The International Energy Agency’s (IEA) new report on the role of critical minerals in clean energy transition provides the starkest indication yet of a looming crisis in mineral supply.
IEA’s analysis, published on 5 May, suggests that to reach the goals of the Paris Agreement, minerals supply for clean energy technologies will need to grow four-fold by 2040. To hit net-zero globally by the middle of century, six times more mineral inputs will be required in 2040 compared with today.
Mineral supply plans today are not ready to support accelerated energy transitions, says IEA
The picture becomes even more alarming when one considers IEA’s forecasts for the minerals core to electric vehicle batteries. To meet Paris goals, the Lithium supply will need to expand 42-fold, graphite 25-fold, cobalt 21-fold, and nickel 19-fold.
The authors acknowledge that demand trajectories are subject to large technology and political uncertainties, including the evolution of battery chemistries, the opportunities presented by material substitution, rates of recycling and the application of stated climate policies. Nevertheless, in all the scenarios considered by IEA, demand for critical minerals expands dramatically.
IEA points to five key risks that need to be addressed:
- High geographical concentration of production:
For lithium, cobalt and rare earth elements, the world’s top three producing nations control well over three-quarters of global output. In some cases, a single country is responsible for around half of worldwide production. The Democratic Republic of the Congo (DRC) and People’s Republic of China (China) were responsible for some 70% and 60% of global production of cobalt and rare earth elements respectively in 2019.
- Long project development lead times:
IEA’s analysis suggests that it has taken on average over 16 years to move mining projects from discovery to first production. These long lead times raise questions about the ability of suppliers to ramp up output if demand were to pick up rapidly
- Declining resource quality:
In recent years, ore quality has continued to fall across a range of commodities. Extracting metal content from lower-grade ores requires more energy, exerting upward pressure on production costs, greenhouse gas emissions and waste volumes
- Growing scrutiny of environmental and social performance:
Production and processing of mineral resources gives rise to a variety of environmental and social issues that, if poorly managed, can harm local communities and disrupt supply.
- Higher exposure to climate risks:
Mining assets are exposed to growing climate risks. Copper and lithium are particularly vulnerable to water stress given their high water requirements. Over 50% of today’s lithium and copper production is concentrated in areas with high water stress levels. Several major producing regions such as Australia, China, and Africa are also subject to extreme heat or flooding, which pose greater challenges in ensuring reliable and sustainable supplies.
As countries accelerate their efforts to reduce emissions, they also need to make sure their energy systems remain resilient and secure. As the IEA says in its report; “Concerns about price volatility and security of supply do not disappear in an electrified, renewables-rich energy system.”
IEA’s report does not consider the role for new mineral sources but the clear conclusion to be drawn from their analysis is that new sources, including polymetallic nodules found in the seabed, should continue to be explored to see if they can help meet future demand in an environmentally and socially responsible way.