In the wake of the Russian invasion of Ukraine and amid heightened tensions with China, the United States and its key partners are making a concerted effort to diversify and friendshore clean energy supply chains, relocating them to countries with shared interests or values. G7 countries are focusing especially on the critical minerals that are needed for renewable electricity production and batteries.
In June 2022, the United States and its G7 partners launched the Partnership for Global Infrastructure and Investment (PGII) to build clean energy supply chains. They also signed the Minerals Security Partnership to produce, process, and recycle critical minerals. Subsequently at Davos, in January 2023, European Commission President Ursula von der Leyen announced that a key pillar of the EU’s new industrial strategy will be global partnerships to access inputs needed for industry. This builds on existing EU initiatives, such as the European Battery Alliance and the Critical Raw Materials Act, which both aim to onshore and secure supply chains.
These initiatives mark the emergence of a phenomenon we call “joint industrial policy:” when states coordinate their industrial strategies at the international level and build supply chains collaboratively. Joint industrial policy entails states working together to secure supplies of needed technologies and create markets in support of net-zero industries in their home countries.
The push for collaborative strategies for critical minerals raises important questions: how much critical minerals could the United States and its partners produce, and where should they focus efforts to diversify and rebalance clean energy supply chains?
In a new study of these issues, the Net Zero Industrial Policy Lab at Johns Hopkins University finds that partnerships among democratic states would be able to produce enough minerals to enable the world to limit warming to 1.5 degrees Celsius, the more ambitious target in the Paris Agreement. However, producing enough metals to meet these targets would require extraordinary technological and financial cooperation.
Examining Critical Mineral Reserves in Democratic Countries
This study begins by estimating the amount of various critical minerals needed for solar, wind, and electric vehicle (EV) battery supply chains. These minerals include the copper used in electrical wiring, the nickel and lithium used in many batteries, and the zinc used in protective coatings for solar panels and wind turbines. Demand was indexed to deployment levels in 1.5-degree-Celsius scenarios by the International Renewable Energy Agency (IRENA) and the International Energy Agency (IEA).
The study then compares the estimated need to the mining reserves of various groups of countries. Table 1 and table 2 look at what a proposed democratic friendshoring partnership could produce. Table 1 compares the minerals needed to the mining reserves of all democratic countries, as classified by the Varieties of Democracy (V-Dem) Institute’s Liberal Democracy Index.1 This group has ample reserves to meet 2030 targets in all but one metal: tellurium, which is a key input for innovative American solar panels.
However, table 2 shows that shortfalls in graphite, silver, and tin emerge when dropping countries coded as fragile democracies2—including Argentina, Brazil, Bolivia, Indonesia, Mexico, Poland, and South Africa, which all have large reserves. Graphite is a major component of lithium-ion batteries, silver is an important resource for solar photovoltaic cells, and tin is used in solder to create electrical connections.
Although there appears to be ample nickel in both democratic groups, this is misleading because nickel is also needed in the steel sector, so thin reserves will create a global squeeze. Moreover, Indonesia maintains an export ban on raw nickel, and Chinese companies dominate processing in the Southeast Asian nation. As table 2 shows, dropping Indonesia, and therefore conceding the production of nickel to Chinese supply chains, would create a major liability.
This liability emerges despite the fact that the Johns Hopkins Net Zero industrial Policy Lab’s model reduces nickel-rich batteries to 50 percent of world battery supply, with the world relying on iron-phosphate batteries for the other 50 percent. Further action to reduce reliance on nickel, such as prioritizing hydrogen fuel cells for long distance trucking, may be required. Table 2 also suggests that nickel projects in friendly countries and a processing project inside Indonesia should be urgent priorities for the U.S.-led global partnerships.
Table 3 focuses on U.S. free trade partners, which are favored by the U.S. Inflation Reduction Act of 2022 (IRA). More shortfalls emerge in this scenario for cobalt, chromium, and selenium.
From Reserves to Production
Reserves data doesn’t tell the whole story. Reserves include only measured and indicated deposits that have been deemed economically viable. Many countries have large mineral resources not currently considered to be reserves. These resources may become economically viable in the future, at which point they would be converted into reserves. Moreover, new discoveries can create new reserves. With these additions, the pattern has tended to be that reserve levels stay stable over time despite ongoing extraction.
We need to look at mineral production to examine what can be realistically achieved by 2030. Table 4 compares current and projected annual production numbers. Production here includes only the extraction of the minerals; it does not include processing capacity, where China leads the world.
