Critical Minerals and the Clean Energy Revolution
The clean energy sector hinges on a reliable supply of essential minerals necessary for producing various technologies, including wind turbines and electric vehicle batteries. These “critical” minerals aren’t necessarily rare, but they aren’t evenly distributed around the globe, which can lead to geopolitical tensions as demand for these resources intensifies.
The US Energy Act of 2020 outlined what qualifies as critical minerals:
- They are vital to US economic or national security.
- The supply chain is susceptible to disruptions.
- These minerals play a key role in manufacturing essential products related to economic or national security.
As projected by the International Energy Agency, global demand for major minerals used in clean energy could at least double by 2040. This increase may even quadruple, depending on how quickly clean energy is adopted worldwide. Most of this demand is driven by electric vehicle batteries, with lithium experiencing the most rapid growth. Meanwhile, overall demand by weight is led by graphite, copper, and nickel.
UN Secretary-General Antonio Guterres remarked, “A world equipped with renewable energy is a world starving for critical minerals.” He stated that for developing nations, these crucial minerals present opportunities for job creation and economic diversification, but success hinges on proper management.
While tapping into these resources can yield significant economic benefits for emerging economies, the extraction processes aren’t without drawbacks. For instance, lithium production requires substantial water and often releases harmful chemicals into the environment. There have been alarming reports—thousands of dead fish found in Tibetan rivers since 2016—due to toxic runoff from local lithium extraction sites.
These minerals are, by definition, subject to significant vulnerabilities, with potential impacts on both the economy and national security, not just in the U.S. but globally. A recent Vox report highlights how the uneven distribution of these minerals can burden some countries with environmental costs while allowing wealthier nations to reap the economic benefits, creating stark disparities in the global clean energy market. If prices surge or new technologies create shortages, the consequences could be severe.
There are also real concerns about nations controlling the supply of critical minerals. Currently, China dominates this market, supplying between 85-95% of the world’s sophisticated rare earth minerals. It has built this dominance through almost complete control over refining capabilities. In fact, around 68% of cobalt, 65% of nickel, and 60% of lithium for electric vehicle batteries come from Chinese refineries.
China has demonstrated a readiness to leverage its power to disrupt global supply chains for political reasons in the past. Such vulnerabilities have been worsened by the protectionist policies established during the Trump administration.
The results indicate significant instability and uncertainty in the global clean energy market, risking serious environmental and economic repercussions. If producers of these critical minerals opt to restrict access as a political strategy, or if prices fluctuate drastically, the repercussions could be widely felt across industries.
