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Business Activities / Extractive industries

Opinion: Net zero could create more problems for humanity than it solves

Western leaders are pushing for net zero by 2050, but not enough thought is being given to where all the metals for the green transition will come from.

Electric vehicles are heralded as the key to a greener future, but little thought is given to the mining of the metals needed to manufacture EVs, nor how the electricity needed will be generated. (Photo by Sean Gallup/Getty Images)

In trying to solve one problem – climate change – the world is storing up future problems in myriad other ways, which political decision makers have been slow to acknowledge.

The UK, the US, the EU and Japan have all set the goal of achieving net zero by 2050. China and the US are the world’s two biggest carbon dioxide-emitting countries (China’s share of global emissions is 28% while the US’s is 15%). In September 2020, the Chinese president Xi Jinping said that China would peak its carbon emissions before 2030 and reach ‘carbon neutrality’ before 2060. US President Joe Biden has pledged to reduce US emissions by up to 52% by 2030 (he wants 50% of all new cars and lorries sold in the US to be powered by electric batteries by that year) and to attain net zero by 2050.

However, the so-called ‘green transition’ throws up a number of problems, which are being exacerbated by the ‘technology revolution’ taking place around the world. Rare earth metals – in particular neodymium and dysprosium – are critical components of the permanent magnets used in the motors of hybrid and electric vehicles (EVs) and in the generators of wind turbines. The bright colours of a smartphone display are produced by small amounts of rare earths. However, China dominates their whole supply chain. If we are not careful, the Western world’s ‘green revolution’ will make us even more dependent on China.

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In 2020, Chinese mines produced 140,000 metric tonnes (t) of rare earths, almost 60% of total global mining output, according to the US Geological Survey. In 2020, the country also produced 85% of the world’s rare earth refined products, according to Roskill. Approximately 70% of global production is consumed within the Chinese domestic market. Chinese production at both the mining and refined stages is controlled by quotas assigned to six state-owned enterprises, which are highly integrated throughout the rare earth supply chain. Another big issue with rare earth minerals is that the recycling rates are under 1% and some are not recycled at all. Although rare earth oxides production worldwide is only worth several billions of dollars, it is essential for industries that are worth trillions.  

The burgeoning global market for rechargeable batteries for EVs and consumer electronics is also driving a surge in the demand for cobalt – which normally comes as a by-product of nickel or copper mining – as batteries containing the metal have a high energy per unit mass compared with other electrical energy storage systems. Lithium cobalt oxide rechargeable batteries are mostly used in portable electronics while nickel cobalt manganese rechargeable batteries are mainly used in EVs. The monthly futures price of cobalt worldwide jumped from $41,200 per metric tonne (/t) in January 2021 to $49,600/t in June, reflecting the skyrocketing demand for the mineral.

Furthermore, the demand for cobalt is likely to jump even higher in the future, as more and more Westerners switch to EVs and purchase 5G smartphones, which require 25% more cobalt than 4G phones. By 2040, energy analysts estimate that more than half of all passenger vehicles sold worldwide could be electric. About 7,075t of raw cobalt is needed to produce 500,000 large-format EV batteries. In the UK alone, up to six ‘gigafactories’ are being developed that are expected to churn out up to one million EV batteries a year by the end of the decade.

In January 2021, BMI Research reported that globally up to 186 ‘megafactories’ – with a production capacity of more than 1GWh in battery cells a year – were expected to go live by 2030. This year, of the 142 'gigafactories' on the planet, 109 of them are located in China.

The ethical dilemma around cobalt production

However, cobalt production throws up a big ethical dilemma: the Democratic Republic of the Congo – consistently ranked as one of the world’s most corrupt countries – supplies 70% of the world’s cobalt. It is estimated that up to 200,000 artisanal miners in the country work with their bare hands and with shovels down mines of up to 30m in length to extract the ore. Campaigners say that many children are involved in the process. Moreover, today’s global cobalt supply chain is dominated by China: it owns up to 50% of the global production of this vital metal and controls about 80% of its worldwide refining. Again, the Western world's embrace of 'clean energy' and demand for new consumer electronics is making it more dependent on China and on a politically fragile country in Africa.

Furthermore, if batteries are to be made without cobalt, researchers will face an unintended consequence. The metal is the main factor that makes recycling batteries economical because other materials – especially lithium – are currently cheaper to mine than to recycle. In fact, lithium is the other metal that is key to the green and technology revolutions under way globally. Some 65% of the lithium produced in the world is used in rechargeable batteries for portable electronic devices and increasingly for electric tools, EVs and grid storage applications.

Strong demand for home computers, tablets and games consoles during Covid-19-related lockdowns throughout the world in 2020 helped consumer electronics trade revenues reach $358.5bn globally – a jump of 7% over 2019 – according to Strategy Analytics, a technology consultancy. Shipments of home computers and tablets surged by 11% to 396 million units worldwide in 2020, while revenues ascended by 17% to $199bn, as millions of people needed new devices for working and learning from home. Games console revenues jumped by 18% to $11.9bn, driven by the launch of new consoles as well as lockdowns. The global weighted average lithium carbonate price jumped to $12,958 in July this year from $6,125 in December 2020 on the back of all that battery demand.