To project 2030 production, we chose an ambitious growth curve based on the increase in mining during the last commodity supercycle (1995–2010), when rising Chinese demand drove a major expansion in mining. At the peak of the boom, annual growth reached 6.5 percent. Table 4 scales production using the same growth curve.
In table 4, the demand column focuses on the demand of democratic countries, estimated at 54 percent of global demand.
To assess which metals are likely to be supply-constrained, we analyzed democratic countries’ projected demand for critical minerals in 2030 as a percentage of production in 2021 and projected production in 2030. High percentages mean that major increases in production capacity are needed.
Demand as a percentage of 2021 production (the fifth column of table 4) presents the scale of the challenge. On this indicator, anything over 25–30 percent is cause for concern. If 2030 demand requires supply chains 2,500 percent of the current size, as is the case of graphite, then a massive build-out is required.
The last column of the table can be read as the shortfall that would remain after a major build-out of the mining sector in democratic countries. It shows the demand for clean energy supply chains as a percentage of the additional capacity produced by a hypothetical supercycle mining boom. Assuming existing production is needed for other parts of the economy, most of what will be available for clean energy supply chains will be in the additional volumes created by a mining boom. Here, any number over 100 percent represents a shortfall.
In brief, this production-focused analysis presents the same list of trouble minerals as the reserve analysis: cobalt, graphite, lithium, nickel, silver, tellurium, and tin. Even after a projected boom, significant shortfalls remain in these metals. Copper shortfalls are also likely, as production may struggle to ramp up despite ample reserves.
The scale of the challenge is incredible. Even aggressive growth in the mining sector would leave democratic countries drastically short on critical minerals supply. Thus, while all democratic countries could achieve critical minerals independence in most areas based on reserves, increasing production to achieve clean energy targets for 2030 would require unprecedented action.
China’s ability to restrict the export of solar inputs and critical minerals demonstrates that crucial clean energy technologies and inputs could become unavailable to the G7 and its allies. At the same time, excluding China from supply critical minerals is simply not possible in the short term. Therefore, a clear and coherent strategy for focusing and aligning joint industrial policies among the United States and its partners is needed.
Conclusions
The cautiously optimistic conclusion of this study is that, given existing reserves, it is possible for the United States and its key partners to significantly friendshore production. However, given current production in democratic countries, it would require an unprecedented build-out of the mining industry to achieve 2030 clean energy targets.
The implication is that critical minerals development must follow the ethos that led the development of COVID-19 vaccines: the United States and its partners must work faster than ever thought possible. This would require an extremely focused and targeted approach—nothing less than a highly coordinated joint industrial strategy. However, the ability to achieve the necessary build-out of the mining industry is subject to significant financial, social, environmental, and political risks. For example, major protests and legal challenges designed to halt mining development could serve as a hard brake.
This study could be used to underpin joint industrial policy by identifying priorities for initiatives such as the PGII and the Minerals Security Partnership. First, it could be used to set focused targets for U.S. diplomatic and economic efforts. Since the build-out of these supply chains needs to happen so rapidly, a targeted, strategic approach is necessary.
Second, the study highlights linchpin countries that should be engaged to ensure they remain U.S. partners or remain nonaligned. Indonesia (which has large reserves of nickel and tin), Peru (silver), Brazil (graphite), and Türkiye (graphite and chromium) are all critical. These countries already partner with the United States and other democracies on security and economic challenges, and the United States should double down on these partnerships. The key will be making sure that the governments of these countries see value for themselves in being part of a resilient supply-chain partnership.
Third, the study has implications for the coordination of domestic industrial strategies, highlighting potential technology choices. As noted above, for example, nickel demand can be reduced in a variety of ways, including by incentivizing hydrogen use for some road applications or decreasing demand for EVs. Graphite has potential substitutions such as silicon, and targets could be adjusted accordingly. More ambitious policy proposals, such as drastically reducing car usage and sales, would also reduce the need for battery metals and potentially lower demand for solar panels and turbines through reduced electricity demand.
Finally, this analysis has a number of limitations. The most important is that it looks at reserves and not resources and that it scales only at historically observable rates. Both of these assumptions could be varied in future work.
Notes
1 For wind and solar, this study used IRENA’s 2021 deployment targets for their 1.5-degree-Celsius scenario. For EV batteries, this study used IEA’s net-zero scenario vehicle number times an average pack size of 80GWh.
2 Countries coded in the V-Dem dataset as ED or ED- were classified as “fragile democracies” in this study.
