The first project will provide support for wool and cashmere manufacturers in pushing for a green, sustainable development of the cashmere industry, according to a visiting EU delegation to Mongolia.

Mongolia is the world's second-largest producer of raw and washed cashmere, with a goat population of more than 27 million and an annual cashmere output of up to 9,400 tons.

Some 90 percent of the cashmere is exported and only the remaining 10 percent is made into final products.

On Wednesday, the Mongolian government also launched two other EU-funded projects aimed at boosting environmental protection in the capital Ulan Bator.

One of them will help build new, warm homes for a total of 1,000 low-income households living in the ger districts or shantytowns. Another project is intended to increase public awareness about air pollution.

Ulan Bator suffers from some of the world's most severe air pollution in winter months.

More than 800,000 residents, or over half of its population, live in shantytowns with no tap water, central heating, sewerage systems or regular garbage collection. They usually burn raw coal and other flammable materials such as plastics and old tires to keep warm and cook meals during the six-month-long winter.

The three EU-funded projects will last three years with total funds of 5 million euros (5.8 million U.S. dollars).