The development of several sustainable technologies, including electric vehicles, solar panels and wind turbines, is heavily dependent on supplies of relatively scarce minerals such as lithium, cobalt and the group of so-called rare-earth minerals. While the earth’s crust most probably holds sufficient quantities of these minerals, concerns over mining and processing capacity are growing and so is societal resistance against the societal and environmental impact of these processes. Moreover, given their (uneven) distribution across the globe, these minerals are of increasing strategic importance.

Our observations

  • A recent report highlights how a broader suite of green technologies, including photovoltaic solar panels and wind turbines, could suffer because of limited supplies of certain minerals. In those cases, the problem is mostly with limited production capacity, rather than with occurrence per se. The problem seems more fundamental with lithium, cobalt and nickel, but all depends on future growth rates of these technologies and whether or not new reserves will be found.
  • While electric vehicles are definitely cleaner to operate than conventional vehicles, the environmental and social impact of their production is increasingly being scrutinized. This pertains mostly to the use of lithium and cobalt in their batteries and, to a lesser extent, the rare-earth minerals that go into their electric motors (i.e. permanent magnets). Currently, batteries account for some 41% of lithium demand and 30% of demand for cobalt. By 2025, these shares are expected to grow to 76% and 53% respectively. This growth is predominantly driven by electric mobility applications.
  • Lithium is mostly sourced in Australia (40%) and Chile (30%), which also have the largest known reserves(17% and 47%). Bolivia holds large quantities of lithium as well (17%), but is struggling to become a significant producer. As for cobalt, reserves are much more concentrated, with Congo accounting for 58% of global production and almost half of all known reserves. Other nations, e.g. Australia, seek to increase production but are less willing to accept the environmental impact that comes with mining.
  • Umicore, a major cobalt producer, claims to source exclusively from certified mines with (somewhat) decent labor conditions and a limited environmental impact. Last week, it issued a profit warning and pointed, among other factors, to the increasing inflow of cheap cobalt from “artisanal” mines, where workers (including children) are exposed to unsafe and unhealthy conditions.
  • Volkswagen recently joined the ranks of, among others, Ford, LG Chem and Huayou Cobalt to develop a blockchain-based system to improve transparency and traceability in the value chain for strategic minerals. The system will be based on IBM Blockchain Platform and is supposed to provide accurate (i.e. unchangeable) data on the origins and pathway of a batch of minerals. Not surprisingly, cobalt will be the first mineral to be included in the system. BMW has pledged to source its own cobalt (instead of leaving this to battery manufacturers) and to do so (almost) exclusively from Australia and Morocco instead of Congo.

Connecting the dots

Every technology stack is ultimately dependent on the availability of natural resources to build its foundational material layer. This is true for the digital stack, which relies heavily on silicon, as well as for the energy and mobility stacks, which will come to rely more and more on lithium, cobalt and other, more “exotic”, materials. That is, the ongoing transition in these systems implies a radical rearrangement of the entire value chain and this very much includes the sourcing of raw material in particular; from fossil fuels to a wide range of relatively new and scarce minerals.
Meeting the material needs of these new stacks poses challenges in terms of sheer availability and volatile prices due to basic commodity cycle dynamics. Demand for these metals is obviously growing rapidly, while existing production capacity is not always adequate. This occasionally leads to soaring prices (e.g. in early 2018, cobalt was three times more expensive than today), but in the longer term, supply will match demand and prices need not go up. Even more so, as the Umicore example illustrates, even in times of great demand for cobalt, overproduction may occur as well. Nevertheless, battery (and car) manufacturers are scrambling to secure longterm supplies in order to produce sufficient EVs to meet the emissions standards governments have imposed on them.
Merely getting their hands on sufficient quantities of raw material is not the only concern for these companies. Societies today are more concerned about the impact of their production and consumption systems than ever before. This is especially true for technologies that are presented as sustainable alternatives to conventional technologies; their environmental and sustainable impact will be scrutinized heavily, if only by climate skeptics and others who seek to discredit these solutions in favor of our existing technology stacks. To make matters worse, few countries are willing to mine for these minerals because of the environmental harm done by the mining and refining process

(i.e. a ruined landscape and large quantities of chemical waste). As a result, much of mining takes place in countries where institutions are relatively weak and little to nothing is done to reduce environmental harm and improve labor conditions. In other words, the sought-after minerals may not be in short supply per se, the amount of socially acceptable minerals is likely to become all the more scarce.
Finally, there’s a clear geopolitical dimension to the quest for minerals for sustainable technologies. Geological formations that hold minable quantities and concentrations of these materials are limited to specific areas (often, but not exclusively, in the global south). This obviously renders these reserves into strategic assets and this is especially true for the lithium and cobalt.  China has actively sought, and succeeded, to become a monopolist (Deng Xiaoping used to compare rare-earths to crude oil), by keeping prices low, and is now able to turn its rare-earths into a strategic asset (e.g. in its negotiations on tariffs with the U.S.). This will only work to some extent though, as other countries will take environmental damage for granted and start mining their own reserves.  The greatest concern for bulk consumers, including the U.S., is to maintain steady prices. American investments in shale oil and gas have allowed them to play a major role in the global oil and gas trade and the U.S. is likely to try and do the same for the these “new” strategic resources. It could very well be that the invasion of, and longer-than-expected presence in, Afghanistan was and is also driven by the fact that Afghanistan holds an estimated 1-3 trillion USD in rare-earths, lithium and copper, over which the U.S. seeks to exert some level of control.
In sum, it seems unlikely that fundamental scarcity will put a brake on the production and adoption of renewable technologies, but it could very well play a role in determining which technologies, businesses and nations come out on top the global sustainability transition.

Implications

  • So far, li-ion batteries (and other electronic waste) are hardly recycled, because the mined material is cheaper than recycled feedstocks. This, however, is mostly a problem of scale and many metal processors are developing advanced recycling methods to take on the large numbers of spent batteries that will become available in the coming years. Spent batteries may also get a “second life” as a means of storing excess (renewable) electricity in the grid. Scaling such projects will be challenging, however, given the great variety in battery chemistries, shapes and sizes.

  • Growing concerns over the sourcing of lithium and cobalt may become a genuine stumbling block for battery-electric vehicles and create a window of opportunity for hydrogen fuel cell vehicles that don’t face this particular problem.

  • To circumvent sourcing issues with these materials, alternative chemistries for batteries are being studied. Tesla claims it has already “significantly” reduced the cobalt content in its batteries and that it is working on cobalt-free batteries. Others are striving to do the same and, in the longer-term future, new battery chemistries may eradicate altogether the need for scarce or controversial minerals.