Today’s energy crisis harkens back to the 1973 oil shock, during which Arab petrostates instituted an oil embargo against Western countries that led to skyrocketing prices and astonishingly long lines at the gas pump. Since then, oil importers have structured their foreign policy around energy security to blunt “the oil weapon.” Now, as we head toward a future defined by clean energy, many hope the era of geopolitical conflict over energy resources will soon be in the past. Unlike natural resources like oil and gas, which are highly concentrated underneath a few fortunate countries, renewable energy sources such as wind and solar are more evenly distributed across the globe.
While it is true that these energy resources are inherently more accessible, the shift to a clean energy system will likely give way to new arenas of geopolitical competition. Minerals like lithium, cobalt, copper, and rare-earth elements (REE) will define the clean energy transition due to their critical role in manufacturing electric vehicles, solar panels, and wind turbines. But the supply of these minerals will invoke contestations of their own. Currently, China is by far the most important player in the production and refining of REEs, and Beijing’s past actions suggest it will not hesitate to use this dominance as leverage in geopolitical conflicts. In order to make way for a decarbonized energy system, today’s energy security apparatuses must be modernized to account for the distinct challenges posed by the mineral supply chain.
While oil supply is concentrated in relatively few regions, mineral production is even more centralized: The top producing nations control over 75 percent of global output of lithium, cobalt, and REEs, as compared to 42 percent for oil. China currently dominates the industry, controlling over 50 percent of the refining process for lithium and cobalt, and it has essentially monopolized the entire REE supply chain. Over the past decade or so, China has also aggressively extended its international hold over the REE market, establishing deals with the Democratic Republic of Congo and Kenya that exchange infrastructure for mining rights. Other countries, including Cameroon, Angola, Tanzania, Zambia, and Greenland, are also in China’s sights.
As the energy transition accelerates, demand for critical minerals will rise significantly. The International Energy Association (IEA) estimates that attaining targets for clean energy set by the Paris Agreement would quadruple the demand for clean energy minerals by 2040. Projections of current supply, including mines presently under construction, will only meet 50 percent of lithium and cobalt demand and 80 percent of copper needs by 2030. Further complicating accessibility issues are the mineral supply chain’s many vulnerabilities—including detrimental environmental and social practices, long project development lead times, and most critically, an extremely high production concentration. As a result, even countries earnestly trying to move away from fossil fuels will face significant barriers in acquiring the necessary materials to do so.
China has already shown its willingness to utilize its mineral dominance as a geopolitical tool. In 2010, China blocked exports of REEs to Japan in retaliation for Japan’s detention of a Chinese fishing trawler captain. And at the height of the trade war in 2019, Beijing threatened to cut off exports of REEs to the United States—a move that would have hammered major sectors of the US economy, including automobiles, oil refinery, renewable energy, and defense.
Part of the reason Beijing has established such dominance over the mineral supply chain is its lax environmental and labor policies. Efforts to mitigate the harms of mining on workers and the environment in countries outside of China, such as Australia and the United States, increase companies’ costs, thus hampering their competitiveness in the global market. The two primary mineral extraction methods generate air pollution, lead to erosion, and cause chemicals to leach into groundwater—impacting not only the environment but also all the individuals who rely on the water and land’s resources. Human rights abuses are yet another concern, with regular reports of overworked and underpaid workers facing disproportionate health problems. Chinese officials recognize these threats and are slowly attempting to counteract them through large-scale cleanup efforts and the shutdown of smaller, illegal mines. Currently though, China’s established mining capacity, taken in conjunction with extremely high barriers to entry, ensures its supremacy in the short term.
Luckily, there are multiple avenues for western states to counteract Chinese dominance. A carbon tariff, such as the Carbon Border Adjustment Mechanism proposed in the EU, would reward market players that have strict environmental and labor regulations. Australia, which is home to Lynas Corporation, the world’s largest REE producer outside of China, and Japan, where deposits of the important REEs yttrium, europium, and terbium were recently discovered in far eastern territorial waters, are two key allies with rigid environmental laws and strong potential in the mining industry. By committing to sector-by-sector border adjustments that neutralize the disadvantages countries with stricter regulations otherwise face in the global minerals market, the United States and its allies can reduce China’s market dominance and ensure the long-term viability of a clean energy transition.
Another important aspect to addressing this crisis is technological advancement. Additional research is needed to minimize the environmental impact of mining, reduce the mineral intensity of clean energy products, and recycle energy transition metals. Already, researchers at Harvard University have developed a cleaner REE extraction method with less acidic bacterial solutions, and Purdue University researchers have found a novel approach that removes REEs from coal ash. Further investment could perfect these strategies and bring them to market. Moreover, the IEA estimates that 2040 supply requirements for copper, lithium, nickel, and cobalt could be reduced by 10 percent through recycling, but work must be done to initiate standardized recycling practices and incentives.
Policymakers must also send clear signals about their commitment to the clean energy transition. If companies are given competitive reassurance and are properly incentivized by aggressive government and private sector investment, they will be more likely to accelerate their own investments to reduce the usage of minerals in clean energy products. Renault’s electric Zoe car mitigates rare-earth metal consumption by using copper windings rather than magnets, and BMW’s fifth-generation electric vehicle was produced without any REEs.
China may be a stable supplier of low-cost minerals today, but its mining processes pose significant environmental, social, and geopolitical challenges. Given that new mining operations take 16.5 years on average to go from planning to production, failure by the United States and others to quickly invest in the mineral supply chain will likely result in a mineral bottleneck which will obstruct the energy transition and pose dangerous security risks. If the clean energy movement is to meet its goals of reducing environmental harm and mitigating conflicts, there must be immediate investment in and regulation of the mineral supply chain.