Despite the protests of some environmentalists, global energy and financial specialists have consistently identified the discovery and development of new mineral resources as a key to reducing CO2 emissions and a clean energy future.
International Energy Agency
The U.S.-headquartered International Energy Agency (IEA) has repeatedly declared that minerals are essential components in many of today’s rapidly growing clean energy technologies – from wind turbines and electricity networks to electric vehicles (EVs).
The IEA World Energy Outlook Special Report says demand for these minerals will grow quickly as clean energy transitions gather pace, with many complex links between the vital minerals needed and the prospects for a secure, rapid transformation of the energy sector.
The IEA report found that an energy system powered by clean energy technologies differs profoundly from one fuelled by traditional hydrocarbon resources. Solar photovoltaic (PV) plants, wind farms and EVs generally require more minerals to build than their fossil fuel-based counterparts.
A typical electric car requires six times the mineral inputs of a conventional car and an onshore wind plant requires nine times more mineral resources than a gas-fired plant. Since 2010 the average amount of minerals needed for a new unit of power generation capacity has increased by 50% as the share of renewables in new investment has risen.
“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realizing those ambitions,” said Fatih Birol, executive director of the IEA.
“The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action. By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions.
“Left unaddressed, these potential vulnerabilities could make global progress towards a clean energy future slower and more costly – and therefore hamper international efforts to tackle climate change.
“This is what energy security looks like in the 21st century, and the IEA is fully committed to helping governments ensure that these hazards don’t derail the global drive to accelerate energy transitions,” Dr Birol said.
The IEA said the types of mineral resources used vary by technology. Lithium, nickel, cobalt, manganese, and graphite are crucial to battery performance, longevity, and energy density. Rare earth elements (REEs) are essential for permanent magnets that are vital for wind turbines and EV motors.
Electricity networks need a huge amount of copper and aluminium, with copper being a cornerstone for all electricity-related technologies.
The IEA said this shift to a clean energy system is set to drive a huge increase in the requirements for these minerals, meaning that the energy sector is emerging as a major force in mineral markets.
Until the mid-2010s, for most minerals, the energy sector represented a small part of total demand. However, as energy transitions gather pace, clean energy technologies are becoming the fastest-growing segment of demand.
In a scenario that meets the Paris Agreement goals (as in the IEA Sustainable Development Scenario), their share of total demand rises significantly over the next two decades to over 40% for copper and REEs, 60 to 70% for nickel and cobalt, and almost 90% for lithium. EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end user of nickel by 2040.
Centre For Strategic & International Studies raises concerns
Bipartisan, non-profit policy research organization, the Centre For Strategic & International Studies, has identified the safeguarding of critical minerals as one of the keys for the energy transition.
A recent report from the Centre found that the transition from fossil fuels to low-carbon energy sources will depend on critical minerals.
It noted that helping this system emerge, and safeguarding it, is a major objective for the U.S. in particular, both to ensure an orderly energy transition and to limit the externalities that often come with extractive industries.
Yet the Centre says the term “critical minerals” lumps together markets with disparate characteristics, which makes it harder to craft a strategy toward each commodity. The geography of critical minerals is also poorly understood. Too often the phrase “critical minerals” is seen as a synonym for cobalt in the Democratic Republic of the Congo or REEs in China.
The Centre says the tendency to see critical minerals through the prism of U.S.-China competition is another problem, overlooking the fault lines that will define these minerals, especially the likely tensions between mining companies and the populations and sovereigns to which these resources ultimately belong.
Critical minerals strategy
The Center says a strategy to safeguard critical minerals should begin with a basic understanding of which minerals really matter and why, where they are mined today and where they could be mined in the future, what applications they might be used for, and whether they can be substituted by other minerals in specific applications.
“To begin with, it is important to understand that two applications could drive three-fourths of the demand for critical minerals in 2050: electricity networks and batteries, chiefly for EVs.
“Half of the total projected demand in 2050 is for copper and a quarter is split between nickel and graphite. Then come lithium, manganese, and cobalt. In terms of value, copper accounts for a third of the total in 2050, lithium and nickel each account for almost a quarter each, graphite 10%, and cobalt 7%,” the Centre said.
“Of course, these are just forecasts. But they reveal important trends and realities. Copper is by far the most valuable mineral. Copper, lithium, and nickel will account for over 80% of the market value in 2050. The production of each mineral is concentrated, but the major producers differ by commodity. The largest copper producer is Chile (40% of the total), Peru is second (11%), and China is third (9%). Australia produced half of the world’s lithium in 2020, Chile 22%, and China 17% The top nickel producer is Indonesia (30%), followed by the Philippines (13%) and Russia (11%). Also on the list are countries such as Cuba (cobalt), Argentina and Brazil (lithium), and New Caledonia (nickel).”
The Centre concluded that no discussion about critical minerals should be static. It suggested that technologies have different mineral requirements, and there are active innovation efforts to reduce the reliance on one mineral or another. And as markets grow, they will become more diversified, stable, and transparent, alleviating some of the concentration challenges the world faces today.
International Monetary Fund
The International Monetary Fund (IMF) recently suggested that the clean energy transition needed to avoid the worst effects of climate change could unleash unprecedented metals demand in coming decades, requiring as much as 3B tons.
It said metal prices have already seen large increases as economies reopened, highlighting a critical need to analyse what could constrain production and delay supply responses. Specifically, the IMF suggested an assessment needed to be made on whether there are enough mineral and metal deposits to satisfy needs for low-carbon technologies and how to best address factors that could restrain mining investment and metals supplies.
Supply constraints
A IMF blog suggested that replacing fossil fuels with low-carbon technologies would require an eightfold increase in renewable energy investments and cause a strong increase in demand for metals. However, developing mines is a process that takes a very long time – often a decade or more – and presents various challenges, at both the company and country level.
The IMF said the first question is how far current metals production is stretched and whether existing reserves can provide for the energy transition.
“Given the projected increase in metals consumption through 2050 under a net zero scenario, current production rates of graphite, cobalt, vanadium, and nickel appear inadequate, showing a more than two-thirds gap versus the demand. Current copper, lithium and platinum supplies also are inadequate to satisfy future needs, with a 30% to 40% gap versus demand,” the article said.
World Bank
A new World Bank Group report, Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition, finds that the production of minerals, such as graphite, lithium and cobalt, could increase by nearly 500% by 2050, to meet the growing demand for clean energy technologies.
It estimates that over 3B tons of minerals and metals will be needed to deploy wind, solar and geothermal power, as well as energy storage, required for achieving a below 2°C future.
The World Bank added that while the growing demand for minerals and metals provides economic opportunities for resource-rich developing countries and private sector entities alike, significant challenges will likely emerge if the climate-driven clean energy transition is not managed responsibly and sustainably.
The World Bank has suggested there is a need for a Climate-Smart Mining Initiative which will help resource-rich developing countries benefit from the increasing demand for minerals and metals, while ensuring the mining sector is managed in a way that minimizes the environmental and climate footprint.
The initiative would support the sustainable extraction and processing of minerals and metals to secure supply for clean energy technologies by minimizing the social, environmental, and climate footprint throughout the value chain of those materials by scaling up technical assistance and investments in resource-rich developing countries.
While the growing demand for minerals and metals provides economic opportunities for resource-rich developing countries and private sector entities alike, significant challenges will likely emerge if the climate-driven clean energy transition is not managed responsibly and sustainably.
