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One of the global economy’s most significant challenges in the coming years is the transition from a carbon-based oil and gas economy to a renewable energy future powered by the sun and wind. This came into sharp focus at the COP26 in Glasgow, Scotland, last November. While delegates maintained their commitment to limiting global warming to 1.5 degrees Celsius, most nations are nowhere near achieving this goal. What’s more, the planet would need to reach net-zero carbon emissions by the middle of the century to limit the global temperature rise to 1.5 degrees. At best, today’s trajectory will limit global warming to about 2.5 degrees C by 2100, according to the United Nations.
A big part of the shortfall is that corporations and governments are focusing on carbon reduction efforts of their own operations, called Scope 1 and Scope 2 emissions. Scope 1 includes direct emissions from company-owned or controlled sources, such as factories and warehouses. Scope 2 includes indirect emissions from purchased electricity, steam, heat, and cooling.
However, the most significant component of a company’s emissions is Scope 3, which includes the operations of supply chain partners, from raw materials to components to finished goods.
Any chance of getting close to the 1.5 degrees C goal by 2100 demands companies expand their focus to include their supply chain emissions. Today, a minority of supply chain managers have the necessary visibility into sustainability practices in the global supply chains to make this happen, even though their supply chains account for the vast majority of their overall climate impact.
According to the Boston Consulting Group, the electronics sector is responsible for about 3 percent of global emissions. It is ranked fifth of eight industries that combined account for 50% of all global emissions. About two-thirds of the electronics industry’s CO2 footprint comes from mining metals and transportation, which are Scope 3 emissions. The remainder is from the industry’s Scope 1 and 2 emissions from operations.
Source: Boston Consulting Group
Mined metals used in electronics components and products include aluminum, copper, lead, lithium and gold. Rare earth metals are a growing segment of mined metals essential for cell phones, computer memory, consumer electronics, rechargeable batteries, catalytic converters, magnets, and wind turbines. They include lanthanum, cerium, neodymium, samarium, europium, terbium, and dysprosium.
As power generation shifts from fossil fuels to wind and solar, the demand for electronic products grows, and electric vehicles replace internal combustion vehicles, the growth in demand for lithium, cobalt, copper, and rare earth minerals will accelerate. For example, the International Energy Agency (IEA) estimates demand for lithium will increase by as much as 40 times by 2040, while the market for graphite, cobalt and nickel will increase by around 20-25 times.
The geopolitics of climate change
Globally, this is good news for the environment. However, the playing field that pits nation against nation is far from level. According to IEA, China processes 50 percent to 70 percent of the world’s lithium and cobalt and as much as 90 percent of rare earth metals. As a result, when China cut exports in 2010, rare earth prices skyrocketed. In the last few years, the US has increased production of rare earth metals but still lags far behind China.
Source: USGS Fact Sheet 087-02USGS Publications Repository, USGS.gov
What’s more, China is actively scoping out new metal mining opportunities around the world. Two recent examples are Afghanistan and the Democratic Republic of Congo.
- Afghanistan: The U.S. Defense Department recently released a 2010 study that claimed Afghan deposits of copper, rare earth metals, lithium, and various other minerals could be worth more than $1 trillion, according to FP. According to the Global Times, since the US withdrew from Afghanistan, at least 20 Chinese state-owned and private companies have made inquiries about visiting the country. In November 2021, representatives from five Chinese mining companies conducted on-site inspections of potential lithium projects in Afghanistan.
- However, despite China’s growing interest, there are major risks for any Afghan mining project in the near term, given the political uncertainty. Consequently, China’s exploitation of Afghanistan’s mineral wealth will likely be on hold until conditions improve.
Democratic Republic of Congo
- The DRC is the Saudi Arabia of the mineral world. It produces two-thirds of the world’s cobalt, and as of 2020, Chinese companies own or have financed 15 of the 19 cobalt mines there, according to the New York Times.
- Under the former Congolese president, Joseph Kabila, China built a productive relationship that expanded its mining footprint. In 2016, Kabila refused to step down following the end of his term. Shortly after, China Molybdenum acquired a majority stake in Tenke Fungurume, one of the country’s largest copper and cobalt mines previously owned by Arizona-based Freeport-McMoRan. In 2020, the same Chinese firm acquired another cobalt reserve from Freeport-McMoRan. This marked the end of any significant US mining presence in cobalt in the DRC.
As geopolitical tensions intensify between the U.S. and China, the competition for minerals for electronics, automobiles, and power generation will likely intensify.
The global lithium-ion battery market is projected to grow at a compounded annual growth rate of 12.3 percent, from $41.1 billion in 2021 to $116.6 billion in 2030. If China maintains its competitive advantage and geopolitical tensions between the U.S. and China continue to intensify, it will mean problems for the U.S. and a less-than-sustainable future for the planet.
