Will geopolitics pick the green tech winners?
Just over a decade ago, governments and businesses in the advanced industrial economies became (publicly) concerned about access to rare earth elements, the minerals and metals that are critical to the production of high technologies and essential to a modern military. Anxiety is rising again as those same countries contemplate a transition to a green economy, one in which demand for those same rare earths will explode. Ample and secure supplies of those resources will be vital not only to the realization of a greener economy, but will also determine which  and whose  technologies dominate that transformation. Rare earth elements are 17 heavy metals essential to the manufacture of many high-tech products. The name is a misnomer: They arent actually rare, but economically exploitable deposits are hard to find. Mining and processing are dirty and expensive, which discourages their extraction. A better term, and one that is increasingly common, is critical raw materials, although some countries refer to strategic materials. This is a more expansive concept, one that includes rare earths along with others. Each government has its own list. China has 24 on its, as does Australia (although the items are different), Europe has 30, Japan has 34 and the U.S. has 35. (The lists are periodically updated, so names and numbers may differ.) Those minerals became the focus of global attention in 2010 when China cut Japans access to its rare earths exports after the arrest of a Chinese fishing boat captain who rammed and then ran from Japanese coast guard vessels after he was caught fishing in waters near the Senkaku Islands. That incident exposed the worlds reliance on Chinese supplies and the vulnerability that created. In the years since, consumers of those minerals have tried to diversify their sources, and they have had some success. Still, production and processing of many critical minerals remains highly concentrated in just a few countries, with the top three producers accounting for more than three-quarters of supplies. That continuing dependence is troubling, but it becomes even more alarming as demand for critical minerals is anticipated to go through the roof as the world attempts to transition to a green, carbon-free economy. Andrew DeWit, professor at Rikkyo University, who has done considerable work on energy economics, explained in a recent paper that Greening requires prodigious amounts of very tangible critical raw materials whose environmental costs and geopolitical implications are increasingly huge.  A May report by the International Energy Agency (IEA), The role of critical materials in clean energy transitions, provides hard  and troubling  numbers. A typical electric car requires six times the mineral inputs of a conventional car. An onshore wind plant requires nine times more mineral resources than a gas-fired power plant. Offshore wind capacity is more than 10 times more copper-intensive than natural gas- and coal-fired fossil fuel plants, and DeWit reckons those estimates might be low. The IEA estimates that over the last decade, the average amount of minerals needed for a new unit of power generation capacity has increased by 50% as the share of renewables has risen. Meeting the goals of the Paris Agreement  climate stabilization at well below 2C global temperature rise  requires a quadrupling of mineral requirements for clean energy technologies by 2040. If the goal is net-zero globally by 2050, then mineral inputs would be six times greater in 2040 than they are today. The key point is simple: Green tech uses a lot more critical materials than conventional technologies and production, and use of clean tech must grow exponentially if the world is going to reach its climate goals. Honoring the Paris Agreement means that clean energy technologies would account for 40% of the demand for copper and rare earths, 60% to 70% for nickel and cobalt, and almost 90% for lithium. Its not clear if that supply exists. DeWit points to Dutch researchers who concluded that in a world in which 30% of vehicles are electric by 2030, and even with advanced battery chemistries, the demand for cobalt, lithium and select rare earths outstrips global supply. He highlights warnings that current planning for 2023 implies seven times more demand for lithium than any conceivable scenario for global supply.  IEA findings are consistent with his: Expected supply from existing mines and projects under construction is estimated to meet only half of projected lithium and cobalt requirements and 80% of copper needs by 2030. A European Union report forecasts a significant shortage of lithium in the absence of large, medium-term investments. The European Commission has acknowledged the implications of this imbalance: The transition to climate neutrality could replace todays reliance on fossil fuels with one on raw materials, many of which we source from abroad and for which global competition is becoming more fierce.  In her recent analysis, Jane Nakano, an energy expert at CSIS, the Washington-based think tank, explained that clean energy technology has become the latest frontier for the geoeconomic rivalries sparked by Chinas competitive economic sector. Once primarily an exporter of those minerals, China now consumes more than 80% of the rare earths it produces as it seeks to transform its own economy and builds the clean technology powerhouses that will dominate this sector in the future. Last October, Prime Minister Yoshihide Suga announced that Japan too would aim for net-zero greenhouse-gas emissions by 2050, and the Diet confirmed that pledge last month when it passed revisions to a law promoting measures to fight climate change. One focus of Japanese energies is the battle for global leadership in batteries needed for electric vehicles. That field is currently dominated by Chinese and South Korean companies, but Japan is hoping to overtake them with solid batteries, which should be able to go farther and remain charged longer than the lithium-ion models that their competitors make. Unfortunately, both types require critical minerals, meaning that access to supplies could determine which model prevails. Having been the target of Chinas 2010 export cutoff, the Japanese government has been aggressively working out ways to ensure its supply of critical minerals. It has promoted research on recycling, the use of substitutes and ways to reduce consumption of rare earths, while expanding its stockpiles of those materials. It has also helped develop alternative suppliers elsewhere in the world. As a result, Japans reliance on Chinese rare earths fell from 85% in 2009 to 58% a decade later, and the country looks set to reach its target of relying on a single supplier for no more than 50% of its consumption by 2025. Those successes have not been matched elsewhere. Nakano warns that recognition of the importance of the issue, along with a 2014 World Trade Organization ruling that Chinese export restrictions violated its rules have not appeared to materially improve current import-dependence for critical minerals in the U.S. and the EU. The Biden administrations recently completed 100-day supply chain review has several recommendations for securing supplies, a few of which address green technologies. Among them are calls for cooperation with allies and partners to diversify supply chains away from adversarial nations and sources with unacceptable environmental and labor standards.  That logic makes sense in a world defined by geopolitics. The climate challenge defies such thinking, however. It is existential  for all nations. Brad Glosserman is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior adviser (nonresident) at Pacific Forum. He is the author of Peak Japan: The End of Great Ambitions (Georgetown University Press, 2019).