According to IRENA, the growing demand for critical materials to support the global energy transition has highlighted associated geopolitical risks and opportunities, as well as supply chain vulnerabilities worsened by market monopoly.
A new report published by the International Renewable Energy Agency, Geopolitics of the Energy Transition: Critical Materials, suggests that there is no scarcity of reserves for energy transition minerals.
However, limited capabilities for mining and refining them, as well as supply disruptions could hinder the energy transition.
Currently, the supply chain is particularly vulnerable to “external shocks, resource nationalism, export restrictions, mineral cartels, instability, and market manipulation could therefore increase the risks of supply shortages,” states the report.
IRENA’s director-general, Francesco La Camera said in a statement: “The risk of supply chain disruptions is less about energy security and more about the potential slowdown of the transition, which must be avoided. On the road to COP28, my message is to urgently strengthen collaboration on critical materials to minimise the geopolitical risks of concentrated supply chains and accelerate the deployment of renewables to limit rising temperatures to 1.5°C.”
A diverse supply chain is more sustainable
In terms of mining and processing of critical materials, it is geographically concentrated, with a few countries and a few major companies playing a dominant role – an “oligopolistic” market situation according to IRENA.
For example, in terms of processing, China accounts for more than 50% of the world’s refined supply of (natural) graphite, dysprosium (a rare earth), cobalt, lithium, and manganese and the top five mining companies control 61% of lithium output and 56% of cobalt output.
According to the report, addressing vulnerabilities within the extractive commodities supply chain will directly lead to an opening up or diversifying of the supply chain, thereby building a more inclusive, ethical, and sustainable value chain.
This could include opening up opportunities for mining and processing in developing countries, as well as ensuring policies to support the realising of business opportunities in those regions.
According to La Camera, “redefining the narrative of extraction” will ensure developing nations can capture a larger share of the value chain, making the market more inclusive and resilient.
The report also emphasises the risks associated with extractive industries such as labour and other human rights abuses, land degradation, water resource depletion and contamination, and air pollution. La Camera calls for greater international cooperation “to raise and enforce standards and longer-term corporate views are essential for sustainable development and social license.”
This was the second report released this week on the topic of critical materials. Yesterday the IEA released their Critical Minerals Market Review which highlighted the significant surge in planned clean tech projects, leading to a 30% rise in investments centred around developing critical minerals in 2022.
Originally published on Power Engineering International.