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Student reporter Cleo Carney spent the past two summers working at an investment firm focused on the minerals that are playing a role in a clean energy transition. She came away convinced that this industry holds the key to our future —and that few of us understand that.
Mining is going to save the world. That may not be the statement you expect to see in an environment-focused publication, but it is one that I believe the West needs to wake up to.
When you think about it, mining very literally made the world we live in now by providing the raw materials for almost everything we have. Ergo, if we want to not just reshape, but fundamentally overhaul, modern society to mitigate the effects of the climate crisis we need aptly-named critical minerals and metals to facilitate this. Yet most of the G7 countries only invested pocket change into this field — dribs and drabs that add up to less than a billion U.S., compared to China’s billions. According to CNBC, China currently produces 60% of the world’s rare earth minerals and materials, investing US$19.4 billion in metals and mining in 2023 alone. The West’s myopic attitude has steered us into the undeniable disaster of the climate crisis (although many still deny its existence). Without a rapid increase in investment, we will be left scrabbling to get out of this crisis, only to discover we do not possess the physical (in terms of infrastructure) or geopolitical power to do so.
The past two summers I have interned at an investment firm called TechMet. Headquartered in Ireland, it is 15% owned by the U.S. government. TechMet focuses on the strategic mining of the critical minerals and metals needed for the energy transition. With a value of over $1 billion U.S., the company is at the forefront of the China-free investment focus in the mining sector. After working at TechMet and attending the London 2024 Indaba Mining Conference — where I gained valuable insights into the future of mining from executives of coal companies, such as Exxaro, and the Head of the London Stock Exchange — I felt compelled to write a piece about this underinvested-in sector in order to spread awareness about what I believe is one of the greatest and most pressing investment areas in modern history.
So what are the critical minerals and metals?
Lithium-ion batteries power everything from your laptop to an electric car or electrical energy storage system. They are a crucial tool to facilitate the energy transition: a World Economic Forum report on the sustainable battery chain in 2030 found that, directly and indirectly, the use of batteries in transport and power sectors in 2019 resulted in emission reductions of 2.6 Gigatonnes of CO2 equivalent. This is a sizable decrease — the 2.6 Gigatonnes value is roughly equivalent to Japan’s total emissions that year.
But batteries cannot function without lithium, nickel, copper, cobalt, manganese, graphite, and rare earth elements (such as yttrium and the 15 lanthanide elements). As the world weans off oil and natural gas to renewable electric sources of energy, we will need more capacity to store that clean energy. The global demand for batteries is anticipated to increase from 185 Gigawatt hours (GWh) in 2020 to more than 2,000 GWh by 2030 (and that's before factoring in the explosive demand coming from AI — more on that below). A 2022 McKinsey Battery Insights analysis predicts that the lithium-ion battery value chain will likely increase between 2022 and 2030 by greater than 30% annually, eventually amassing over a US$400 billion valuation and a market size of 4.7 Terawatt hours (4700 GWh). For reference, this market size was 700 GWh in 2022. This projection is for the entire lithium-ion battery chain, from mining to recycling.
For another illustration of the size of the expanding market for batteries, let's compare it with the current boom in AI’s market size. Statistica reports the worldwide AI market size will exhibit an annual growth rate of 28.46% between 2024 and 2030. This rapid expansion of AI follows an almost identical growth pattern as the battery and mining industry’s market growth.
There is an intersection between AI and mining growth: Materials Nexus is a British company that is utilizing an AI tool to find alternatives to the critical metals needed for the energy transition. While this is a promising area of crossover, the need for the original critical minerals and metals is not disappearing — quite the opposite: according to a White House press briefing, “as the world transitions to a clean energy economy, global demand for these critical minerals is set to skyrocket by 400 to 600% over the next several decades,” with demand for the primary components of EV batteries (such as lithium and graphite) expected to increase “as much as 4,000%.” Furthermore, the use of AI is vastly increasing our energy consumption levels: Goldman Sachs estimates that data center power demand will increase as much as 160% by 2030. Tech company Microsoft made a deal last month to reopen a shuttered nuclear reactor at Three-Mile Island to fill the need.
How much do we really need?
