China’s role in supplying critical minerals for the global energy transition: What could the future hold?

Rodrigo Castillo and Caitlin Purdy

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The world faces major challenges in responsibly sourcing large quantities of minerals that are critical for the transition to low-carbon energy sources. Consumption of these critical minerals—most notably nickel, copper, lithium, and cobalt—is projected to rise, largely driven by their use in the renewable energy sector. Demand is expected to quadruple by 2040 under the International Energy Agency’s Sustainable Development Scenario, in which global action would limit the global temperature rise to well below 2°C, and it is projected to rise by six times under a net-zero scenario.[1] Many governments, including the United States, European Union members, and China, seem to share the goal of increasing the supply and rate of production of the raw materials needed for the energy transition to address the challenge of global climate change. However, meeting this demand will be difficult—and producing these minerals in strict adherence to robust environmental, social, and governance criteria will be even more so.

China is the dominant player in global mineral processing. This report analyzes how its strategic position in regard to critical minerals may evolve, to shed light on current and emerging challenges for the energy transition, given the country’s high level of engagement in global mineral supply chains.

Two major factors are likely to influence dynamics around responsible sourcing of critical minerals for the energy transition. This first factor is China’s level of dominance across critical minerals supply chains. There is growing concern that a high level of dependence on China for these minerals and their derivative products may create energy security risks.[2,3] Other governments, notably in the U.S. and Europe, have moved to build out their own critical minerals supply chains, creating uncertainty about whether China will maintain its dominant position. The second factor is the level of enforcement of due diligence requirements in China’s mineral sector and midstream and downstream industries (e.g., refiners or original equipment manufacturers) to make these supply chains “cleaner” and “greener.” Comprehensive, globally aligned due diligence requirements are needed to ensure that the sourcing of minerals needed for the energy transition does not cause or contribute to adverse social and environmental impacts. These two factors will likely shape the future of critical minerals supply chains.