Securing Critical Minerals for a Net-Zero Economy

The global shift towards a net-zero economy is driving an unprecedented surge in demand for clean energy technologies, including electric vehicles (EVs), solar panels, and wind turbines. These technologies rely heavily on critical minerals and rare earth elements (REEs), which are essential for their functionality and performance. However, the concentration of these minerals in a few countries poses significant challenges to ensuring a smooth and equitable transition to a net-zero future. This report examines the critical minerals essential for clean energy technologies, the geopolitical landscape surrounding their supply and demand, and the initiatives underway to secure access to these vital resources.

Critical Minerals for Clean Energy Technologies

Several critical minerals and REEs are indispensable for manufacturing clean energy technologies. These minerals possess unique properties that enable the production of high-performance batteries, efficient solar panels, and powerful wind turbines. Some of the most important minerals include:

• Lithium: A key component of lithium-ion batteries, used in EVs and energy storage systems, lithium provides high electrochemical potential, enabling efficient energy storage¹.
• Cobalt: Used in lithium-ion batteries to improve their energy density and lifespan, cobalt enhances the stability and performance of the battery cathode¹.
• Nickel: Another crucial element in EV batteries, contributing to higher energy density and greater storage capacity, nickel enhances the battery's overall performance and longevity¹.
• Copper: A highly conductive metal used extensively in electrical wiring, motors, and generators in various clean energy technologies, copper enables efficient transmission of electricity with minimal energy loss².
• Graphite: Used as an anode material in lithium-ion batteries, graphite facilitates the movement of lithium ions, enabling the battery to charge and discharge¹.
• Silicon: A semiconductor material crucial for solar panels, silicon converts sunlight into electricity, forming the basis of solar photovoltaic technology³.
• Rare Earth Elements: A group of 17 elements with unique magnetic and conductive properties, essential for permanent magnets in wind turbines and EV motors, REEs enable the production of lightweight and powerful magnets that improve efficiency⁴.

• Neodymium: Used in high-strength permanent magnets for wind turbines and EVs, neodymium enhances the magnetic field strength, leading to more efficient energy conversion⁴. The global demand for neodymium is expected to grow 48 percent by 2050, exceeding the projected supply by 250 percent by 2030⁶.
• Praseodymium: Often alloyed with neodymium to enhance the performance of magnets, praseodymium further increases magnetic strength and improves the magnet's resistance to demagnetization⁴. The need for praseodymium could exceed supply by 175 percent by 2030⁶.
• Dysprosium: Improves the heat resistance of magnets used in wind turbines and EVs, dysprosium ensures the magnets maintain their performance at high operating temperatures⁴.
• Terbium: Used in high-temperature magnets and fuel cells, terbium enables the development of advanced technologies that operate under extreme conditions⁴.

In addition to their use in EVs and wind turbines, REEs also play a vital role in energy storage systems. For example, they are used in the production of high-performance batteries for grid-scale energy storage, which is crucial for integrating renewable energy sources into the power grid⁵.

The demand for these minerals is projected to increase significantly as the world transitions to clean energy. For example, the consumption of minerals like copper, lithium, nickel, and cobalt could increase sixfold by 2050². This surge in demand underscores the need to secure access to these vital resources and ensure their sustainable and responsible sourcing.

Global Reserves and Production of Critical Minerals

The distribution of critical mineral reserves is geographically concentrated, raising concerns about supply chain vulnerabilities and potential geopolitical risks. The table below shows the top three countries with the largest reserves of some key critical minerals:

China plays a dominant role in the production and processing of many critical minerals⁷. This concentration of production in a single country raises concerns about potential supply disruptions, price volatility, and geopolitical influence. It also highlights the need for diversification of supply chains and increased investment in mining and processing capacity in other regions.

