For good or for ill, metals are the new oil. We need more “rare earths” and “everyday earths” to build the technologies of the future and make real a carbon transition. The geopolitics around mines, minerals, and the processing of metals are heating up. For that reason, the U.S. needs a more sophisticated strategy to ensure that the U.S. and our allies have access to mines and minerals.
The amount of minerals needed for a carbon transition will require a vast expansion of mining and the processing of minerals. For example, given current technologies and techniques, we will need to increase the production of cobalt and lithium by 40 times for the electric batteries needed to move from internal combustion engines to electric vehicles.
Much of the challenge of metals and minerals is centered around copper mining and copper processing. Many of the “rare earths” are derived from copper mining, so getting copper mining and copper processing “right” means getting strategic minerals “right.”
Achieving the 4th Industrial Revolution will depend on metals. While many of these metals are “rare earth elements,” that are often found in remote or inhospitable parts of the world, more common metals like copper are essential to all electric technologies — with predicted supply insufficient to meet future demand.
Compounding the scarcity problem is Beijing’s lock on mining and mineral processing. China currently accounts for 63 percent of mining and 85 percent of processing for rare earth elements used to produce electric vehicles and advanced military technology like the F-35. As for copper, smelters, which refine copper ore into metal, have been unable to keep pace with demand, with the bulk of processing growth coming from China. China’s smelters are state owned enterprises, while in the West many of the smelters are owned and run by private companies as part of complex metals value chains. China’s smelters are largely subsidized, while Western private operations largely are not.
Because China’s mining and processing companies have the strategic advantage of being state-owned enterprises with heavy subsidies, low wages, dirty emissions, and poor environmental standards, competitors have struggled.
China created a new state-owned megafirm called China Rare Earth Group in 2022 which will control 60 percent to 70 percent of China’s rare earth element production and 30 percent to 40 percent of global supply. State-owned enterprises in China have put a squeeze on profit margins elsewhere and created limited incentives for private investment.
Assuming we have a carbon transition in the next 30 years, are we prepared to switch our current dependence on Venezuela, Iran, and Saudi Arabia and their influence over global oil for China’s dominance of the processing of copper and rare earths?
In 2010, China abruptly cut off Japan from rare earth exports as leverage in a fishing dispute. China could do the same to the United States or one of our allies at any time — for example, if there was an increase in tension over Taiwan. China’s ability to extend its will over its adversaries and competitors dwarfs the abilities demonstrated by OPEC nations during the 1970s Arab oil embargo.
Several steps have been taken to address this issue. The Trump administration was the first to address the problem seriously, developing a 2017 federal strategy and issuing a 2020 executive order aimed at increasing domestic production. The Biden administration’s Inflation Reduction Act contains tax breaks for mining companies and domestic sourcing requirements for electric vehicle producers. And the 2023 National Defense Authorization Act requires that the Department of Defense bolster its stockpile of critical minerals and procure metals outside of China.
Individual legislative changes are significant and helpful, but a coherent strategy remains absent.
The Biden administration’s 2022 National Defense Strategy, for instance, contains no mention of the mining and processing challenge posed by China. This omission is regrettable given that past assessments have found that China strategically floods the metals market to undermine U.S. producers critical to national security.
The U.S. will need to be more aggressive about developing its own home-grown mining and minerals processing. This means easier permits to mine and to process minerals domestically.
Politically, mining and processing operations face the same barriers as nuclear power: NIMBY-ism and overly zealous environmental activism. The irony is that environmentalists seeking a carbon transition sue against the very mines necessary for that carbon transition, which is music to the ears of Chinese officials who have mounted disinformation campaigns to stoke protests against proposed mines.
President Biden and the Democrats will have to take on some of his allies in the environmental community to overcome these political hurdles. To be clear, even if the U.S. puts all its mining and processing on steroids, the U.S. and the West are still going to need a broad set of minerals activities in the Western Hemisphere, Europe, and elsewhere (e.g. Africa and Central Asia).
An abundance of mining is in developing countries, but aid agencies, development finance institutions, and multilateral development banks (MDBs) have little to no interest in mining issues. Instead of viewing mining and materials processing as an environmental evil to be excised, aid agencies and MDBs should view them as part of an integrated energy, growth, and climate policy. The alternative to Western-backed mining is not no mines, but rather Chinese-run dirty mines and minerals processing.
Any mining and minerals processing plan must be integrated into broader strategic thinking, such as the National Defense Strategy. A 2022 memo between the Departments of Defense, Energy, and State, for example, directs the coordination of a critical mineral stockpile. This is a good start but far from adequate.If Ukraine wins the war, democracies must help keep the peaceRise of the tax machines: IRS algorithms are coming for you
Finally, the United States cannot grapple with this issue alone. Our strategy must include working with other countries in the Western Hemisphere including Canada, Mexico, Chile, Argentina, Ecuador, and Brazil. There is also need for greater development assistance to countries like the Democratic Republic of the Congo with rich mineral resources but with serious human rights, labor rights and environmental concerns.
The Biden administration wants to bring about a carbon transition. It will require more focus and assertive steps domestically and internationally in mining and minerals to make this happen.
Originally published on thehill.com on February 11, 2023.