Christine Nikander finds bargains in the global secondhand store of transition metals.
Growth in the production and trade of most critical raw materials is not keeping up with the expected demand the energy transition creates. The International Energy Agency (IEA) has said that even if all the mining and processing projects that are currently planned globally are carried out, it will only be possible to cover two-thirds of the critical minerals needed to meet global net zero targets. The planned projects could bring us onto a solid trajectory until 2030, so long as unexpected costs and project delays do not occur. After 2030, additional projects would be needed to sustain development aligned with net zero targets.
In a blog post from November 2023, IEA Executive Directo Fatih Birol along with the president of the European Investment Bank, Werner Hoyer and president of the European Central Bank, Christine Lagarde declared that “Europe must push the green transition forward if it wants to remain competitive in the world.” Yet, according to the German Institute for Economic Research, the European Union (EU) is currently 100% dependent on foreign suppliers in 14 out of 27 critical raw materials and 95% dependent on another three critical raw materials.
The competition over the control of the extraction and processing of minerals used in renewable technologies has only intensified in the aftermath of the Russian invasion of Ukraine. In response, Australia, Canada, France, Germany, Japan, the UK, and the USA announced in late 2022 that they were forming the Sustainable Critical Minerals Alliance, with the aim of increasing their resource security.
The European Union is currently 100% dependent on foreign suppliers in 14 out of 27 critical raw materials.
There are a handful of countries – namely China, Russia, Australia, South Africa, and Zimbabwe – with a particularly high concentration of critical mineral mining and refining. More than 70% of the global supplies of cobalt originates from the Congo and over two-thirds of the global extraction of rare earth metals is carried out in China. The geopolitical tension this creates is only getting greater as the production, import, and export of critical raw materials are all becoming more concentrated.
Yet the OECD has said that mineral trade is still relatively well diversified overall and that there is a limited risk of significant disruptions to the energy transition through import or export disruptions. There are also signs of increasing diversification in the extraction. What remains an area of key concern is processing.
Currently, most critical minerals – including cobalt, copper, and lithium – are processed in China. And, half of planned global lithium chemical plants will be located in China and 90% of all planned nickel refining capacity will be in Indonesia.
Increasing export restrictions could extensively affect the availability and prices of materials. According to the OECD, there has been a five-fold increase in export restrictions on critical raw materials since 2009. About 10% of critical raw material exports globally are now subject to at least one measure restricting them. To achieve net zero, it is therefore essential that we continuously assess how critical raw material markets are being influenced by geopolitics and export restrictions.
The market demand for e-waste
Electronic waste (e-waste) is a large dormant resource. The raw materials contained in the e-waste produced globally in 2019 alone were estimated to be worth $57bn. Yet, only 17.4% of global e-waste was collected and recycled properly in 2021. In Europe, the rate was 54%. The rest was hoarded at home by consumers, burned or thrown into landfills, or traded illegally and then probably treated in a sub-standard manner.
To achieve net zero, it is therefore essential that we continuously assess how critical raw material markets are being influenced by geopolitics and export restrictions.
The diversification of resources, including increased local sourcing and recycling of e-waste, could help secure supply chains. The batteries of electric vehicles (EVs), for example, contain large quantities of copper, cobalt, nickel, and lithium – which makes them a good potential source for secondary raw materials. Renault notably re-collects the batteries from the EVs it sells, by offering its customers the option to lease rather than buy EV batteries. 93% of its customers currently make use of this option.
By shifting over to an electronics economy that functions in a more circular and sustainable manner, the amount of new minerals that need to be mined for the energy transition can be reduced. For example, while we currently lack the silver resources to produce the millions of new solar panels needed for the energy transition, we might be able to recover close to three-quarters of the silver and other materials needed for this from old units. As the first-generation of domestic solar panels is now reaching the end of its lifespan, the amount of waste from them is expected to grow significantly in the second half of this decade. The IEA even estimates that there may be 4Mt of scrap solar panels globally by 2030 and over 200Mt by 2050. Notably, many of the solar panels produced in the 1990s contain larger quantities of silver.
As the first-generation of domestic solar panels is now reaching the end of its lifespan, the amount of waste from solar panels is expected to grow significantly in the second half of this decade.
In 2022, the Biden administration introduced the Inflation Reduction Act, under which producers can receive tax credits in the US if they meet the requirements set out on the origin of battery components. The aim of the act was to reduce the reliance of the US on China for batteries and to move the US closer to its goal of having 50% of new vehicle sales be electric or hybrid by 2030.
Last year, the European Commission followed suit with its own regulation. Under the Critical Raw Materials Act, which is scheduled to come into force this year, the EU wants to secure a diversified and affordable supply of critical raw materials. Through the act, the EU hopes to strengthen its domestic capacities, increase the collection and recycling of waste containing high amounts of critical raw materials and make progress towards securing its material needs for reaching net zero by 2050.
It now remains to be seen which other regulators will follow suit in setting up governance structures that aim to close the loop around critical raw materials. In any case, it is a welcome change to see both private and public actors take steps that factor e-waste and the broader life cycle of products into their efforts to reach net zero.