According to the UN Secretary-General’s Panel on Critical Energy Transition Minerals, “demand for critical minerals is set to grow by three and a half times by 2030.” (You can take a closer look at demand for the different minerals and anticipated suppliers in this International Energy Agency Global Critical Minerals Outlook 2024 report.) This is a seismic shift. In order to align with the 2016 Paris Accord’s targets, the United Nations Environment Programme (UNEP) estimates that over 3 billion tonnes of energy transition minerals and metals are required by 2050 to facilitate the necessary wind, solar, and energy storage.
Prices for these metals and minerals have gone up significantly due to supply chains vulnerable to geopolitical issues and natural disasters, soaring demand, and underinvested production sites. Between January 2021 and March 2022, aluminum prices increased by 76%, lithium increased by 738%, and cobalt by 156%.
While increased prices cause problems by limiting access to the metals and driving up prices of derivative goods (such as electric cars), rapid price drops can also have a negative impact on the sector by scaring off much-needed investors. In early summer 2024, there was significant concern about decreasing nickel prices, which resulted in decreased investment in nickel mining; in 2023, the average annual price of nickel dropped by 15.3%. Since Indonesia banned the export of nickel ore in 2020, China has invested US$30 billion in cheap, environmentally degrading nickel mines and smelters in Indonesia (according to the World Energy Outlook Special report); Indonesia now possesses a 55% share of the world’s nickel market. Consequently, nickel markets were flooded with cheap nickel, putting downward pressure on the equilibrium price. Chinese EV manufacturers have capitalized on this, using lower nickel prices to further decrease EV car prices, increasing accessibility and demand in China. Some Chinese carmakers, including Xiaomi Corp., Li Auto Inc., and the Zhejiang Geely Holding Group Co., have begun implementing medium-nickel, high-voltage batteries in their new models. This is expected to decrease costs for automakers by as much as 10%.
Demand for the primary components of EV batteries (such as lithium and graphite) is expected to increase “as much as 4,000 percent,” according to the White House.
Yet the drop in price had ramifications for other nickel producing nations such as Australia, which is the fifth largest producer of nickel (it produced 158,100 tonnes in 2023) and which possesses the world’s second-largest nickel reserves. In response to the plummeting prices, Australian nickel and lithium producer, IGO, cut jobs and pivoted away from extraction to focus on improving lithium hydroxide production, a cheaper production stream. IGO’s pivot from nickel is a prime example of the global West’s shortsightedness when it comes to critical minerals and metals: we need far more nickel investment, not less — especially if nickel is the key to cheaper EVs.
Challenges
It should be noted, however, that mining these critical energy transition minerals and metals is accompanied by a myriad of considerations. Mines have a long history of devastating biodiversity, harming the health of local communities, and engaging in dangerous and illegal practices. At the same time, mines have also brought life and employment to rural communities, as well as fueled the technology our society depends on. Without mining you could not be reading this article.
Part of the investment struggle mines face is that they do not easily fall under the category of investment strategies that create beneficial social and environmental effects as well as financial gains, known as ‘impact investments’. While these investments may have significant impact on the shape of the world (literally), many investors avoid the historically taboo mining sector for fear of ‘dirtying’ their portfolio with risky investments (which face volatility in the West due to the regulatory challenges and comparatively low governmental support). In a world that is increasingly focused on appearances, the future of humanity is being undermined (pun intended) by short-sightedness and superficiality.
Furthermore, there is often a trade-off between environmental and social causes when constructing a mine. Some mines rely more heavily on manual-labor focused mining tactics. This decreases the need for heavy machinery and thus the carbon footprint of these projects. Yet, these practices typically increase hazards for workers.
Where do we go from here?
Overall, the rapid expansion of critical minerals and metals mines is crucial for the clean energy transition. In particular, Western countries urgently need to invest significantly in this sector in order to prevent China from dominating the supply of critical minerals and batteries. As the human population continues to grow, the future will increasingly become a battle for resources. If the West does not want to be beholden to China they need to open their checkbooks and start investing to secure the metals and minerals of the future. But in our inevitable scramble for these resources, we must demand that companies extract in a way that aligns with the end goal of said extraction: a clean, green, and sustainable future. If our mining practices spoil the environment in the hope of acquiring the resources to save the environment, we risk prolonging the cycle of short-sightedness that dragged us into peril in the first place.
Watch as Cleo talks climate finance with her dad, Mark Carney, who is the UN Special Envoy on Climate Action and Finance, and the former head of the Bank of Canada and the Bank of England.