The rise in lithium mining carries its own environmental concerns: current forms of extraction require copious amounts of energy (for lithium extracted from rock) or water (for extraction from brines). Modern techniques being developed in Germany and the UK that extract lithium from geothermal water – using geothermal energy to drive the process – are considered more benign; however, these techniques are not yet cost-effective.

Demand for metals could jump tenfold

The World Bank’s 2017 report entitled 'The Growing Role of Minerals and Metals for a Low-Carbon Future' shows demand for metals – including copper – could rise tenfold by 2050 if the world moves towards a low-carbon energy future. According to the International Energy Agency (IEA), mineral demand for use in EV and battery storage will jump at least 30 times by 2040 if climate goals are to be met. Similarly, the rise of low-carbon power generation to meet climate goals means a tripling of mineral demand from this sector by 2040.

In trying to solve climate change, we must be careful not to turn the world into one giant quarry or wind farm.

The IEA declared in May 2021 that we are witnessing a massive industrial conversion that marks a "shift from a fuel-intensive to a material-intensive energy system". That has profound implications for the kind of planet that we are going to live on, but is not something that policymakers, scientists and businesspeople are thinking enough about. In trying to solve climate change, we must be careful not to turn the world into one giant quarry or wind farm. Neither are particularly pleasing on the eye.

Many powerful vested interests are forming around the emerging industries of the future (the scientific community, the renewables, recycling and EV industries, mining, Big Tech and space, to name a few) and many fortunes will be made from the so-called 'green industrial revolution'. A potent form of groupthink has developed, insisting 'this is progress and the way the world must proceed'. However, people must be careful not to delude themselves about what kind of planet they will be living on. There is a lot of self-righteous fury in the Western world about climate change and an almost ideological zeal for net zero but not enough thought is being given to the implications of the 'green transition'. Let's not kid ourselves that people are pushing these emerging industries for purely altruistic reasons.

Already global demand for iron, for example, is about 2.15 billion metric tonnes per year (98% is used in steel production), an astonishing figure when you start to think about it. Copper is 25 million tonnes a year and we will need a whack-load more of it to shore up our electrical grids because of those millions of EVs about to come onto our roads. The average EV requires 30kWh to travel 160km – the same amount of electricity an average American home uses each day to run appliances, computers, lights, heating and air conditioning. A US Department of Energy study found that increased electrification across all sectors of the economy could boost national electricity consumption by as much as 38% by 2050, in large part because of EVs. Already the US consumes a lot of energy – in 2020, about 100 quadrillion BTUs (the equivalent of 17 billion barrels of oil).

Where will all the electricity come from for all those EVs? Where will all the rare earth metals, cobalt and lithium come from? How about all the copper that will be needed for the improved electrical grids?

Africans are not concerned about net zero

Moreover, there is likely to be a growing cultural tension between the Western world and Africa. Africa's population is expected to double to 2.5 billion people by 2050. Currently, the continent accounts for only about 4% of global greenhouse gas emissions but that is expected to shoot up as the region industrialises. There is no way that Africa can move towards net zero, and in fact many Africans are not especially concerned about it. They want any car even if it is a diesel one and they want to be able to fly internationally even if it is on a budget airline. They want electricity even if it is produced from coal. Will Westerners deny them these luxuries (or in the case of electricity, necessities), something that they themselves have taken for granted for decades? That could create a massive cultural tension.

There is no way that Africa can move towards net zero and in fact many Africans are not especially concerned about it. They want any car even if it is a diesel one and they want to be able to fly internationally even if it is on a budget airline.

Something needs to be done about climate change. There is no escaping that fact. However, decision makers need to think more strategically and act more carefully. The green energy and technology revolutions are making the West more dependent on China, an autocracy. That one country now produces most of the world’s aluminium, bismuth, gallium, germanium, magnesium, rare earth elements, scandium, tin, tungsten and vanadium – all of which are considered critical minerals by the US. China could hold the West to ransom in the future if it is not vigilant.

The transition to net zero should be managed more cautiously and should start with closing down all coalfields first and replacing coal with natural gas, the cleanest fossil fuel. The natural gas must be produced in the West or by friendly countries, otherwise it will become too dependent on Russia if it is not on its guard. This would give the West time to develop greener decarbonised technologies such as nuclear fusion, modern fission plants and green hydrogen that can deliver energy at the scale required to replace fossil fuels. During the next decade, decision makers should be putting more emphasis on hybrid vehicles too instead of pushing people directly to EVs.

An ideological approach to climate change will fail and make the Western world dependent on China or Russia. Global warming is harming the planet. However, in trying to solve that problem, humans could damage the planet in many other ways. Do we really want to live in a world where many millions of hectares are taken up by quarries and mines or given over to wind farms and solar parks? Currently, we talk about mankind's carbon footprint; one day we may well be talking about mankind's metal footprint. The Western world must proceed more cautiously or it could be storing up massive problems for the future.

Jason Mitchell

Senior editor

Jason Mitchell is a senior editor at Investment Monitor, with a specialisation in emerging markets.