Electric La-La Land — Handing China the Metals Card

Workers transport soil containing rare-earth elements for export at a port in Lianyungang, Jiangsu Province, China, in 2010. (Stringer/Reuters)

A new report sounds the alarm on the mismatch between policies forcing an energy transition and the availability of the critical minerals that would make it feasible.

While Joe Biden was out for a spin in Ford’s new electric F-150 earlier this month, the International Energy Agency (IEA) was sounding the alarm on the mismatch between policies forcing an energy transition and the availability of the critical minerals that would make it feasible.

The IEA’s report, “The Role of Critical Minerals in Clean Energy Transitions,” presents a sobering account of the geopolitical and environmental risks arising out of this mismatch, undercutting the credibility of wind, solar, and battery storage in turn. These technologies, often hailed as clean and abundant, are in some ways more resource-intensive than the electricity sources and vehicle types they would replace.

Minerals such as lithium, cobalt, zinc, manganese, copper, nickel, and the rare-earth elements, led by neodymium, are essential to the wind–solar–battery triumvirate with which the Biden administration wants to anchor our energy mix. The IEA, however, sees a scramble for these minerals on the horizon.

In the IEA scenario consistent with the Paris Agreement, the requisite demand increases are so arresting as to require direct quotation. The IEA states that hitting Paris targets “would mean a quadrupling of mineral requirements for clean energy technologies by 2040.” The largest demand increases in the IEA forecast are driven by batteries for electric vehicles and power storage. Demand for these end-uses will grow “at least thirty times to 2040,” with lithium, graphite, cobalt, and nickel demand growing fastest.

Energy Transition and Geopolitical Risk

The geopolitical problems arising from a forced energy transition are by this point well worn. China, a country that the Biden administration deems “our most serious competitor,” is the leading processor of all of the key minerals that would enable the transition in question, processing between 30 and 40 percent of global copper and nickel, 55 to 60 percent of global cobalt and lithium, and 85 percent of rare-earth elements, according to the IEA. China also produces a majority of the rare-earths needed for wind turbines and of the graphite that composes battery anodes.

According to the Wall Street Journal’s Chuin-Wei Yap, China is increasing its systematization on these fronts. “Since October, dozens of Chinese manganese processors accounting for most of global capacity have joined a state-backed campaign to establish a ‘manganese innovation alliance,’” Yap writes, “setting out in planning documents goals and moves that others in the industry say are akin to a production cartel.” The goals include centralizing control over supply, coordinating prices, stockpiling, and networking for mutual financial assistance. This development is consistent with the reassertion of party-state influence over commercial affairs, most visible in the “Made in China 2025” initiative and the dual-circulation strategy.

From a geopolitical standpoint, China and the U.S. have divergent energy interests. China has a strong strategic incentive to wean itself from oil and gas. While it is the global leader in what the IEA calls the “energy transition minerals” (ETMs), it imports more oil than does any other country on earth. With its comparative advantage firmly set on the ETMs, Beijing’s effort to get itself — and the rest of the world — off fossil energy creates leverage. For the U.S., the world’s top hydrocarbon producer, it is difficult to justify eschewing affordable, locally sourced energy in favor of a new resource dependence.

According to market orthodoxy, geopolitical risks such as those in the ETM supply chain will be priced in — i.e., firms have an incentive to account for risk by investing in sourcing diversity, even if it means higher costs in the near term. Real-world data, however, chill expectations of a rapid mineral ramp-up in the event of coercive behavior from China. The IEA’s average observed lead times (from discovery to production) based on 35 projects that came online in the last decade were four years for Australian lithium, seven years for South American lithium, 13 years for nickel sulfide, 17 years for copper, and 19 years for nickel laterite.

The IEA, therefore, does not expect the balance of ETM power to shift anytime soon. Its analysis of the existing project pipeline indicates that “most of the output growth for lithium, nickel and cobalt are expected to come from today’s major producers, implying a higher degree of concentration in the years ahead.”

Energy Transition and Environmental Risk

On environmental matters, the IEA report lands body blow after body blow, with its hardest punches pertaining to mineral requirements.

Electric vehicles, such as the F-150 Lightning the president hopped into, require six times more mineral inputs than comparable internal-combustion vehicles do. The average EV needs over 200 kilograms of minerals, with graphite (over 50 kg), copper (over 50 kg), nickel and manganese (combined over 50 kg) being at the top of the list. The mineral requirement for the average conventional vehicle is less than 40 kg total, most of it being copper.

On electricity generation, the IEA says that “while solar PV plants and wind farms do not require fuels to operate, they generally require more materials than fossil fuel–based counterparts for construction.”

Per megawatt, the IEA data show, offshore wind requires about 8,000 kg of copper and 5,000 kg of zinc; onshore wind requires about 3,000 kg of copper and 5,000 kg of zinc; and solar requires about 3,000 kg of copper and 3,000 kg of silicon.

Meanwhile, nuclear requires less than 2,000 kg of copper and less than 6,000 kg of minerals total; coal requires around 3,000 kg of minerals; and natural gas requires less than 2,000 kg per megawatt.

Moreover, according to the IEA, the mining and processing of resources for allegedly clean energy involve substantial environmental harm, including water contamination, intensifying of water stress in arid regions, adverse impacts on biodiversity, and the generation of toxic and radioactive material.

Even the ostensible purpose of a forced energy transition — to eliminate greenhouse-gas emissions — is only partially served by the chosen wind–solar–battery means. Because they entail higher emissions per unit than bulk metals, the IEA warns, “production of energy transition minerals can be a significant source of emissions as demand rises.”

Comparing automobiles, IEA calculates that the lifecycle greenhouse-gas emissions of an electric vehicle — taking into account battery production, vehicle manufacturing, and battery recharging via electricity — are about 50 percent of the lifecycle greenhouse-gas emissions of a conventional vehicle. That is, while a conventional vehicle will emit 40 tonnes from start to finish, an EV will still emit 20. Considering the size of the new electric F-150’s battery pack (an estimated 150 kWh according to Car and Driver), you can be certain it comes with dubious environmental effects.

Trade-offs, Not Solutions

Paradoxically, the IEA itself seems unable to comprehend the significance of its findings. In response to a column from Mark Mills highlighting the report in the Wall Street Journal, the IEA’s head of communications penned a letter to the editor insisting that its analysis was being misrepresented and that the mineral-related challenges of a forced transition are “surmountable.”

Yet all the IEA has to offer for guidance toward what it refers to as “mineral security” is a set of generic, Pollyannaish suggestions. Its six “key recommendations” are to “ensure adequate investment,” “promote technology innovation,” “scale up recycling,” “enhance supply chain resilience and market transparency,” “mainstream higher environmental, social and governance standards,” and “strengthen international collaboration.”

A forced energy transition presents tangible, resource-acquisition challenges that cannot be solved easily. Vague recommendations to “mainstream” standards and “strengthen” cooperation are analytical malfeasance.

Perhaps the reason investment has not been “adequate” and recycling needs “scaling up” is that the vaunted transition simply does not make economic sense. This IEA mineral report adds to a chorus suggesting that it may not make geopolitical or environmental sense either, as we would be swapping climate risks for risks of others sorts. In the words of the esteemed Thomas Sowell, when it comes to public policy, there are no solutions, only trade-offs.

Are these the energy trade-offs we want to make?

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