Got the minerals? China’s control of key metals poses challenges for green transition, IEA warns
China’s control of many of the key metals that are crucial for manufacturing renewable technologies could risk the world’s transition to clean tech, a leading climate body has warned.
The International Energy Agency (IEA) has today called on the world to develop new international partnerships to build new supply chains to ensure countries could secure key minerals and materials.
It said it feared current supply chains for clean energy were embedded with issues such as “high geographic concentrations” of mining, processing and technology manufacturing.
In its latest report – ‘Energy Technology Perspectives 2023’ – the Paris-based climate group noted these issues in the case of key technologies for batteries, heat pumps, solar panels and wind turbines.
In particular, it flagged that China has a dominant position in these markets.
Meanwhile, it noted geographic over-concentration was especially potent in the mineral sector, where the Democratic Republic of Congo makes over 70 per cent of the world’s cobalt (with China investing significantly in the country’s producers).
In the case of lithium, just three countries – Australia, Chile and China – account for more than 90 per cent of global production.
China also has a key position in the world’s copper market, which City PM has also reported on.
These minerals are vital for electric vehicle manufacturing, and in the production of renewable energy sources.
Given the uneven geographic distribution of critical mineral resources, the report believed international collaboration and strategic partnerships will be crucial for ensuring security of supply.
Fatih Birol: We will pay a price for disruption
The IEA argued a more diversified networks for resources would not only ensure the energy independence of Western economies but would also help drive down prices for green technology – reducing the overall cost of the challenging transition from fossil fuels.
Its report suggested the risks of tight supply chains were already being laid bare, as increasing prices for cobalt, lithium and nickel led to the first ever rise in electric vehicle (EV) battery prices last year, which jumped by nearly 10 per cent globally in 2022.
The cost of wind turbines outside China has also been rising after years of declines, while similar trends can also be seen in solar panels.
Executive director Fatih Birol compared the situation to Europe’s continued dependence on Russian gas for decades prior to the country’s invasion of Ukraine.
He said: “As we have seen with Europe’s reliance on Russian gas, when you depend too much on one company, one country or one trade route – you risk paying a heavy price if there is disruption.”
Birol was pleased to see many economies around the world were jostling to be global leaders in green technology but also wanted countries to work together.
He said: “It’s important that this competition is fair – and that there is a healthy degree of international collaboration, since no country is an energy island and energy transitions will be more costly and slow if countries do not work together.”
Countries shift to green energy strategies as pivot from China begins
Despite the challenges, he was also encouraged by positive developments reflected in the report, such as an expected trebling in the global market for mass-manufactured clean energy technologies.
The IEA predicts the market will be worth around $650bn (£534bn) a year from the end of the decade 2030 – more than three times today’s level – if countries worldwide fully implement their announced energy and climate pledges.
He said: “The encouraging news is the global project pipeline for clean energy technology manufacturing is large and growing. If everything announced as of today gets built, the investment flowing into manufacturing clean energy technologies would provide two thirds of what is needed in a pathway to net zero emissions.”
Major economies are staring to act to combine climate, energy security and industrial policies into broader strategies for their economies.
Examples includes the Inflation Reduction Act in the US, the REPowerEU plan in the European Union, and Japan’s Green Transformation programme.
Meanwhile, the UK has launched its own critical minerals strategy, to secure essential materials from friendly partners and reduce its dependence on China.