Jennifer Granholm, the US energy secretary, has raised a concern about the growing complexity of ensuring energy security as we shift away from fossil fuels. This complexity arises because China has a strong grip on the production of essential minerals needed for renewable energy.
China holds a dominant position in industries related to minerals like cobalt, rare earths, and graphite. These minerals are crucial for renewable energy sources, electric vehicles, and defense technologies. China’s global market share in refining these materials is more than 70 percent for each of them.
Granholm stated, “In the context of these critical minerals, we are facing a dominant supplier that is willing to use its market power for political purposes,” a reference to China’s influence. She further emphasized, “The very essence of this energy transition – these critical minerals – will significantly complicate global energy security and make it even more crucial in the coming decades.” She shared these remarks during the International Energy Agency’s inaugural summit on critical minerals in Paris.
Concerns have been growing among Western policymakers about relying on countries that may not be friendly in terms of politics for the supply of important materials. This unease has escalated due to Russia’s invasion of Ukraine and increased tensions between the US and China concerning Taiwan.
China has a strong hold on the production of many crucial minerals, including graphite and rare earths. This dominance has raised concerns about dependence on China for these essential resources.
To address these concerns, US President Joe Biden introduced the Inflation Reduction Act, which aims to reduce reliance on Chinese supply chains for clean energy technologies. The US government, specifically the Department of Energy and Department of Defense, has also invested significant amounts of money to support the development of domestic mines and processing facilities.
However, transitioning to electric vehicles and renewable energy requires large quantities of minerals like lithium, copper, and nickel. Meeting this demand while reducing dependence on China will require substantial investments from the mining industry, which historically tends to move slowly in increasing supply.
Meeting the growing demand for copper alone will require a substantial investment of $250 billion by 2030, as noted by Mike Henry, the CEO of BHP, the world’s largest mining company. So far, we’ve spent around $40 billion to $50 billion to increase copper supply.
China’s influence also extends to the mining of essential materials like rare earths and graphite. This makes it even more challenging for Western economies to shift to other suppliers if their relations with Beijing worsen.
China has shown a willingness to use supply chains for political purposes. For instance, they imposed restrictions on vital chipmaking materials like gallium and germanium in August in response to Dutch plans to limit the sale of advanced semiconductor manufacturing equipment to Chinese companies.
The European Union’s Commissioner, Thierry Breton, echoed the concerns raised by the United States. He emphasized the need for the European Union to reconsider its trend of moving industries outside the bloc to achieve decarbonization due to the changing dynamics of supply chains on a global scale.
“We in the European Union now understand that we shouldn’t replace our dependency on fossil fuels with a dependency on raw materials,” he explained. “We’re aware that someone could use these dependencies against us.
“We’ve experienced the significant costs in Europe,” he added, referring to the expenses incurred when EU member states had to reduce their reliance on Russian oil and natural gas.
He also mentioned that the EU is currently in the process of finalizing partnerships for critical minerals with countries like the Democratic Republic of Congo and Australia. This is part of an effort to broaden our sources of critical minerals supply.
However, it’s worth noting that despite the need to diversify our sources, a report by the International Energy Agency (IEA) published in July revealed that the supply of critical minerals has actually become more concentrated in the hands of a few countries in recent years.
