Humanity is at a turning point in the fight against climate change. The next decade will be a critical test of whether we can deliver both the technology and the policies needed to fundamentally transform the world economy and its energy and transportation systems.
Modern human society has always relied on mining and the minerals and metals it produces to build our economies, power our technologies, and serve as the foundation and structure of our buildings. The energy systems of the future, which rely more on renewable energies than on fossil fuels, will be much more mineral and metal-intensive than those of the past.
The recent unveiling of an electric version of the iconic Ford F150 is an equally clear example of the transition from oil-dominated energy systems to those dominated by minerals and metals.
According to a current International Energy Agency (IEA) report, we would have to quadruple the production of raw materials by 2040 in order to achieve the goals of the Paris Climate Agreement. To reach net zero worldwide by 2050, around five times more mineral inputs would be required in 2040 than today.
The demand for solar panels, wind turbines, LED lights, and other technologies has skyrocketed, but right now the global mining industry does not have the capacity to produce the raw materials required for this transition, nor does it have the processing facilities required. Importantly, the markets for these materials are often tiny, opaque, poorly regulated, and don’t provide good price signals for investments – which makes the gaps to come even more worrying.
The US Congress and the Department of Defense have taken note of this. Analysis so far has focused on what can be done in the U.S. to improve mining licenses, procurement policies, and tax measures to motivate companies to get back into mining and processing these critical materials.
But the US has ignored the reality that there is one country that dominates the space: China. Not only does China control most of the advanced manufacturing of solar modules and batteries for electric vehicles, it also controls much of the processing of these critical minerals – like cobalt and lithium. It is also a major player in the mining of raw materials. Its dominance extends across the entire supply chain. In addition, the United States’ understanding of the safety issues of critical minerals is still emerging. The methods and metrics are still somewhat simplified and tied too much to a supply-side focus or flawed ideas such as independence.
Given the importance of mining to our climate goals, the US must act to address this threat and take these important steps to find a solution.
First, acknowledge the sometimes cruel labor practices and environmental impact of mineral supply chains. When looking at minerals and metals, one has to think about supply chains. Just the thought of rocks and the upstream is limiting. It is also made more difficult by the fact that there are many different supply chains in this area to keep an eye on. The data and methods used to track finances or emissions across these chains are difficult to find or too complex. This requires international cooperation towards more transparent practices around the world, including the creation of standards and certifications for products and emissions.
Second, just last week, the IEA proposed a new “producer-consumer dialogue” for critical minerals – similar to its international agreement on crude oil – to address this new global threat to energy security. It will be difficult to compete with China’s trade deals, state-owned companies, and relatively weak labor and environmental standards. They also have a big head start, may require their industry to take action that doesn’t necessarily make economic sense, and go to places that American companies consider too risky. Still, the US should begin formal diplomacy focusing on minerals with China.
Third, the mineral markets for most critical minerals are not transparent. As a result, there are glaring governance issues that need to be addressed. The lack of pricing and liquidity in these markets limits suitable investment signals. This can be seen, for example, in the investment gaps in lithium. Since the market size is relatively small in many cases, additional challenges arise. Again, an international partnership is needed to establish the global governance required to build such markets.
Fourth, we in the United States must build sustainable mining and processing industries for those minerals where we have good resources and green job opportunities. It is necessary to address topics ranging from research and development to building demand through procurement to the choice of location, instruments for financial risk reduction and institutions. The US can play a leading role from mining to advanced manufacturing with the right guidelines.
Fifth, it is necessary to embed this in US domestic politics and political machinery. However, remember that politics is mostly about prioritization and implementation. Raising the issue and keeping it on the agenda through multiple administrations in the wider climate and security debates will make a difference, as will the advancement of the 150 year old General Mining Act.
Critical minerals and the advanced products they help create are the new key area of energy security. As fossil fuels decline and minerals rise, they become essential to meeting our climate goals. The US leadership is critical, but not sufficient. Both international cooperation and thoughtful navigation in a new geopolitical landscape are required.
Morgan Bazilian is the director of the Payne Institute for Public Policy at the Colorado School of Mines and a former Lead Energy Specialist at the World Bank.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.