Today the global energy system is in the midst of a major transition to clean energy. This calls for the massive deployment of a wide range of clean energy technologies—wind turbines and solar panels to electric vehicles and battery storage—many of which in turn rely on critical raw materials (CRMs).
Estimates suggest that to achieve a net zero transition by 2050, the global demand for CRMs is expected to increase by up to six times by 2040. It becomes necessary to foster stable supplies of these materials to support accelerated the clean energy transitions. For countries such as India that are dependent on the import of CRMs, this is an issue of immense significance because the variability of CRMs can impact the country’s energy security.
Critical Raw Materials are deemed ‘critical’ because of their growing economic importance and high risk of supply shortage. Lithium, nickel, cobalt, manganese and graphite are crucial to the EV sector for battery performance and longevity. Rare earth elements are essential as raw materials for the manufacturing of permanent magnets that are vital for wind turbines and EV motors. Electricity networks need a huge amount of copper and aluminium, with copper being a cornerstone for all electricity-related technologies. The demand for CRMs is growing fast as governments and companies seek to achieve net zero emissions.
CRMs have been in the spotlight as the impacts of climate change become more severe. The availability of CRMs affects the transition from a fossil-based energy system to one based on clean energy, necessary to cope with climate change. The global energy sector has remarkably shifted during the last decade and has strengthened decarbonisation efforts in context of the Paris Agreement. A growing number of countries has adopted net zero pledges. Climate policies and decarbonization pathways must integrate CRM considerations and availability in the scale-up of clean energy technologies in order to tackle climate change more effectively.
The need for CRMs to fuel clean energy transitions raises its own set of sustainability challenges. One area of notable concern is their supply and availability. The various critical materials that are needed to contribute significantly to the energy transition are often geographically concentrated in few regions of the world. In addition, the capacity to process CRMs varies from country to country. The availability of certain raw materials may even need to be scaled up within a relatively short time to prevent shortages and keep new-technology costs competitive.
Alongside supply concerns, there are significant concerns associated with the environmental, social and governance (ESG) impacts of mining projects. Transparent ESG performance is required to promote sustainability-oriented process. Further, the production, development and use of CRMs in clean energy technologies will require a substantial amount of finance. With the increasing demand for CRMs, new financial instruments must be developed to enable price stabilisation and mitigate price and supply risks.