In the race to secure critical minerals, critical needs and questions need to be addressed

Antonio Guterres, the Secretary-General of the United Nations, has stated that renewable energy transformation has the potential to be the peace project of the 21st century. While renewables are an answer to mitigating climate change and have incredible potential to enhance wellbeing and contribute to building more resilient societies, it will fail in this mission if anticipated risks to the transition are not addressed. 

Critical minerals, while seen as a key piece of the energy transition, also pose some big risks. Major countries are racing to secure access to a group of minerals like lithium, nickel, cobalt, manganese, copper and graphite that are used in a wide array of applications in renewable energy technologies such as solar and wind, and in complementary infrastructure like batteries and electrolysers. This is making the energy sector a leading consumer of a majority of minerals as the transition accelerates. 

The International Energy Agency (IEA) projects a quadrupling in the demand for such minerals by 2040 to meet the Paris Agreement goals, and experts project that the demand for critical minerals will match or surpass supply by 2030. This has increased focus on exploration and mining of critical minerals – both on land and sea, and instilled a sense of urgency among nations to secure access to these minerals through international trade agreements.  

This trend is also driven by a small number of countries holding significant control over supply and processing of some minerals; for example, China’s share of refining is around 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements. Concerns of demand outstripping supply and risks associated with geographical concentration dominate the global discourse around critical minerals.   

Signs of a shallow, piecemeal transition 

As the critical minerals sector sits on the cusp of a major expansion, there are also other associated risks that require urgent attention. Several signs point to the fact that in the race to secure these minerals, there is a risk that the current approach will force increasing trade-offs between sustaining the energy transition and other sustainable development goals.  

Pressure to increase output from existing sources, exploration of new regions will likely result in instances where decision makers will have to consider environmental and social trade-offs. Current governance systems do not enable these decisions to be made in line with a just transition, with long-term sustainability as their goal. Instead, they prioritise individual security and short-term gains, focusing primarily on securing the quantity needed. This puts us on a path away from a deep and just energy transition and towards one that is a shallow, piecemeal energy transition, which comes with several risks: 

IEA’s report, The role of critical minerals in clean energy transitions, suggests that “In a scenario that meets the Paris Agreement goals, clean energy technologies’ share of total demand rises significantly over the next two decades to over 40% for copper and rare earth elements, 60-70% 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.” 

Moving away from China 

The challenge with the supply chain for critical minerals is two-fold: it is a globally complex system, and it is dominated in a rather simple way by both China and by powerful mining and trading companies. However, the quickening pace of many countries to break from this monopolistic grip of Chinese processing of critical minerals such as lithium opens up possibilities for transformation and creating a system that avoids the downfalls of the current one, and that of the oil and gas trade. 

Over the last decade or so, the call to move away from reliance on China has grown globally. Global and regional powers such as the US, EU, UK, India and Brazil have prioritised strengthening trade agreements between each other. One of the primary reason industry pioneers have called to move away from China is its poor human rights record and opaque environment policies.  

Taking a just and regenerative approach 

Moving away from China presents a unique opportunity – it is not enough to only “not do what China is doing” – as it sets a low bar for the rest of the globe. Rather, there is an opportunity to demonstrate what truly pioneering action looks like – one that centres resilience, circularity, resource efficiency and actively contributes towards environmental conservation. 

At Forum for the Future, we work with our partners to take a just and regenerative approach to their sustainability efforts. For businesses, this means "focusing on the business creating value [...] sharing costs and benefits fairly, working to eradicate structural inequality". It also means "enabling the capacity of living systems to heal and thrive", recognising the “untapped potential in such systems." 

In critical minerals value chains, incorporating this mindset and approach can open opportunities across multiple value levers: 

Critical questions needed in the critical minerals discourse 

One pushback often heard is “this isn’t the time right now; we need to secure minerals first and then think about social and environmental safeguards.” However, we know from experience that it will become harder to put in social and environmental safeguards after the sector picks up momentum. These safeguards are treated more as “roadblocks” than best practices, resulting in compliance-driven mindset and action; rather than proactively accounting for societal and environmental resilience.  

We believe that the industry directly involved in exploring, mining and processing critical minerals, along with the clean energy industry are mature enough and have years of experience behind them to know how to proactively put in safeguards right from the get-go. While the supply chains and demand drivers might be new, the practices and policies have evolved over decades.  

Hence, both the clean energy industry and the minerals industry need to ensure that a clean energy transition happens in a way that is both deep and just. For this to happen, the following questions need to become an integral part of the critical minerals discourse: 

The answers to these questions have the potential to unlock deeper understanding of the critical minerals value chains and inform how we can ensure that social and environmental resilience is an integral part of the sector, and a renewables-led energy transformation delivers on its promise.