who provide eco- and funding. The incentives and funding will both system services should be rewarded for doing so persuade and enable the groups who use and man- (in this case land and resource users in the Upper age the Upper Tuul land and resources to ensure Tuul) and those who use the services should pay that the ecosystem is conserved and assures clean, for the provision (in this case downstream water regular, and equitable water supplies for Ulaan- users in Ulaanbaatar). baatar’s residents into the future. 71 Annex: Summary of Methods and Assumptions The eco-hydrological model and PULSE) can be used for simulation of water quality (e.g., nitrogen, pH, and alkalinity). The HBV Model is a computerized catchment model that converts precipitation, potential evapo- In different model versions HBV has been ap- ration, and snowmelt, if applicable, into stream- plied in more than 40 countries all over the world. flow/reservoir inflow by simulating of the natural It has been applied to countries with such differ- hydrological processes. ent climatic conditions as Sweden, Zimbabwe, India, and Colombia. The model has been applied It is part of a computerized system for hydro- for scales ranging from lysimeter plots (Lindström logical forecasting, discharge simulation, design and Rodhe 1986) to the entire Baltic Sea drainage flood computations and climate change studies, the basin (Bergström and Carlsson 1994; and Graham HBV/IHMS (Integrated Hydrological Modeling 1999). HBV can be used as a semi-distributed System). Special versions of the model (HBV-N model by dividing the catchment into sub-basins. General HBV model information Data requirement Sub-basin division and coupling, altitude and land cover distribution, time-series of precipitation and temperature (time-series of observed water discharge at some site). Applicability The model is simple, and has been applied in some 40 countries, in all parts of the world. The model runs under a Windows graphical user interface (IHMS), and a new modern interface (available in 2003). Operational experience and skills requirement of users Two weeks of training for model setup and applications. Basic knowledge in hydrology. License agreements The model is free for research purpose. For commercial use a license may be bought from the Swedish Meteorological and Hydrological Institute. Cost indication Application to one catchment requires about 2-weeks work of an experienced modeler (if necessary database is already available). Training Courses are organized regularly at the Swedish Meteorological and Hydrologi- cal Institute. 73 Mongolia – The Economic Value of the Upper Tuul Ecosystem Each sub-basin is then divided into zones accord- ECORR, and the interception storage capacity ing to altitude, lake area, and vegetation. The IC for different vegetation zones, but the ratios model is normally run on daily values of rainfall between the values for forested and non-forested and air temperature, and daily or monthly esti- areas are kept constant. mates of potential evaporation. The model is used for flood forecasting in the Nordic countries and Optimal interpolation of precipitation and for many other purposes such as spillway design temperature: The standard model uses a rather floods simulation (Bergström and others 1992), crude weighting routine and lapse rates for com- water resources evaluation (Brandt and others putation of areal precipitation and air tempera- 1994: 643–51), and nutrient load estimates. tures. In HBV-96 a geostatistical method, based (Arheimer 1998). on optimal interpolation was introduced (Daley 1991). This method is frequently used in meteo- Input data are observations of precipitation, rological applications, and similar to kriging. The air temperature and estimates of potential evapo- method may be based purely on data from me- transpiration. The time step is usually one day, teorological stations and general knowledge of the but it is possible to use shorter time steps. The precipitation/temperature pattern. One may also evaporation values used are normally monthly add the information included in a meteorological averages although it is possible to use daily values. model to take into consideration (e.g., topography Air temperature data are used for calculations and prevailing winds); such a grid was developed of snow accumulation and melt. It can also be for 40 years of daily values for Sweden (Johansson used to adjust potential evaporation when the 2002). temperature deviates from normal values, or to calculate potential evaporation. If none of these Snow routine. The standard snowmelt routine of last options are used, temperature can be omitted the HBV model is a degree-day approach, based in snow-free areas. on air temperature, with a water-holding capac- ity of snow, which delays runoff. Melt