Imagine a small, resource-poor nation on the cusp of an energy transition. Leaders and citizens alike have been working tirelessly to wean the country off fossil fuels. But they hit an unyielding wall: they can't access the critical minerals needed for renewable energy technology - no lithium for batteries, no rare earth elements for wind turbines. Their hopes for a sustainable future are suddenly clouded by an inability to break free from the geopolitical strongholds of a few mineral-rich countries.
Critical minerals serve as the backbone of renewable energy technologies, making them indispensable in the global shift towards a greener, more sustainable future. According to the International Energy Agency, by 2040, total mineral demand from clean energy technologies would double in its stated policy scenario and quadruple in sustainable development scenario. Similarly, the demand for graphite, cobalt, and nickel is estimated to increase by 25 times. The increasing dependency on these minerals, however, raises complex issues around supply chain resilience, geopolitical tensions, and market volatility. Unlike fossil fuel reserves, which are relatively abundant and geographically dispersed, critical minerals are often found in politically unstable regions or in countries with monopolistic control. As investments in renewable energy infrastructure surge, the demand for these minerals will significantly outpace current supply capabilities, making it a national security issue for countries aiming for energy independence.
The term "geopolitical monopoly" may sound abstract, but its impact is painfully tangible. These monopolies don't just shift numbers on a stock exchange; they can stall the hopes of entire nations aiming for a more sustainable, equitable future. Michael Klare's work reveals the precariousness of this situation - how monopolies on natural resources can spawn conflicts and jeopardize global security, much like the oil-fueled strife we have witnessed for decades.
Consider the question of justice, as framed by John Rawls. Rawls asks us to consider the world as if we didn't know where we'd end up in it, advocating for a system that benefits even the least advantaged. If we live in a world that hoards critical resources in the hands of the few, are we not perpetuating injustice? For those nations locked out of the mineral bounty, it isn't just a matter of economics - it's a question of their citizens' right to progress, to environmental health, and ultimately, to dignity.
Critical Minerals Colonialism
It's against this backdrop that Prime Minister Narendra Modi's words strike a chord, a resonant warning that this concentration of resource power risks birthing a "new model of colonialism". There's a gravity to his warning that should pull at the conscience of the international community. The "entire humanity needs it," he said, and indeed we do - for our hopes, our progress, our very ability to dream of a better future.
The Prime Minister's call for viewing critical mineral reserves as a "global responsibility" echoes the collective moral imperative we face. It's not just about market dynamics; it's about a shared future, about ensuring that these critical resources don't become the chains that bind entire nations to a fate of dependence and stagnation.
Current Players
Data from the US Geological Survey on mine production and reserves of rare earth elements reveals China's overwhelming dominance in this sector. In 2021, China produced an estimated 168,000 metric tons, a figure that rose to 210,000 in 2022. Thus, China accounted for 70% of total rare earth mining production in the year 2022. This dwarfs production in other countries; for example, the United States and Australia, two of the other major producers, generated 42,000 and 24,000 metric tons in 2021. China's reserves are also considerable at 44,000,000 metric tons. Nevertheless, China's current production capacities and established supply chains give it a distinct advantage and considerable influence in the global market for rare earth elements. This hegemony has significant geopolitical implications, given the critical role these minerals play in everything from renewable energy technologies to defense applications.
Antidote to Critical Mineral Colonialism
The need for stable and secure supplies of critical minerals makes it crucial for countries to work together. Take the Minerals Security Partnership (MSP) as an example. This strategic alliance involves 13 member states - Australia, Canada, Finland, France, Germany, Japan, South Korea, Sweden, the UK, the US, the European Union, Italy, and India. Its goal is straightforward: encourage both public and private investment in global critical mineral supply chains. Notably, India is the sole developing country in this group. But this shouldn't be the case. Other countries with abundant reserves of critical minerals, like Indonesia, Brazil, Tanzania, and South Africa, should also join. Doing so would strengthen the alliance and make it more resilient. However, a lot of Chinese companies have already gotten mining rights in some of these countries.
India, on the other hand, is forging critical mineral alliances bilaterally or through other regional groupings. For Instance, India has recently formed a partnership on five target projects (two lithium and three cobalt) on which to launch detailed due diligence and also agreed to deepen cooperation and extend their existing commitments to the India- Australia Critical Minerals Investment Partnership. Further, under the the QUAD, the private sector-led Quad Investors Network (QUIN), has been facilitating investments in strategic technologies, including clean energy, semiconductors, critical minerals, and quantum.
Apart from this, the Ministry of Mines has recently released the report of the Committee on Identification of Critical Minerals listing 30 critical minerals essential to India, including lithium, cobalt, and copper among others. To stress on the exploration of these minerals, the Geological Survey of India and other agencies have been actively involved. Additionally, a joint venture company, Khanij Bidesh India Ltd. (KABIL), has been established with equity contributions from three Central Public Sector Enterprises - National Aluminium Company Ltd, Hindustan Copper Ltd, and Mineral Exploration Company Ltd. The aim of KABIL is to secure overseas mineral assets that are critical and strategic, such as Lithium and Cobalt, to ensure supply stability. The company is currently in talks with nations like Argentina and Australia for the acquisition of such mineral assets. KABIL should not limit its scope to just immediate, viable opportunities but also invest in exploring and securing critical mineral reserves where mining may not be viable today but where there are significant future prospects.
As nations around the globe strive for energy independence and sustainable futures, the looming shadow of critical mineral scarcity cannot be ignored. The global concentration of these vital resources in the hands of a few has implications for geopolitics, environmental justice, and equitable progress. The path forward necessitates a cohesive international effort to diversify supply chains, bolstering exploration and bilateral partnerships, and prioritizing ethical considerations in resource acquisition. It is paramount to ensure that the quest for sustainability does not perpetuate a new age of resource colonialism, but rather fosters collaboration and mutual growth. The collective pursuit of a green and equitable future depends on it.
(Bibek Debroy (@bibekdebroy) is Chairman & Aditya Sinha (@adityasinha004) is OSD, Research, EAC-PM)
Disclaimer: These are the personal opinions of the author.