The energy transition is creating a whole new demand for minerals and mining. That familiar term “Big Oil” will be joined by “Big Shovels” But can the demand be met? The answers will depend not only on what happens in terms of mining but also geopolitics.
The IMF recently warned that the pursuit of net-zero emissions by 2050 will “spur unprecedented demand for some of the most crucial minerals,” leading to “soaring costs” that could “derail or delay the energy transition.” The rising crescendo of alarm is justified: “crucial minerals” loom as the main bottleneck to decarbonization.
Will a shortage of minerals short-circuit the clean-energy transition? National governments – including the United States, Japan, Britain, and Canada – the European Union, and international organizations such as the World Bank, the International Monetary Fund, and the International Energy Agency are raising the alarm. As the IMF puts it, the pursuit of net-zero emissions by 2050 will “spur unprecedented demand for some of the most crucial metals,” leading to “soaring costs” that could “derail or delay the energy transition itself.”
Demand for the required minerals is already increasing dramatically, and the IEA’s net-zero 2050 scenario projects that it will more than triple just over the next seven years. That could be an understatement. The proliferation of government programs aimed at accelerating the energy transition will further increase demand. S&P Global’s own recent analysis finds that America’s massive Inflation Reduction Act (IRA) will add significantly to the already high projections.
The race is heating up to secure supplies and build new supply chains. GM has invested $650 million in a lithium project in Nevada to address the lack of an “established value chain that will support our ambitions for the next ten years.” Ford has a stake in a $4.5 billion nickel-processing plant in Indonesia. Volkswagen and Stellantis are helping to form a new mining company to extract copper and nickel in Brazil.
Government net-zero policies are incentivizing the production of electric vehicles that require 2.5-3 more copper than a traditional car, on average. Battery storage, offshore and onshore wind systems, and solar panels also require large amounts of copper. To estimate how much additional copper will be needed to meet this new demand, S&P Global started with the US and the EU’s 2050 climate goals and then assessed the technologies that would be required to meet them. The conclusion was stark: copper supply will have to double by the second half of the 2030s.
Project Syndicate, Daniel Yergin, vice chairman of S&P Global, is the author of “The New Map: Energy, Climate, and the Clash of Nations.”