Geopolitical Landscape and Supply Chain Risks

The geographic concentration of critical mineral reserves and production has created a complex geopolitical landscape with potential risks to the security and stability of supply chains. Some of the key geopolitical considerations include:

Resource Nationalism

Countries with significant mineral reserves may be tempted to impose export restrictions or implement policies that favor domestic industries⁸. This "resource nationalism" can disrupt global supply chains and create uncertainties for countries that rely on imports of critical minerals. For example, in the past, China has imposed restrictions on exports of select critical minerals to several countries, including the United States, Japan, and Sweden⁹. Such actions can hinder the development and deployment of clean energy technologies, potentially slowing down the transition to a net-zero economy.

Supply Chain Disruptions

Political instability, trade conflicts, or natural disasters in mineral-producing regions could disrupt the flow of critical minerals, impacting the production of clean energy technologies¹⁰. For example, the war in Ukraine has led to scrutiny and regulation of Russian exports, impacting the availability of some critical materials sourced from the region¹⁰. These disruptions can lead to price increases, delays in production, and hinder the progress of clean energy transitions.

Environmental and Social Concerns

Mining and processing critical minerals can have significant environmental and social impacts, including water pollution, deforestation, and human rights violations¹¹. These impacts can raise concerns about the sustainability and ethical sourcing of critical minerals. Addressing these concerns is crucial for ensuring that the clean energy transition does not come at the expense of environmental protection and social well-being.

Price Volatility

The concentrated supply and growing demand for critical minerals can lead to price fluctuations, making it challenging for manufacturers to plan and invest in clean energy technologies¹⁰. Price volatility can create uncertainties in the market and hinder long-term investments in clean energy infrastructure.

These geopolitical and supply chain risks underscore the need for international cooperation and diversification of supply sources to ensure a stable and sustainable supply of critical minerals.

International Agreements and Initiatives

Recognizing the importance of securing critical minerals, several international agreements and initiatives are underway to promote responsible sourcing, diversify supply chains, and foster collaboration among countries. Some of the notable efforts include:

• US-Japan Agreement on Strengthening Critical Minerals Supply Chains: This agreement aims to strengthen and diversify the supply chains of critical minerals, particularly those essential for EV batteries. It underscores the importance of promoting fair trade, environmental protection, labor rights, and sustainable sourcing of these minerals¹².
• US-EU Critical Minerals Agreement: Under negotiation, this agreement seeks to enable critical minerals extracted or processed in the EU to count toward EV tax credit requirements in the United States. This collaboration aims to deepen U.S.-EU cooperation on diversifying critical mineral and EV battery supply chains¹⁴.
• Sustainable Critical Minerals Alliance: Announced at COP15, this alliance brings together several countries, including Canada, Australia, Germany, France, Japan, the United Kingdom, and the United States, to develop sustainable and inclusive mining practices. The alliance focuses on employing a nature-positive approach, supporting local and indigenous communities, and fostering ethical corporate practices¹⁵.
• Minerals Security Partnership (MSP): Led by the United States, this partnership aims to catalyze investment in critical mineral supply chains. The MSP brings together countries like Canada, Australia, and Japan to collaborate on the sourcing, production, and recycling of critical minerals¹⁶.
• European Raw Materials Alliance: This initiative seeks to reduce the EU's dependence on critical mineral imports and foster innovation in resource extraction and recycling. The alliance aims to secure access to critical and strategic raw materials, increase EU resilience, and promote sustainable and responsible sourcing¹⁶.

These agreements and initiatives demonstrate the growing international commitment to addressing the challenges of securing critical minerals for the clean energy transition.

