The clean energy revolution will depend on a steady supply of critical minerals to support the manufacturing of a wide range of technologies, from wind turbines to electric vehicle batteries. While not all of these ‘critical’ materials are rare, they are not naturally available everywhere in the world, leading to potential geopolitical minefields as competition over these supply chains heats up.
The United States Energy Act of 2020 provided an operational definition of ‘critical minerals’ as those that are:
- essential to the economic or national security of the United States
- have a supply chain vulnerable to disruption; and
- serve an essential function in the manufacturing of a product integral to the economic or national security of the United States.
According to projections from the International Energy Agency, global demand for critical minerals from the clean energy industry will at least double, and possibly even quadruple, by 2040 depending on the world’s rate of clean energy adoption. That demand growth will primarily come from electric vehicles and battery storage. Lithium will see the fastest rate of growth, while graphite, copper and nickel will dominate overall demand when calculated by weight.
“A world powered by renewables is a world hungry for critical minerals,” UN Secretary-General António Guterres said at a Panel on Critical Energy Transition Minerals held last year. “For developing countries, critical minerals are a critical opportunity — to create jobs, diversify economies, and dramatically boost revenues. But only if they are managed properly.”
While developing these materials can provide huge economic opportunities for emerging economies, extraction of these metals and minerals is also associated with significant environmental externalities. The production of lithium, for example, is incredibly water-intensive and can expose environments and communities to harmful and toxic chemicals. In a notable case from 2016, thousands of dead fish washed up seemingly overnight in a Tibetan river, which was poisoned by toxic chemicals from a nearby lithium extraction operation.
By definition, these minerals are also subject to key vulnerabilities and could be implicated by critical supply chain disruptions, with significant consequences for economies and national security, not just for the United States but for nations around the world. According to a recent Vox report, the uneven spread of critical minerals “could leave some countries bearing most of the environmental burdens from mining critical minerals while wealthier nations reap the economic benefits and other countries get left out of the supply chain entirely.” Moreover, spotty concentrations and uneven control over these critical supply chains creates key vulnerabilities in global clean energy markets if prices spike or collapse, or if emerging technologies increase scarcity.
There is also considerable concern that the countries that control the supply of critical minerals could hold a dangerous amount of leverage over global markets. China currently dominates the global market for a huge number of these materials. Beijing supplies about 85-95 percent of the world’s refined rare earth minerals – many of which are also critical minerals – and has dominated global markets for decades now thanks to a near-monopoly on rare earth refining capacities. China alone accounts for a whopping 85-90 percent of the world’s rare earth mine-to-metal refining. Chinese refineries supply 68 percent of the world’s cobalt, 65 percent of nickel, and 60 percent of EV-battery-grade lithium.
And China has shown in the past that it is not afraid to flex its might and disrupt global supply chains for its own political interest. And this potential weak spot in global critical mineral supply chains has only been exacerbated by Trump-era tariffs and an overall bent toward nationalism and protectionism.
As a result, we could see major upheaval and uncertainty in global clean energy markets, with far-ranging environmental and economic consequences. “If producers of these substances decide to restrict access to their customers as a political lever, if prices shoot up, or if more industries develop an appetite for them and eat into the supply,” Vox reports, “companies could go bankrupt and efforts to limit climate change could slow down.”
By Haley Zaremba for Oilprice.com
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Source: Critical Minerals Fuel Geopolitical Competition | OilPrice.com
