“All animals are equal, but some animals are more equal than others.”- George Orwell
Energy security concerns are going through a paradigm shift. While the key questions such as securing assured sources of supply and managing price volatilities have remained the same, the focus has shifted from fossil fuel resources to critical minerals. As countries around the world traverse along low carbon pathways in a bid to achieve net-zero outcomes, concerns regarding securing critical minerals are increasingly coming to the fore.
Many countries around the world have critical mineral strategies that help them maintain the resiliency of energy supply chains and address strategic vulnerability aspects. While countries differ in how they define critical minerals, two broad ideas remain the same i.e. economic importance of said mineral (how much do they contribute to manufacturing, the existence of substitutes, etc.) and its supply risk (import dependency, geopolitical risk in supplier countries, etc.). There has been some interesting work done for India as well. A study done by CEEW assesses the relative importance of 49 minerals for the Indian manufacturing sector till 2030 and finds that 13 among them fall in the category of ‘most critical’. Building on and improving this framework, a study done by CSEP looked at critical minerals and their needs for green technologies in India. They assessed the criticality of 23 non-fuel minerals in the country and found that India lacks reserves of nickel, cobalt, molybdenum, rare earths, neodymium, and indium which are key for battery storage, solar and wind energy technologies. Additionally, the availability of certain base metals such as copper and precious metals such as silver are lower than India’s needs in the future. Bereft of a critical minerals strategy, the country may find it difficult to secure the requisite minerals it needs for its industries.
To ameliorate these concerns both studies suggest some steps. However, the neatest framework of approaches that could significantly help are provided by a study done by the Takshashila Institution. While the study only looked at devising a rare earths strategy, the recommendations were logically grouped into three separate bins – (a) Mineral first – that looked at economies of production processes as far as upstream extraction and processing facilities were concerned, (b) Demand first-strategies to make downstream processes more efficient and competitive and also nurturing towards businesses, and (c) Geostrategy First- to position India as a major supplier of processed rare earths globally. While the last strategy as is spelled out in the aforementioned report has limited relevance given India’s lack of reserves in many of the needed critical minerals. If the last point is instead re-casted in the form of strategies for improving assurance of supply through geopolitical ties with key supplying nations, equity ownership of mines abroad, etc.; the entire framework could be used to develop a critical minerals strategy/policy for India.
One must acknowledge at this juncture that many of these strategies are not new. They are evocative of conventional wisdom of the fossil fuel era that opined on much of the same – improve mineral extraction policy, make downstream Oil Marketing Companies (OMCs) more competitive, and have a geopolitical strategy in place for OPEC nations. As is clear, there are certainly two key points of departure from the earlier thinking process. Firstly, no country is arguing for maintaining strategic reserves for critical minerals for domestic security (at least till now!), and secondly as many current supplier countries have not been able to organize themselves as a coherent sellers’ bloc (like OPEC), most of the strategic ties are bilateral.
A recent report by IEA on critical minerals, arguably one of the most authoritative resource on this subject, talks about how the energy sector is emerging as a major demand force in mineral markets. Minerals such as Lithium that had limited demand till very recently coming primarily from consumer electronics, etc. have found an increasing number of takers in the EV and battery storage industry. Their bottom-up assessments suggest a quadrupling of mineral requirements for clean energy technologies by 2040. This seemingly formidable demand would unquestionably lead to fears of supply chain vulnerabilities, price risks and rises in energy investment costs. Despite these dire warnings of possible resource crunches that the world would face in the future (aka Cassandra’s dilemma), the report noted that investments in mineral supplies are not keeping pace. Due to weak policy signals, businesses would continue to make investment decisions based on much more conservative expectations of resource availability.
The last point needs to be mulled over at length. Much is already happening on the policy as well as implementation front, however, this needs to be further bolstered by key strategies for investments in assuring mineral supplies. Four related, but critical points, need to be kept in mind:
- Energy technologies are not a static construct. While current technologies may need certain types of critical minerals, it should be possible to diversify away from them through technological breakthroughs. Countries, therefore, need to invest in research and development facilities that come up with technologies using their readily-available indigenous natural resources.
- The transition will take time and cold turkey turn-offs of conventional fuel supply systems are not a possible answer, even if we want to. Therefore, for orderly energy transitions countries need to use this time fruitfully in developing their manufacturing capacities that suit their endowments and implementing their critical mineral strategies.
- At the outset it would feel that India is facing a double whammy – not only has it announced ambitious net-zero emission targets but it also aims at doing this through domestic manufacturing capabilities. This makes the question of securing resources even more of a national imperative.
- There are many more dimensions of the discourse (social and environmental dimensions) that were not present in the discussion thus far. Sustainable supply chains are the buzzwords these days and it is important to underline that sourcing needs to occur through ethical and environmentally benign routes. Urban mining or material recycling has therefore emerged as an attractive option for securing mineral resources.
As the need for action is global, G20 could emerge as a platform that could help in securing critical minerals supply. As has been witnessed historically, G20 emerged as a strong voice whenever there was a common global threat that needed an urgent solution – be it the global financial crisis, recovery post-COVID, and others. This strong unified voice could be used to pave the way in this case as well. It is understandable that as the member countries’ resource endowments and processing technologies differ, so do the identified critical minerals; but there are many ways it could help. For example, the G20 countries in the past came together for the JODI Oil, Gas, and Coal initiative that looked at making energy markets more transparent and prices less volatile. A similar idea in the case of key minerals could be experimented with as well.
Another idea could be sharing of cutting-edge technologies for mineral extracting and processing industries. The latter would not only improve production volumes but also keep the environmental and waste management concerns at bay. A related issue that could be taken up is material recycling and improving recovery rates of extracted critical materials. In fact, these two themes could be taken up as a priority area in subsequent G20 Presidencies.
(Views expressed are the author’s own and don’t necessarily reflect those of ICRIER.)
