Image credit: Dennis Schroeder - NREL Photographer - NREL Image Gallery
March 03, 2022
The New Race for Energy Resources
Natural resources are critical for national security. Land, water, and energy capacity all directly affect a nation’s social and economic stability—dubbed “natural security.” In particular, secure access to energy resources helps empower armies, cultivate cities, and stimulate advancements in technology. For example, during World War II, America’s oil reserves shot it to supremacy: the country was able to quickly deploy its military and keep it moving with a constant flow of American oil. After the war, the same reserves spurred breakthroughs in technology and modernized society. These advancements, brought on by energy independence, catapulted the dollar above the British pound, placing America at the center of global finance and helping secure its status as a global hegemon.
Today, scarcity, price volatility, and concerns over climate change are pushing world leaders and businesses away from fossil fuels. In their place, newer, cleaner energy sources—such as wind and solar power—and types of transportation—such as electric vehicles (EVs)—are gaining market share. However, these energy and transportation shifts come with their own challenges, which are beginning to propagate across the global stage.
Renewable energy sources and EVs rely on a different kind of energy resource: critical minerals. Critical minerals are commodities vital to the country’s economic and national security for which there are potential supply disruptions and no viable substitutes. These now include 50 elements that most people haven’t heard about since high school chemistry class: arsenic, gallium, germanium, indium, and tellurium for solar cells; cobalt, lithium, and manganese for batteries; and aluminum and rare earth elements, primarily comprised of a chemical group called the lanthanides, for reducing the weight of EVs and powering their permanent magnet motors, respectively. Critical minerals also underpin numerous advanced weapons systems and other high-tech applications.
Compared to oil and natural gas, reserves of raw mineral resources and refinement of critical minerals are much more geographically concentrated, which impacts global supply chains and redefines the geopolitical landscape. China currently dominates the production and processing of critical minerals even though, geologically speaking, it doesn’t have a monopoly over critical mineral reserves. Instead, Chinese-owned enterprises strategically invest in mining claims around the world for the minerals they need but don’t have, and the Chinese government is able to exploit the resources it does have cheaply and efficiently by avoiding environmental and labor regulations.
For example, Chinese firms control about 70 percent of the world’s lithium supply even though mainland China only has about 6 percent of global lithium reserves—the majority exist in South America. Chinese firms also control 15 of the 19 cobalt-producing mines in the Democratic Republic of Congo, where more than two-thirds of the world’s cobalt comes from. Although China does have considerable reserves of rare earth elements (around 36 percent), it controls an outsized percentage of rare earths production (around 90 percent). Chinese firms are able to produce rare earths more cheaply than other countries, in part by disregarding the environmental damage from the radioactive waste created during the refinement process.
More important than controlling the raw mineral resources, China is the dominant processor of critical minerals—the key step in breaking down raw ore into useable compounds and alloys. According to the International Energy Agency, China is the top processor of minerals like copper, nickel, cobalt, lithium, and rare earth elements—all critical for batteries and the clean energy future. Therefore, it doesn’t matter where minerals are currently extracted—the bulk of them will be sent to China for processing.
It’s time for the United States to remove its global blinders and commit to sourcing the clean energy future with responsible, resilient, and secure mineral resources.
This extreme concentration of critical mineral supply chains poses both national and economic security threats. First, the United States’ inability to secure key aspects of the critical minerals value chain limits its ability to capture the innovation, expertise, and economic opportunity that flow from being able to independently secure access to these raw energy resources. Second, the United States’ dependence on China—its strategic competitor—for foundational materials required for much of its advanced weapons systems to properly function leaves the country incredibly vulnerable. Third, the United States’ reliance on critical mineral commodities could inadvertently support supply chains that are counter to U.S. values by perpetrating environmental and human rights abuses, and thereby diminishing its soft power and ability to act with any moral authority on the world stage. Finally, as the global COVID-19 pandemic has shown, overly concentrated supply chains are at risk of severe supply disruptions.
Breaking into the entrenched critical minerals market is incredibly difficult. First, the industry has very high capital requirements with low margins, making it hard for newcomers to become established and compete, especially when they are up against government subsidized industries, such as in China. Second, both mining and processing are labor intensive and can be harmful to the environment. As a result, countries with historically low environmental standards and little regard for human rights do much of the work to extract and process critical minerals.
