IEA (2023), Why the European Union needs bold and broad strategies for critical minerals, IEA, Paris https://www.iea.org/commentaries/why-the-european-union-needs-bold-and-broad-strategies-for-critical-minerals, License: CC BY 4.0
The transition to clean energy is underway with major implications for economies across the globe. The world is set to add as much renewable power in the next five years as it did in the previous 20 years – an amount equivalent to the entire electricity capacity of China today. And by 2030, one out of every two cars sold in the United States, the European Union and China could be electric.
As this new global energy economy emerges, many nations are racing to strengthen and diversify their supply chains for clean energy technologies ranging from solar panels and wind turbines to electric cars and heat pumps. And many of these technologies depend on an array of different critical minerals – such as lithium, cobalt and rare earth elements. Without secure and resilient supply chains of critical minerals, clean energy transitions around the world risk becoming slower and more costly.
Looking at commodity markets over the past year, the risks of inadequate supply are clear. Price spikes in copper, lithium and other materials have broken a decades-long run of cost declines in clean energy technologies such as wind and solar PV, which both saw significant increases in manufacturing costs in 2021. Similarly, prices for EV batteries have seen a marked increase too at a time when policy makers around Europe are trying to tempt consumers into purchasing low-emission vehicles.
The reality is that many of the essential minerals for clean technologies are often produced in a small number of countries. For example, China accounts for over 80% of global production of graphite used in batteries and has a dominant position in the processing and refining of many other minerals and metals: it processes almost two-thirds of rare earth elements, critical to a plethora of technologies including wind turbines and EV motors. The Democratic Republic of Congo mines 70% of the world’s cobalt. Russia is a major producer of battery-grade nickel and platinum. Geographical concentration raises major security concerns as physical disruptions, trade restrictions, technical failures or other geopolitical events in a major producer can quickly affect global supply.
With its Fit for 55 package and REPowerEU plan, the European Union is at the forefront of efforts to combat climate change by rapidly deploying clean energy technologies. There is also an expanding European project pipeline to manufacture wind turbines, electrolysers and EV batteries. However, as the EU nurtures its clean energy manufacturing ambitions, the reliance on imports of critical materials remains a cause for concern in many Member States. While Europe is responsible for over one-quarter of global EV production, it is home to very little of the materials that feed into them.
To mitigate future shocks, a broad and bold strategy is needed that brings together investment, innovation, recycling, and rigorous sustainability standards. This is at the heart of the Critical Raw Materials Act that will be presented in March. Greater investment to bring new mines and refineries online in the EU as well as in partner countries will be essential to bridge potential supply gaps. This can be supported by a range of policy tools to streamline permitting procedures, de-risk investment and facilitate partnerships with suppliers in diversified regions.
Technology innovation on both the demand and production side can bring substantial security benefits by promoting more efficient use of materials, substitutions and unlocking sizeable new supplies. For example, 40-50% reductions in the use of silver and silicon in solar cells over the past decade have enabled a spectacular rise in solar PV deployment. For batteries, new chemistries and innovation that reduce the need for critical minerals such as cobalt and lithium need support.
Reuse and recycling can also relieve pressure on primary supplies. The security benefits of recycling can be far greater in regions, like the EU, with high levels of clean energy deployment and limited resource endowment. Putting in place better collection systems, harmonised waste regulations and a sound investment framework for recycling facilities are vital to position the EU as a leader in the space. The circular economy and battery regulation introduced by the European Commission will ensure that there is a new legal framework to guarantee standards and targets for recycling. For instance, by 2027, the production processes for new batteries must enable at least 90% of the cobalt and nickel used to be recycled with a 50% threshold for lithium.
Clean energy transitions must also be carried forward in a way that addresses the environmental and social risks linked to mining and mineral processing, such as human rights violations, corruption, CO2 emissions and loss of biodiversity. That’s why we welcome the due diligence legislation currently under negotiation.
Such an all-inclusive programme will be essential to combine the EU’s climate and energy security with industrial policy ambitions. The EU needs to act fast, and with intent, to get ahead in the global clean energy race while reducing emissions. Critical minerals must not be thought of as a sideshow, instead they are part of the main event as Europe moves to a net zero energy future.