The energy transition presents a Catch-22: decarbonization requires the development of more raw materials to build such things as windmills and electric vehicle batteries. Yet, such exploration often shortchanges the host country and leaves an environmental scar.
But the facts remain. If the global community is to comply with the Paris Agreement and limit temperature increases, then more raw materials are essential to achieve climate security. That includes reaching 33,000 gigawatts of renewable energy and electrifying 90% of the transport sector by 2050.
That’s according to the International Renewable Energy Agency, which just released the “Geopolitics of the Energy Transition” — a focus on raw materials. It concludes that the supply of rare earths and minerals is not an obstacle to achieving net zero. However, the mining techniques must use the best practices while the host countries should grow economically and create value at home.
“We want to set up a green industrial industry and build out the renewable sector, which needs rare earths in their processes,” says Francesco La Camera, director general of the International Renewable Energy Agency (IRENA), in a Zoom call with this reporter. “That addresses inequities and allows those countries to gain from the added value in the supply chain. We must extract and process the raw materials in the same location.”
The rare minerals are concentrated in a few countries, putting the rest of the world at risk of everything from political unrest to export restrictions to market manipulation. For example, Australia supplies lithium, China has graphite, Chile possesses copper, and the Democratic Republic of the Congo has cobalt. Indonesia is rich in nickel, while South Africa sits atop platinum and iridium.
Moreover, the top five mining companies control 61% of lithium output and 56% of cobalt output.
IRENA’s premise is that a well-planned energy transition can rehabilitate the extractive industry — activities that carry risks for local communities, such as labor and human rights abuses, land degradation, water resource depletion and contamination, and air pollution. Indeed, stronger international cooperation is necessary to enforce higher corporate standards — something that gives foreign investors a broader social license.
“We aim to reduce the environmental and social impact,” says La Camera. “Many raw material reserves are in protected areas — sometimes close to indigenous lands. The rare earths are evenly distributed worldwide. The problem is how to mine them respectfully.”
What About the Environmental Footprint?
While rare earths are abundant, developing countries need more knowledge and capital to access the minerals. But global demand is surging, necessitating more production in the short run and more recycling in a decade or two. However, the primary impediment is giving the host country a greater stake in the end value.
Consider: the Democratic Republic of the Congo renegotiated foreign access to cobalt reserves while Peru reformed its copper royalties to increase government revenues. Meantime, Indonesia banned the export of unprocessed nickel, while Zimbabwe prohibits raw lithium export to curb harmful mining and attract downstream enterprises.
The United States mined rare earths from the 1960s through the 1980s at a single mine in California. But this country defaulted to China because of its cheap labor cost — and the environmental footprint left behind. Rare earths contain 17 minerals that must be separated, which is a dirty and labor-intensive effort.
Today, China mines 63% of the rare earths, equating to 140,000 of the 240,000 tons globally developed. But it still controls 85% of the processing — the effort to separate the 17 minerals from the rare earth rock, creating the added value IRENA wants for all emerging economies.
If those countries can succeed at building value, they can train more qualified workers and create more jobs. Getting the United States and Europe to drill for more raw materials is a big ask. They will never be able to out-mine the developing world, meaning the more affluent countries will focus on building better and cheaper battery technologies — not on exploring raw materials.
But the natural resources can come from hungry economies like Bolivia, which has 21 million tons of lithium reserves but produces less than 1% of the world’s supply. In that case, 54% of minerals are located on or near indigenous peoples’ land, underscoring the need for community engagement.
The raw materials are trapped in a supply chain maze or come from unfriendly nations. But the good news is that rare earths are widespread and abundant. And more importantly, the technology exists to recover at least 90% of those materials with no sacrifice in quality.
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“We need to shift the way we use critical raw materials — we need to respect them by reusing, recycling, and valuing them far more,” says Tahmid Chowdhury, who runs the taskforce for Climate Neutral and Circular Materials at Corporate Leaders Group Europe, part of the Cambridge Institute for Sustainability Leadership, in an email exchange.
“This would reduce the negative environmental and social consequences of extraction, to rebalance the scales,” he adds. “Currently, richer countries are benefiting from lithium batteries in phones and electric cars, whilst poorer countries bear the brunt of the damage caused by mining. The European Union can and should help set a new agenda for more sustainable supply chains — both domestically and internationally.”
Raw material exploration is rife with conflict — whether it be political or environmental. But those minerals are irrevocably linked to the green energy economy and fulfilling climate promises. Supply chain chokeholds can be averted. But it means inventing more benign mining practices and sharing the wealth with developing nations — a bargain for all stakeholders.
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