Morgan D. Bazilian and Gregory Brew
After decades of foot-dragging in the United States, there is now momentum to tackle climate change. In August 2022, Congress passed the Inflation Reduction Act, a landmark piece of legislation that directs more than $1 trillion in subsidies and incentives toward clean energy production. This follows legislation such as the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, and the Infrastructure Investment and Jobs Act. All include investments in clean energy. Elsewhere, countries such as China, Japan, and Korea announced net-zero carbon emissions goals. The European Union, meanwhile, has been a leader on climate change for years, as evidenced most recently by the European Climate Law, which explicitly set out the goal to be carbon neutral by 2050.
This is welcome and overdue progress. But implementing plans to reduce greenhouse gas emissions could be stymied in part by a material obstacle: the procurement of critical minerals such as lithium, cobalt, nickel, and copper that are essential to clean energy systems. Several of these mineral and metal inputs now make up the bulk of the cost of electric vehicle (EV) batteries and copper is ubiquitous in the generation and transmission of electricity. All will be needed in large quantities, and demand is outpacing supply.
The way the United States seems intent on obtaining these minerals, however, is myopic. U.S. President Joe Biden’s foreign-policy priorities suggest that energy policy will be shaped by great-power competition, aiming to strengthen domestic U.S. energy output, improving energy security and resilience against disruptions such as Russia’s war on Ukraine, and making the United States less reliant on supply chains controlled by potential adversaries.
This approach is aimed squarely at the ongoing economic warfare with China. To win the energy battle of the twenty-first century, the United States must avoid repeating the policy mistakes of past eras and focus on increasing domestic production and advanced manufacturing at home, while establishing secure and resilient supply chains with allies—and even foes—abroad.
The Mining Gap
Shifting to a clean energy economy will require a decades-long investment in technologies such as solar, wind, geothermal, nuclear, and batteries. All this infrastructure will require massive quantities of critical minerals. According to the International Energy Agency, the world will require four times more critical minerals in 2040 than are currently mined, from roughly seven million tons to 28 million tons. By that point, energy transition needs will consume 40 percent of the world’s copper production, 60 to 70 percent of its nickel and cobalt production, and almost 90 percent of its lithium production. For lithium, demand is expected to be 13 times greater in 2040 than it was in 2020. Over the last 5,000 years, the human race has mined 700 million tons of copper. That is roughly as much as will be needed over the next 22 years to meet global energy transition targets.
This level of supply production does not yet exist. New mines will have to be dug, and processing and refining industrial complexes will need to be built—both exceedingly difficult to do with existing permitting rules. The existing facilities, moreover, are almost entirely outside of the United States. The production of critical minerals is concentrated in a handful of countries. Indonesia makes 30 percent of the world’s nickel, and the Democratic Republic of the Congo supplies 70 percent of the world’s cobalt. The processing of critical minerals and manufacturing of finished goods is overwhelmingly concentrated in China, which refines 59 percent of the world’s lithium and closer to 80 percent of the bulk of the other critical minerals, and holds more than three-quarters of the world’s advanced manufacturing capacity for electric vehicle batteries. The United States, by contrast, produces a relative pittance of most of these critical minerals and refines even less.
The United States faced an analogous quandary in the latter half of the twentieth century. In the 1970s, the domestic supply of oil failed to keep up with demand, forcing the United States to rely on oil imports. The Arab oil embargo of 1973–4 and the twin oil-price shocks of 1973 and 1979 revealed that reliance on overseas supplies could pose considerable security risks. In 1980, President Jimmy Carter committed the United States to securing Persian Gulf oil through military force: any threat to the region, he said, would be considered “an assault on the vital interests of the United States.” For 40 years, the Strait of Hormuz remained open and Persian Gulf oil flowed to economies in the West and East Asia, fueling an increase in global oil consumption from 60 million to 100 million barrels per day.
But the so-called Carter Doctrine was problematic because it ultimately entangled the United States with autocratic states such as Saudi Arabia that do not share U.S. security interests. Multiple military interventions, particularly the 2003 invasion of Iraq, cost trillions of dollars and further disrupted the Middle East’s fragile security.
The contest over critical minerals recalls the twentieth-century struggle for oil.
