The West’s dependence on China for so-called critical minerals once worried only a handful of experts and policy wonks. Now, the anxiety has gone mainstream, capturing headlines and becoming the subject of a BBC documentary series. But we have yet to answer adequately the most important question: What should we do about it?
There is no denying the risks that lie ahead. As Europe has learned over the last several months, it is not prudent to rely on a hostile state to deliver essential commodities. But the solution to today’s energy crisis – to accelerate the transition to renewable sources – threatens to replicate the current situation in a different guise, because it increases our dependence on minerals like cobalt, nickel, graphite, lithium and copper.
From electric batteries to wind turbines and expanded electricity grids, such minerals are essential to the clean energy transition. The World Bank has estimated that their production may need to increase by some 500% by 2050 to support global climate goals.
Just as Russia is a major source of fossil fuels, China dominates the processing of many of these critical minerals. It refines some 60-70% of the world’s lithium, nickel, and cobalt. And it has made major investments in the world’s richest deposits of these resources, from cobalt in the Democratic Republic of the Congo to nickel in Indonesia, meaning that it controls a growing share of the mines from which they are sourced.
Western governments are now rushing to develop strategies for advancing the energy transition without becoming overly dependent on China for critical minerals. In the United States, the recently passed Inflation Reduction Act includes big incentives for electric-vehicle manufacturers to source critical minerals from reliable partners. The United Kingdom has unveiled a “critical minerals strategy,” which includes efforts to expand its domestic capabilities in the sector. The European Union and Australia are pushing ahead with similar initiatives.
All of these governments regard increased recycling of metals as part of the answer. But they also recognize that it can contribute only so much for the time being. So, their strategies all include a focus on swiftly developing more mines and processing facilities for critical minerals, either domestically or in “friendly” countries.
But these strategies fail to acknowledge fully a major barrier: the fraught local politics of opening new mines and industrial facilities. In rich countries, “not in my backyard” activism, opposition by indigenous and environmental groups, and complex planning processes mean that just getting permission to develop large-scale new mines can take decades, if it comes at all.
In lower-income countries, mine development also often faces fierce local opposition, which is compounded by widespread suspicion of large Western-owned mining firms. In rich and poor countries alike, countless proposed new mines for critical minerals – for example, in the US, Peru, Portugal and Serbia – have recently been blocked or delayed as a result of such resistance.
To be sure, this activism reflects well on the vibrancy of local democracy in Western-aligned countries. But the risk remains that if the West cannot access the raw materials the energy transition demands from friendly countries at a reasonable price, it will end up, yet again, at the mercy of a hostile regime. Concerns that China could “weaponize” its dominance over these minerals, as Russia has with natural gas, are now widespread in policy circles.
Unless the problem is tackled soon, Western governments could end up having to take emergency measures that run roughshod over local concerns – for example, opening up domestic mines and facilities as a matter of national security. They would also likely find themselves trying to strongarm developing countries into expanding production, again disregarding local sentiment. This has been the sad pattern of energy and resource geopolitics for a century or more.
Avoiding this outcome will require rapid progress toward a new “grand bargain” between mine operators and local stakeholders. To this end, an ambitious program focused on resetting relations between the two sides must urgently be launched, spanning all mineral-rich, Western-aligned countries.
Mining companies, supported by Western governments, need to ensure that new operations bring greater local economic benefits and are more sensitive to local needs. They also need to implement more credible, visible controls on the environmental and health risks that mines can create. In developing countries, mining companies must demonstrate that they perform far better than Chinese firms on these fronts. Western miners are already involved in numerous good practice environmental and social initiatives, but these need to be ramped up as a strategic priority.
In exchange for these efforts, local regulators must streamline and accelerate permitting processes, and local communities and activists must accept the need to support well-designed projects. Green-minded campaigners will surely recognize the importance of heading off a major threat to the energy transition; but old habits die hard, and resistance to large companies pursuing major projects like mines is, for some, ingrained. Governments can help here, stepping in to mediate disputes between companies and communities.
Some might argue that this is a painful remedy for a problem that has yet to appear. But the dangers posed by dependence on China for critical mineral supplies are now all too obvious. Unlocking swifter mine development closer to home offers the best way forward – and it will require some radical new approaches.
Daniel Litvin is a senior adviser to the executive committee of global sustainability consultancy ERM, a visiting senior fellow at the London School of Economics’ Grantham Research Institute and the founder of Critical Resource, which advises energy and resource companies on sustainability and geopolitical risk.
Copyright: Project Syndicate