Diversifying Supply Chains and Reducing Reliance

To mitigate the risks associated with concentrated supply chains, countries are taking steps to diversify their sources of critical minerals and reduce reliance on any single country. These efforts include:

• Domestic Mining and Processing: Encouraging investment in domestic mining and processing facilities to reduce reliance on imports. This involves streamlining permitting processes, providing incentives for domestic production, and developing the necessary infrastructure to support mining operations¹⁶.
• Strategic Partnerships: Forming partnerships with countries that have significant mineral reserves to secure access to diverse supply sources. This includes collaborating on joint ventures, sharing expertise and technology, and establishing long-term agreements for the supply of critical minerals¹⁶.
• Investing in Recycling and Reuse: Promoting the recycling and reuse of critical minerals from existing technologies to reduce the need for new mining. This involves developing efficient recycling technologies, establishing collection and processing infrastructure, and creating incentives for the recovery and reuse of critical minerals¹⁷.
• Developing Alternatives: Supporting research and development of alternative materials and technologies that reduce or eliminate the need for critical minerals. This includes exploring new material compositions, improving the efficiency of existing technologies, and developing innovative solutions that minimize reliance on critical minerals¹⁷.

These strategies aim to create more resilient and sustainable supply chains, ensuring a reliable supply of critical minerals for the clean energy transition.

Recycling and Reuse of Critical Minerals

Recycling and reusing critical minerals from end-of-life products is crucial for minimizing environmental impacts and reducing reliance on primary sources. Several initiatives are underway to promote the recovery and reuse of critical minerals:

• Battery Recycling: Recycling EV batteries to recover valuable minerals like lithium, cobalt, and nickel. This involves developing efficient recycling processes that can extract these minerals from batteries without significant environmental impact. Currently, only 5% of lithium-ion batteries are recycled in the United States¹⁸.
• Magnet Recycling: Recovering rare earth magnets from electronic waste and industrial equipment. This involves developing technologies that can efficiently separate and recover rare earth magnets from complex waste streams¹⁹.
• Urban Mining: Extracting valuable minerals from discarded electronic devices and other waste streams. Urban mining has the potential to significantly reduce the need for new mining by recovering critical minerals from existing products. The growth in new mining supply for critical minerals could be brought down by between 25-40% by mid-century by scaling up recycling²⁰.

These recycling efforts contribute to a circular economy approach, reducing the need for new mining and minimizing waste.

Challenges and Opportunities

The transition to a net-zero economy presents both challenges and opportunities in securing critical minerals. While the geographic concentration of these minerals and the potential for supply chain disruptions pose significant challenges, there are also opportunities to create more sustainable and resilient supply chains.

One of the key challenges is the need to balance the increasing demand for critical minerals with the environmental and social impacts of mining and processing. It is crucial to ensure that the extraction and processing of these minerals are conducted in a responsible and sustainable manner, minimizing environmental damage and respecting the rights of local communities.

Another challenge is the need to diversify supply chains and reduce reliance on any single country. This requires international cooperation, strategic partnerships, and investment in domestic mining and processing capacity.

However, the transition to a net-zero economy also presents opportunities to promote innovation and economic development. Investing in recycling technologies, developing alternative materials, and establishing circular economy approaches can create new industries and jobs while reducing reliance on primary sources of critical minerals.

Conclusion

Securing access to critical minerals is essential for the successful transition to a net-zero economy. The geographic concentration of these minerals, coupled with growing demand, presents significant challenges and potential risks. However, through international cooperation, diversification of supply chains, and increased recycling efforts, the world can ensure a stable and sustainable supply of critical minerals to support the clean energy transition. By prioritizing responsible sourcing, environmental protection, and equitable access, we can build a net-zero future that benefits all countries and communities.

To achieve this goal, policymakers and industry stakeholders must work together to:

• Promote sustainable and responsible mining practices: This includes minimizing environmental impacts, respecting human rights, and ensuring the equitable distribution of benefits from mineral extraction.
• Invest in diversification of supply chains: This involves supporting domestic mining and processing, forming strategic partnerships, and promoting regional collaboration.
• Accelerate the development and deployment of recycling technologies: This includes investing in research and development, providing incentives for recycling, and establishing the necessary infrastructure for the collection and processing of end-of-life products.
• Support the development of alternative materials and technologies: This involves funding research and development, providing incentives for innovation, and promoting the adoption of technologies that reduce or eliminate the need for critical minerals.

By taking these actions, we can ensure that the transition to a net-zero economy is both environmentally sustainable and socially equitable.

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