As the United States reconsiders its relationship with the Middle East petrostates, the contest over critical minerals has come to reflect the twentieth-century struggle for oil. The White House perceives the problems of climate change and energy security as bound up in the new reality of great-power competition, with China as the clear antagonist. The Biden administration’s 2022 National Security Strategy revealed as much, calling for the United States to be “clear-eyed” about tackling the challenges of “climate change . . . energy shortages, or inflation” within a “competitive international environment.”
The competition extends beyond the Indo-Pacific. In an effort to reduce U.S. dependence on foreign—specifically Chinese—clean energy supply chains, the Inflation Reduction Act offers subsidies to domestic industries that increase investment in energy transition production and manufacturing. At the COP27 climate conference in November, European leaders denounced the act as protectionist and argued that U.S. subsidies for its own domestic energy industries violated the terms of the World Trade Organization charter. EU leaders particularly take issue with a provision supporting EV battery manufacturing, as it would make European EVs less competitive in the U.S. market.
In sum, the United States will be navigating the clean energy transition amid heightened geopolitical competition. The Biden administration will have to develop a strategy to deal with potential adversaries such as China, hostile powers such as Russia, and allies such as Australia, Canada, and the European Union.
Trying Not to Repeat Past Mistakes
To accomplish this feat, Washington should avoid the counterproductive strategies of the oil era and adopt a varied approach combining domestic policy options with a flexible foreign policy. The goal should be to build a secure position for itself and its allies, reduce dependence on Chinese supplies, and recognize the competitive environment without resorting to brute force or nationalistic tendencies.
First, the United States should accelerate development of its own critical mineral resources. This process has already begun: the Department of Energy’s Loan Office, for example, has made several investments in clean energy companies focused on processing critical minerals. To meet current energy supply demands, the Biden administration could utilize the Defense Production Act (DPA), which Congress adopted in 1950 to ensure the availability of industrial resources during the Korean War. The DPA was used in the 1950s to enhance U.S. oil production and expand refinery capacity. It could play a similar role this decade to expand domestic supply chains, particularly for lithium mining and electric battery manufacturing. This process is already underway. In 2020, former U.S. President Donald Trump used the DPA to boost domestic production of rare earth minerals; more recently, Biden utilized it to increase production of minerals for EV and storage batteries. Biden could build on that precedent and authorize the rapid construction of new mines, refineries, and manufacturing centers.
To further expand mining capacity, the United States should streamline the permitting process for new mines. Currently, the process for making a new mine operational can take ten to 15 years. There is, furthermore, only one active lithium mine in the United States and some 17,000 prospecting claims, or permits to search for economically exploitable mineral deposits. A faster permitting process would allow domestic critical mineral capacity to increase quickly. Engaging with local communities and Native American tribes will be essential. The United States needs to consider a new institutional structure analogous to the former Bureau of Mines, which was dissolved in 1996, to help spearhead and monitor domestic production.
The United States should accelerate development of its own critical mineral resources.
Second, the United States should work with allies to develop supply chains for critical minerals. This includes bilateral agreements with critical mineral suppliers. The Biden administration is already taking steps in this direction: in December, U.S. Secretary of State Antony Blinken signed memorandums of understanding with officials from the Democratic Republic of the Congo and Zambia, two major cobalt producers, demonstrating the United States’ desire to import greater amounts of cobalt and other minerals for EV battery manufacturing. The United States should work through the Mineral Security Partnership—a new pact that comprises Australia, Canada, France, and the United States—to fund overseas mining operations through the Export-Import Bank.
Third, the United States and its allies should work to regulate critical minerals markets, which are prone to frequent bouts of volatility. In early 2022, an intense burst of speculation rocked the global nickel market, sending nickel prices soaring to over $100,000 per ton—roughly three times the price from a year before—before the London Metal Exchange was forced to suspend trading. The United States and its allies must work to bring critical minerals markets under control, allowing capital to meet demand and ensure price spikes do not disrupt the global energy transition.
To secure oil in the twentieth century, the United States relied on coercive force, destabilizing oil-producing regions and saddling itself with strategic, economic, and political burdens. The Biden administration must not go down that path again. Working to increase U.S. access to critical minerals both at home and abroad by building diverse, resilient, and secure supply chains would help safeguard the United States’ energy security while staving off the danger of climate change.
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