China mines and processes minerals domestically and around the world with low regard for worker or environmental safety, forcing its citizens to carry the heavy burden of pollution and, at times, to work for little or no pay. This allows the Chinese government to produce things much cheaper than its competitors. For example, the largest rare earths mine in China near the industrial city of Baotou has generated waste that is allowed to be stored in a radioactive tailings lake made of “black, barely-liquid, toxic sludge.” Moreover, the current crisis over the use of forced Uyghur labor in Xinjiang to produce the high-purity polysilicon needed for solar panels is just the latest example of human rights abuses tied to critical mineral resources. About 45 percent of the world’s supply of polysilicon for solar panels comes from Xinjiang where more than one million people are being detained in camps and forced to work.
Reducing the concentration of critical mineral supply chains will ultimately help protect the environment, benefit workers, and ensure the benefits from the energy transition are equally felt around the world. Working with likeminded nations, the United States can create a new market for sustainably sourced goods centered around high environmental, social, and governance standards that will help level the playing field and incentivize the production of mineral resources outside of China.
The United States and its allies have some of the highest quality environmental regulations and social protections in the world, helping keep the air and water clean, ecosystems healthy, and communities safe and able to seek redress should any issues arise. These benefits, however, often cause their products to be more expensive than those produced elsewhere, making it difficult to compete. Policy levers—from trade restrictions that help promote U.S.- and ally-made products to traceability frameworks that allow consumers to make informed decisions about the products they purchase—could help create a level playing field in the race to electrify.
While different standards exist for mineral extraction and production around the world and within the industry, the transparency necessary to ensure adherence to those standards is not universally applied. Traceability frameworks, like blockchain technology, could help ensure the provenance of raw mineral resources does not support forced labor or other human rights abuses and empower consumers to make informed decisions about their purchases. However, technology alone cannot solve this problem. While it is important to know where a mineral commodity comes from and how to track its lifecycle, additional human verification must also be applied to ensure qualitative standards, such as environmental and worker health and safety, are prioritized. Leveraging existing programs like the Blue Dot Network and the Energy Resource Governance Initiative within the U.S. Department of State could help solve this problem.
Once it is clear how products are sourced, that knowledge could be applied to trade deals between the United States and other likeminded nations who could agree to only source supplies for electric vehicles and other key industries from places that adhere to the same level of labor and environmental standards as the United States. Tariffs on goods that don’t measure up—similar to the tariffs the Biden administration recently put on solar products from the Xinjiang region—could provide a good roadmap for implementation.
It’s time for the United States to remove its global blinders and commit to sourcing the clean energy future with responsible, resilient, and secure mineral resources. But the United States cannot do this alone. Only working with its allies can it safely diversify mineral supply chains and ensure the benefits of the 21st-century economy are universally felt.
About the Author
Abigail Seadler Wulf is the director of the Ambassador Alfred Hoffman, Jr. Center for Critical Minerals Strategy at SAFE. Wulf brings broad earth science expertise to the center, from researching rare earth and lithium-rich pegmatites to working with NASA researchers to convey the connections between Earth’s component systems. She previously served as senior science communicator for research within NASA’s Earth Science Division. She also served as policy manager for the American Geosciences Institute (AGI), a nonpartisan federation of more than 50 professional scientific societies. While at AGI, Wulf co-led the Minerals Science and Information Coalition, a broad-based alliance of organizations representing all stages of the critical minerals supply chain. Wulf received her MS from Johns Hopkins University in Environmental Science and Policy and a BA from Hamilton College with majors in geoscience and government where she studied the trace-element chemistry of pegmatites and the national security implications of U.S. dependence on China for rare earth elements.
Thank you to my SAFE colleagues, Robbie Diamond, Dr. Jeffrey "Jeb" Nadaner, Jeff Gerlach, Ron Minsk, Zoe Oysul, Allison Shane, and Maddy Murphy for their help in providing mentorship and guidance on these ideas from the very beginning. A special thank you to Dr. Timothy C. Lehmann, who helped connect my passion for geology with the concept of natural security, setting me on the path toward critical minerals security. Thank you also to Emily Kilcrease for her thoughtful guidance and to Carisa Nietsche, Nathalie Grogan, and the whole Pitch team for their help in developing my pitch and providing me with a platform to share my ideas.