is further The model consists of subroutines for me- distributed according to the temperature lapse teorological interpolation, snow accumulation rate and is modeled differently in forests and open and melt, evapotranspiration estimation, a soil areas. A threshold temperature (TT) is used to moisture accounting procedure, routines for runoff distinguish rainfall from snowfall. If the parameter generation, and finally a simple routing procedure TTINT is used, the threshold is extended to an between sub-basins and in lakes. It is possible to interval and within this interval precipitation is run the model separately for several sub-basins and assumed to be a mix of rain and snow, decreasing then add the contributions from all sub-basins. linearly from 100 percent snow at the lower end Calibration as well as forecasts can be made for to 0 percent at the upper end. The snowpack is as- each sub-basin. For basins of considerable elevation sumed to retain melt water as long as the amount range a subdivision into elevation zones can also be does not exceed a certain fraction of the snow. made. This subdivision is made for the snow and When temperature decreases below the threshold soil moisture routines only. Each elevation zone temperature, this water refreezes gradually. Glacier can further be divided into different vegetation melt will occur only in glacier zones and follows zones (e.g., forested and non-forested areas). the same type of formula as for snowmelt but with another degree-day factor. No glacier melt The model structure of HBV-96 is presented occurs as long as there is snow in the zone. A snow schematically in Figure A.1 (Lindström and others distribution can be made in each zone by subdi- 1997). This only shows the most important char- viding it into a number of sub-areas with different acteristics of the model, and some clarifications are snow accumulation. Normally three snow classes given below. The classes of land use are normally are used. This accounts for re-distribution of snow, open areas, forests, lakes and glaciers. It is possible snowdrift, and snow that is trapped in creeks and to use different values of SFCF, SFDIST, CFMAX, other irregularities in rugged terrain. 74 Annex: Summary of Methods and Assumptions Figure A.1. Schematic structure of one sub-basin in the HBV-96 model72, with routines for snow (top), soil (middle) and response (bottom) 65 Lindström and others (1997). 75 Mongolia – The Economic Value of the Upper Tuul Ecosystem Evapotranspiration. The standard HBV model transforms excess water from the soil moisture is run with monthly data of long-term mean zone to runoff. It also includes the effect of direct potential evapotranspiration, usually based on the precipitation and evaporation on a part, which Penman formula (Penman 1948). These data are represents lakes, rivers and other wet areas. The adjusted for temperature anomalies (Lindström function consists of one upper non-linear and one and Bergström 1992). As an alternative, daily lower linear reservoir. These are the origin of the values can be calculated as being proportional to quick (superficial channels) and slow (base-flow) air temperature but with monthly coefficients of runoff components of the hydrograph. Level pool proportionality. From the interception storage, routing is performed in lakes located at the outlet an evaporation equal to the potential evaporation of a sub-basin. The division into sub-models, de- will occur as long as water is available, even if it fined by the outlets of major lakes (not shown in is stored as snow. If the interception routine is the figure), is thus of great importance for deter- used, it is also possible to reduce the soil evapora- mining the dynamics of the generated runoff. The tion to avoid values of total evaporation that are routing between sub-basins can be described by too large. The interception routine is however not the Muskingum method (Shaw 1988) or simple always used. Instead the potential evapotranspira- time lags. Each one of the sub-basins has indi- tion from forested areas is often assumed to be 15 vidual response functions. percent higher than that from open areas (Johans- son 2002). The potential evapotranspiration is Lakes. Precipitation on lakes will be the same thus a function of the time of the year, the current as for a non-forested zone at the same altitude air temperature, vegetation, elevation, and, as an and will be added to the lake water regardless option, precipitation. Evaporation from lakes will of ice conditions in the same way for both rain occur only when there is no ice. Ice conditions are and snow. Evaporation from lakes will equal the modeled with a simple weighting sub-routine on potential evaporation but can be modified by a air temperature, which results in a lag between air parameter