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A growing need for critical minerals
The International Energy Agency’s (IEA) work on critical minerals for the clean energy transition has been deepening and expanding in recent years, reflecting the central role of these materials for achieving the world’s energy security and climate goals.
Last year, we published a special report that explored the complex links between clean energy technologies and minerals. The report is the most comprehensive global study of this subject to date, underscoring the IEA’s commitment to ensuring energy systems remain as resilient, secure and sustainable as possible.
Demand for critical minerals for clean energy technologies could more than quadruple by 2040 if the world gets on track to meet its climate goals.
We are in the midst of a complex transition to a clean energy future. Renewable electricity defied the COVID-19 pandemic with record growth, and capacity additions in 2022 are on course to reach new heights. Global electric car sales also charged ahead, with 2 million cars sold in the first quarter of 2022, up 75% from the same period in 2021. The efforts of an ever-increasing number of countries and companies to reduce their greenhouse gas emissions call for the massive deployment of a wide range of clean energy technologies, many of which rely on critical minerals such as copper, lithium, nickel, cobalt and rare earth elements. The IEA’s data and analysis show that a concerted effort to reach the climate goals of the Paris Agreement would raise mineral demand for clean energy technologies by at least four times through to 2040.
We all know that when oil demand increases by just a few percent, it can lead to significant imbalances in oil markets, with implications for prices. We have now seen similar behaviour in markets for cobalt, lithium and other critical minerals, with soaring demand in recent times pushing prices sharply higher. This has highlighted that the world is not yet prepared for this kind of volatility and disruption. If policy makers do not address resilience in these supply chains, it will make it much more difficult to meet global climate goals and to maintain energy security.
Learning from the oil crises
One of the IEA's core activities is ensuring the security of oil supplies by setting oil stockholding requirements for member countries. In the case of a major oil supply disruption, the IEA co-ordinates collective action by its members to release oil stocks to mitigate the negative economic effects of a sudden oil supply crisis by providing additional oil to the global market. We saw the value of this recently, following the oil market disruptions in the wake of Russia’s invasion of Ukraine. In response to the market turmoil, IEA member countries carried out two collective oil stock releases—the largest in our Agency’s nearly 50-year history—which contributed to alleviating market strains.
At the IEA Ministerial Meeting in March 2022, our member governments called on the Agency to strengthen and broaden our work on critical mineral security, leveraging our long-standing experience in safeguarding oil market security.
To achieve this, we are going to put in place a new work stream at the IEA specifically focused on critical minerals. This will cover a wide range of aspects to ensure reliable and sustainable mineral supplies, including strengthened activities on market monitoring, technology innovation, supply chain resilience, recycling, environmental and social standards and international and regional collaboration. The aim is to create a safety net so that critical minerals enable the world to speed up progress on secure and affordable clean energy transitions—and also to bring greater prosperity to the countries that produce critical minerals in a sustainable and environmentally viable way.
Resilient Trade Starts with Sustainable Supply Chains by Didier Bergeret, Director of Sustainability, The Consumer Goods Forum
The paramount importance of environmental, social and governance issues
While the availability and prices of critical mineral matter a great deal, energy transitions must also be sustainable and people-centred. Solutions to climate change cannot come at the expense of the environment, the workers or the communities that produce the key materials. That is why a key pillar of the IEA’s comprehensive plan of action on critical minerals involves addressing environmental, social and governance (ESG) risks.
Tackling the environmental and social impacts of mineral development will be essential. These include emissions associated with mining and processing; risks arising from inadequate waste and water management; and impacts from inadequate worker safety, human rights abuses such as child labour and corruption. Ensuring that mineral wealth brings real gains to local communities is a broad and multifaceted challenge, particularly in countries where artisanal and small-scale mines are common.
In this context, the OECD’s Due Diligence Guidance, with effective regulatory enforcement, can be a crucial tool for improving ESG performance. Purchasers and suppliers can make a difference if they can identify, assess and mitigate supply chain risks. In parallel, action by governments at the local level can help address environmental, social and governance concerns. Improving mining codes can help ensure compliance with environmental norms, enhance protections for workers and reinforce transparency norms.
Strong case for international collaboration
Lastly, I would like to highlight the importance of enhancing international co-operation to provide companies and governments with the support they need. It will be important for companies from all across the supply chain to work together to develop new strategies to mitigate the different risks. Co-operation between organisations like the IEA and the OECD can bring different strengths to addressing common problems and ensure that ESG elements are properly considered within the international energy security framework. And most importantly, we will need stronger co-operation between governments, particularly on developing responsible and resilient supply chains.
The turmoil caused by Russia’s invasion of Ukraine underscores how vulnerable global supply chains are to potential disruptions.
Discussions at the 15th OECD Forum on Responsible Mineral Supply Chains in May highlighted that the turmoil caused by Russia’s invasion of Ukraine has made it clearer than ever how vulnerable global supply chains are to potential disruptions. It is a wake-up call for us all to do more to make those supply chains both resilient and sustainable. There is a natural tendency to worry less about human rights and environmental impacts in the supply chain than about the currently overriding issue of security of supply. But we should not forget the long-term perspective. Efforts to ensure secure and responsible mineral supply chain need to go hand in hand.
The message is clear: responsible and resilient supply chains will be essential to avoid governments having to choose between security and sustainability.
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OECD isn’t thinking outside the box of critical materials for long duration batteries