Securing the Future
Critical Mineral Policies in the Global Energy Transition
The global transition to low-carbon energy is driving an increasing demand for critical minerals essential for renewable technologies. The International Energy Agency (IEA) has projected a fourfold increase in mineral demand by 2040 to align with the goals of the Paris Agreement. This reality has unequal effects among countries in the world.
From COP27 Commitments to Action
Recent policy developments emphasise the significance of security in the supply chains of these so-called critical minerals. For mineral consumers, a series of policies have been implemented to guarantee access to natural resources. Notable actions include the United States Inflation Reduction Act (IRA), establishing the Mineral Security Partnership (MSP), and on the other side of the Atlantic, the European Union (EU) introduced the EU Batteries Regulation. Responding to the negative effects of the U.S. IRA, the EU then adopted an all-encompassing legislation called the Critical Raw Materials (CRM) Act, setting out an ambitious target of reducing dependency from third countries. Through the CRM Act, the EU seeks to secure critical minerals for its climate neutrality commitments by setting clear benchmarks for domestic capacities along the strategic raw materials supply chain. Specifically, the EU wants to increase yearly production to take place within the EU—at least 10% for extraction, 40% for minerals processing, 15% for recycling. Importantly, the EU wants to ensure that no more than 65% of every strategic mineral at any relevant stage of processing will not be under the control by a single country. The last clause is particularly important in signalling EU’s desire to reduce its dependency on China, whose market power in the extraction and processing of metals has been unchallenged for decades now.
Amidst these policy shifts, a thought-provoking roundtable was organized by the Wilson Center in the Berlin Climate Security Conference. Dr. Jewellord (Jojo) Nem Singh, Global Fellow of the Wilson Center Environmental Change and Security Program (ECSP) and Assistant Professor in International Development at the International Institute of Social Studies participated in the debate, providing insights on some of the controversial aspects on critical minerals supply chain governance. Dr. Nem Singh’s expertise and research put him at the forefront of engaging with diverse stakeholders in the mining sector, providing valuable insights into the challenges and potential solutions.
Building Trust and Fair Benefits
During the roundtable, Nem Singh analysed the "elephant in the room"—the new geopolitical landscape brought about by deterioriating U.S.-China relations, asserting that after a year of implementing the IRA, the world has experienced a rapid restructuring process across the supply chains. This process, however, was characterised by growing distrust among state and market players. With the geopolitical tensions at an all-time high, both firms and governments in the mining industry and the relevant renewable energy sectors are still grappling for stability in the supply chain. He reflects that the emerging globalisation strategies of various countries—both mineral producers and consumers—are underpinned by trust loss among major players.
While the use of protective policies on core technologies is not entirely new, the extent to which countries have integrated economic security into foreign and economic policies—for example the wider application of Foreign Direct Investment (FDI) screening measures—into many sectors beyond defence has become more common in Europe and the U.S. As highlighted by Nem Singh, ‘’The breakdown of trust that exists, particularly between China and the US, has propelled a series of legislations, not just in the US, but also in the European Union, Japan, and South Korea.’’
One evident manifestation of this geopolitical tension is witnessed in the regulatory adjustments made by both China and the United States concerning access to critical minerals relevant for chip-making. Over the summer, China responded to U.S. led restrictions on Chinese chip players by imposing a licensing system aimed at monitoring gallium and germanium—both of which are critical chemicals to produce semiconductors powering essential technologies such as wind turbines and electric vehicles.
‘’The geopolitics and the securitization of natural resources are a direct outcome of a series of decisions that have been made over the past two years or so. We need to reflect on what these decisions mean and think about how we can move out of this situation, in which distrust among different parties is the prevailing norm,’’ says Nem Singh.
This underscores the urgent need for a thoughtful re-evaluation of the current trajectory to avoid escalating tensions and foster greater cooperation in the international arena. The recent talks between President Joe Biden and President Xi Jinping in November is a welcome step towards the right direction. While their interests fundamentally clash, the meeting opened new pathways of communication to maintain healthy competition as opposed to outright conflicts between the superpowers.