and will occur only when there is no temperature and lake temperature. It is assumed ice. Transformation of runoff is taking place after that the lake is frozen when the weighted tempera- water routing through the lake according to a rat- ture drops below zero. ing curve. If no specific rating curve for the lake is given as input, the model will assume a general Soil routine. The soil moisture accounting of the rating curve. HBV model is based on a modification of the bucket theory in that it assumes a statistical dis- Model calibration. Although the automatic tribution of storage capacities in a basin. This is calibration routine is not a part of the model itself, the main part controlling runoff formation. This it is an essential component in the practical work. routine is based on the three parameters—BETA, The standard criterion (Lindström 1997) is a LP, and FC—as shown in the middle section compromise between the traditional efficiency R2 of Figure A1. BETA controls the contribution measure (Nash and Sutcliffe 1970) and the relative to the response function or the increase in soil volume error, RD: moisture storage from each millimeter of rainfall or snowmelt. The ratio ΔQ/ΔP is often called In practice the optimization of only R2 often runoff coefficient, and ΔQ is often called effective results in a remaining volume error. The criterion precipitation. LP is a soil moisture value above above gives results with almost as high R2 values which evapotranspiration reaches its potential and practically no volume error. The best results value, and FC is the maximum soil moisture stor- are obtained with w close to 0.1. The automatic age in the model. The parameter LP is given as a calibration method for the HBV model devel- fraction of FC. oped by Harlin used different criteria for different parameters (Harlin and Kung 1992). With the Response function and routing. The runoff simplification to one single criterion, the search generation routine is the response function that method could be made more efficient. The optimi- 76 Annex: Summary of Methods and Assumptions zation is made for one parameter at a time while tion. When combined, the modifications led to keeping the others constant. The one-dimensional significant improvements in model performance. search is based on a modification of the Brent In seven test basins, the average value of the parabolic interpolation (Press and others 1992). efficiency criterion R2 increased from 86 to 89 percent, with improvements in both the calibra- HBV-96. A comprehensive re-evaluation of the tion and verification periods. In general the results model was carried out during the 1990s and did not justify any increased resolution in time resulted in the present model version called HBV- or space unless more detailed data are to be used 96 (Lindstrom and others 1997). The objectives as input or for validation. The option of higher were to improve the potential for making use of resolution in space is also necessary for future in- spatially distributed data in the model, to make tegration of spatially distributed field data in the the model more physically sound and to improve model. The improvements in model performance model performance. The model revision led to was more due to the changes in the processing of slight changes in the process descriptions for input data and the new calibration routine than snow accumulation and melt, evapotranspiration, due to the changes in the process descriptions of groundwater discharge, and automatic calibra- the model. 77 Assumptions used for economic valuation and scenario modeling 78 Upper Tuul land and resource uses No protection: rapid land & Continuation of status quo: Conservation: sustainable Base year value* resource degradation gradual deterioration land & resource utilization Tourism International tourists 27,000 people Increases by 2.5% a year Increases by 2.0% a year Increases by 2.0% a year Domestic visitors 106,000 people Number of bednights sold 929,488 bednights Increases by 2% a year Increases by 1.25% a year Increases by 1% a year Government land charges and other Increases by 1.75% a year Increases by 1.00% a year Stays the same taxes Pasture & herding Population of Erdene herder families 271 households Grows by 4.7% a year (continues current trends) Grows by 2.35% a year (half past rate of growth) Grows by 1% a year Population of Nalaikh herder families 274 households Grows by 3.1% a year (continues current trends) Grows by 1.55% a year (half past rate of growth) Erdene herder livestock population 77,725 SEU Average herd size per family maintained until grazing Average herd size per family maintained until Average herd size per family Mongolia – The Economic Value of the Upper Tuul Ecosystem becomes insufficient: reduces by 35% in 2015 and 55% grazing becomes