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Climate: Raw Material Geopolitics

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Critics often argue that the full transition to renewable energy and electric cars would use huge, and probably unsustainable, amounts of strategic materials such as cobalt and rare earths. Those are in short supply and, in many cases, only produced by a handful of countries such as Congo (Kinshasa) and China, which pose a variety of reputational and geopolitical problems (NE Jul.2'20). History, however, suggests that such scarcity fears often appear when new technologies pick up, but never materialize despite occasional supply bottlenecks and price spikes. This was the case, for example, in the mid-1970s when platinum-based catalytic converters were introduced in cars, and again in the mid-1990s when palladium became the preferred catalyst. The car industry was not substantially impacted and South Africa, the leading producer of platinum-group metals, did not become overly powerful. So, is the energy transition different? Because of their low density, wind and solar energy indeed require a lot of material inputs (NE Jul.16'20). Solar photovoltaic (PV), for example, requires some 10-40 times more copper per megawatt hour than fossil fuel-fired plants, and onshore wind 5-15 times more iron, according to Austrian researcher Edgar Hertwich. A recent European Commission report found that the expansion of wind energy in Europe would cause significant demand increases for both structural materials such as concrete, steel and aluminum, and technology-specific materials such as rare earths. In the most severe scenario the commission considered, the annual EU demand for rare earths would increase six times over 2018-30 and up to 15 times over 2018-50. But, with a few exceptions, other uses of materials in the global economy far exceed those in the energy sector, a group of Dutch experts from the University of Leiden’s Institute of Environmental Sciences emphasized in a recent report. "It is only for copper, lithium, indium and neodymium that demand is raised substantially above the expansion rate of the global economy by the change in electricity generation technology and the massive introduction of electric cars." New resources would be needed for copper, lithium and indium. But the first two would only require a "modest" annual expansion rate of reserves, comparable to what was achieved in the 1990s and 2000s during a period of declining prices. Indium, which is used in PV cells, would entail a more substantial push, but it is also a "special case." It is a byproduct of zinc refining, which means that "the problem can probably be solved by increasing byproduction from zinc mines," the report, Metal Supply Constraints for a Low-Carbon Economy?, said. Even for neodymium, a rare earth used in the permanent magnets found in electric vehicles and wind turbines, cumulative demand until 2050 could be met by the currently known reserves, the report found. It would require new mines to be opened to extract those reserves, but at a rate which is "well within the range of normal technical capabilities." And if bottlenecks were to appear anyway, alternative technologies are readily available. Copper-based nonpermanent magnets are already used in Tesla cars and some wind turbines, the report noted. 'Not Like Oil' Another worry is the lack of geographical diversity in mining activities for some materials, but the field is expanding quickly (EC May24'19). Lithium mining was historically led by Chile and Argentina but Australia recently surpassed the others as the world's top producer, and global lithium resources are in fact abundant and widespread. "Lithium is not like oil, there's a massive amount of it, pretty much everywhere," said Tesla's CEO Elon Musk. In Europe, developers are considering several projects to mine resources identified in Austria, the Czech Republic, Finland, Portugal and Spain, while the EuGeLi consortium is looking at extracting lithium from geothermal deposits. In the US, Piedmont Lithium is preparing to develop a major deposit in North Carolina. Cobalt mining is dominated by Congo (Kinshasa), where child labor is widespread in small "artisanal" operations (EC Jun.22'18). While new projects are under way in Indonesia, the Americas and Australia, experts say reliance on Congo (Kinshasa) is unlikely to be curbed anytime soon. But other options can be considered to reduce exposure to undesired sources or supply shortfalls. Tesla, for example, is working on high nickel battery cathodes that have "zero cobalt" in them, the US carmaker's head of powertrain and energy engineering, Drew Baglino, recently said. "Nickel is the cheapest and the highest energy density, and that's why increasing nickel [usage in cathodes] is a goal of ours, and really everybody's in the energy industry." Top nickel producers include Indonesia, the Philippines, Russia, France's New Caledonia, Australia and Canada. Similarly, silicon used as anode material instead of graphite has the potential to absorb more charge, which translates into smaller batteries with longer life. And while natural graphite is mostly mined in Turkey, China and Brazil, silicon, in the form of silicates, constitutes more than 25% of the Earth's crust. Challenges such as controlling the physical expansion of the silicon when charging, remain, however. Recycling is also likely to kick in around 2025, according to Anil Srivastava of Swiss battery maker Leclanche. Eventually, when vehicles, power generation and heating are fully electrified, the amount of battery capacity installed globally will reach a steady state and new batteries will mostly come from old ones, Musk believes. "At that point, we have an awesome resource in those batteries to recycle, so we don't need to do any more mining," Tesla's Baglino emphasized. Philippe Roos, Strasbourg, and Ronan Kavanagh, London Compass Points • SIGNIFICANCE: In past cycles of resource scarcity fears, actual shortages never materialized. This time is unlikely to be different because new resources can be found, materials can be recycled and technologies can be changed. • CONTEXT: As relations have soured between China and the West, many US and European experts are sounding the alarm that the world relies too heavily on China to supply key industries.

Topics:
Security Risk , Upstream Technology, Carbon Capture (CCS), Energy Storage, Renewable Electricity , Policy and Regulation, Electric Vehicles
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