Furthermore, a significant concern for global policy-makers is the uneven costs of the energy transition: the demand for critical raw materials disproportionately impact mining communities while mining business is flourishing amidst geopolitical disputes. Thus, Nem Singh stressed the imperative of making the energy transition collaborative and echoed the importance of local beneficiation, where communities gain from mining activities, emphasizing the need for fair benefit-sharing arrangements.
The Politics of Bargaining for a Better Energy Transition
At the core of the critical mineral debate lies the challenge of balancing costs and benefits while ensuring equitable distribution. Because there is no such a thing as cost-free mining, the international community must pay attention to avoid creating "sacrifice zones" in exchange of powering our clean energy technologies. In line with that, Helge Elisabeth Zeitler, Deputy Head of the Directorate General for Environment at the European Commission, Deputy Head of the Global Resources, Deforestation, and Water unit of the Directorate General for Environment at the European Commission, emphasises the need to prevent environmental harm during mineral extraction, such as deforestation and water scarcity. While recognizing the urgency of meeting critical raw material demands, Zeitler cautioned against hasty mining efforts that could lead to environmental security risks.
There is an urgent need to build a coalition around renewable energy projects so that they are communicated transparently to civil society. The latter comes down to capacity of states to make the project deliver for the communities and to mitigate their socio-environmental costs. Nem Singh weighs in on what “de-risking” means regarding the raw materials supply chain. He argues that while countries can and should protect core technologies, they should not impede healthy competition. He alludes to the idea of building walls: “we need to build high walls in smaller spaces, rather than creating expansive fences that prevent cooperation across policy fields.”
At its core, governments must encourage cooperation between countries and among stakeholders. In particular, developing countries should not be forced to take sides especially by decreasing their commercial ties with China. Instead, the EU and US must offer better deals that are more attractive than what African and Latin American governments signed with China over the past two decades.
Historically, raw materials have often led to underdevelopment in many countries because powerful multinational companies or resource-seeking states have controlled them. Low- and middle-income countries relying on raw material exports have long used controversial policy instruments to encourage investment in downstream sectors and foster domestic development—Indonesia's ban on exporting raw nickel being the primary example.
In this respect, Dhesigen Naidoo, Senior Research Associate at the Institute for Security Studies in South Africa, stressed the necessity of reevaluating who benefits from critical mineral mining and green energy investments. African countries, for example, play a pivotal role in the global critical mineral landscape, as they house 30% of the world's mineral reserves, including key transition minerals like platinum, chromium, cobalt, and copper. However, Africa continues to grapple with significant energy access gaps, with over 600 million people needing more electricity.
Re-centering the Global South in Energy Trasition Debates
Without minerals, we cannot succeed in the clean energy transition. And, with the socio-environmental costs to be borne by mining countries, it is important that we recognize the need for a distributive politics. In concrete terms, future development cooperation policies must consider the aspirations of mineral producing countries to move up the supply chain. Local governments will seek employment gains and more benefits for their communities. National companies in the global South would want technology transfer for processing and refining within their national boundaries. Higher taxes are likely to be imposed on lithium, nickel, and other critical metals in order to compensate for the environmental destruction in the global South. Yet, above all this, we need to still ensure mining communities are given a fair chance at developing capabilities for climate mitigation, and that when they say no to mining projects, the global community can respect this decision.
In sum, a just transition in favour of clean energy demands for a global commitment to environmental sustainability, ethical practices, and equitable benefits distribution. Global cooperation, responsible stewardship, and fair benefit-sharing are essential for achieving a sustainable and equitable low-carbon future. As both mineral producers and consumers navigate the complexities of critical mineral policies, a collaborative and inclusive approach will be crucial in securing the future of the energy transition.
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