insufficient: reduces by 25% in maintained Nalaikh herder livestock population 44,565 SEU in 2025 2020 Timber and firewood Legal roundlog harvest 643 m3 Rises by 5% a year until sustainable harvest exceeded: Rises by 1% a year until sustainable harvest ex- No increase harvest reduces by 5% a year from 2015 ceeded: harvest reduces by 2.5% a year from 2020 Legal cut firewood harvest 4,384 m3 Illegal roundlog harvest 606 m3 Rises by 10% a year until sustainable harvest ex- Rises by 5% a year until sustainable harvest ex- Rises by 5% a year ceeded: harvest reduces by 10% a year from 2015 ceeded: harvest reduces by 5% a year from 2020 Illegal cut firewood harvest 4,114 m3 (continued on next page) No protection: rapid land & Continuation of status quo: Conservation: sustainable Base year value* resource degradation gradual deterioration land & resource utilization Timber roundlogs for household 2,046 m3 Number of households increases in line with popula- Number of households increases by half of Number of households structures tion growth rate (4.7%), per household consumption population growth rate (2.35%), per household increases by 1% year, per maintained at 30 m3 every ten years until sustainable consumption maintained at 30 m3 every ten household consumption harvest exceeded: harvest reduces to 20 m3 every ten years until sustainable harvest exceeded: harvest maintained at 30 m3 every years in 2015 and 10 m3 every ten years in 2020 reduces to 20 m3 every ten years in 2020 and 10 ten years m3 every ten years in 2025 Household firewood harvest 4,955 m3 Number of households increases in line with popula- Number of households increases by half of Number of households tion growth rate (4.7%), per household consumption population growth rate (2.35%), per household increases by 1% year, per maintained at 8 m3/year until sustainable harvest consumption maintained at 8 m3/year until household consumption exceeded: harvest reduces to 5 m3/year in 2015 and 3 sustainable harvest exceeded: harvest reduces to maintained at 8 m3/year m3/year in 2020 5 m3/year in 2020 and 3 m3/year in 2025 Non-timber forest products Households harvesting wild fruits & 282 households berries Rises by 3% a year until sustainable harvest Rises by 2% a year until sustainable harvest Households harvesting wild vegetables 282 households exceeded: per household harvest reduces by 2.5% a exceeded: per household harvest reduces by Rises by 0.5% a year Households harvesting pine Nuts 200 households year from 2015 2.5% a year from 2020 Households harvesting medicinal plants 34 households Big bang commercial pine nut harvest 147.2 tons Occurs every 6 years, 50% of available harvest cur- Occurs every 6 years, 50% of available harvest utilized rently utilized, rising to 75% from 2016 * 2007 is taken as the base year because it is the year immediately preceding the study, and therefore the reference point for most data and statistics collected. Scenario modeling is carried for the years 2005–2030. Prices are held constant between scenarios 79 Annex: Summary of Methods and Assumptions Ulaanbaatar water use 80 Base year value* Assumptions Human population of Ulaanbaatar 1,031,200 Population growth rates taken from records for Ulaanbaatar in 2005, 2006 and 2007, future projections for 2010, 2020, 2025 and 2030 regularized to straight line growth rate between each projection year Number of ger settlement residents 620,950 Current proportion of total population 60%, falling to 50% in 2016, 35% in 2020, 25% in 2025. Water consumption rises from current 7.5 liters per capita per day to in 22.5 liters in 2015 and 75 liters in 2020. Number of apartment dwellers 403,260 Current proportion of total population 39%, rising to 45% in 2016, 55% in 2020, 60% in 2025. Per capita water consumption remains stable. Number of individual household dwellers 6,990 Current proportion of total population 1%, rising to 5% in 2016, 10% in 2020, 15% in 2025. Per capita water consumption remains stable. Number of businesses and industries 20,327 Growing by 5% a year, 6.5% from 2015, 9% from 2020 Number of power stations 3 Increasing to 4 in 2012, 7 in 2025 Number of livestock 724,341 Number of herders increases in line with ger dweller population increase, average herd size remains stable. Area of irrigated farms 290 ha (cropped Area under irrigated farms increases by 10% a year from 2008, 5% from 2015, 2.5% from 2025 area 413 ha) * 2007 is taken as the base year because it is the year immediately preceding the study, and therefore the reference point for most data and statistics collected. Scenario modeling is carried for the years 2005–2030. Prices are held constant Mongolia – The Economic Value of the Upper Tuul Ecosystem between scenarios. References Acacia Institute and IGRAC. 2008. 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