Clean energy demand for critical minerals set to soar as the world pursues net zero goals

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An onshore wind farm. IAC file photo

Supplies of critical minerals essential for key clean energy technologies like electric vehicles and wind turbines need to pick up sharply over the coming decades to meet the world’s climate goals, creating potential energy security hazards that governments must act now to address, according to a report by the International Energy Agency. 

The special report, The Role of Critical Minerals in Clean Energy Transitions, is the most comprehensive global study to date on the central importance of minerals such as copper, lithium, nickel, cobalt and rare earth elements in a secure and rapid transformation of the global energy sector. The report recommends six key areas of action for policy makers to ensure that critical minerals enable an accelerated transition to clean energy rather than becoming a bottleneck.

“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions,” said Fatih Birol, Executive Director of the IEA. “The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action. By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions.”

The report underscores that the mineral requirements of an energy system powered by clean energy technologies differ profoundly from one that runs on fossil fuels. A typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a similarly sized gas-fired power plant.

Demand outlooks and supply vulnerabilities vary widely by mineral, but the energy sector’s overall needs for critical minerals could increase by as much as six times by 2040, depending on how rapidly governments act to reduce emissions. Not only is this a massive increase in absolute terms, but as the costs of technologies fall, mineral inputs will account for an increasingly important part of the value of key components, making their overall costs more vulnerable to potential mineral price swings.

The commercial importance of these minerals also grow rapidly: today’s revenue from coal production is ten times larger than from energy transition minerals. However, in climate-driven scenarios, these positions are reversed well before 2040.

Unlike oil – a commodity produced around the world and traded in liquid markets – production and processing of many minerals such as lithium, cobalt and some rare earth elements are highly concentrated in a handful of countries, with the top three producers accounting for more than 75% of supplies.

Complex and sometimes opaque supply chains also increase the risks that could arise from physical disruptions, trade restrictions or other developments in major producing countries. In addition, while there is no shortage of resources, the quality of available deposits is declining as the most immediately accessible resources are exploited. Producers also face the necessity of stricter environmental and social standards.

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