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US energy secretary Jennifer Granholm has warned that transitioning from fossil fuels will make energy security “infinitely more complex” because of China’s stranglehold on the processing of the critical minerals essential for renewable power.
China dominates the cobalt, rare earths and graphite industries, which are vital for renewable energy, electric cars and defence technologies. Its global market share for the refining of each of those three materials exceeds 70 per cent.
“In this critical minerals context, we are up against a dominant supplier that is willing to weaponise market power for political gain,” said Granholm on Thursday, in remarks widely interpreted as referring to Beijing’s power.
“The fuel of this energy transition — critical minerals — is going to make global energy security infinitely more complex and infinitely more important over the next few decades,” she added at the International Energy Agency’s first ever critical minerals summit in Paris.
Western policymakers have become increasingly concerned about depending on geopolitical adversaries for the supply of commodities following Russia’s invasion of Ukraine and the ratcheting up of tensions between the US and China over Taiwan.
US president Joe Biden introduced the $369tn Inflation Reduction Act last year to galvanise efforts to reduce reliance on Chinese supply chains for clean energy technologies.
The Department of Energy and Department of Defense have poured billions of dollars of subsidies into accelerating the establishment of mines and processing facilities domestically.
But shifting to electric vehicles and renewable power requires vast quantities of lithium, copper and nickel. Meeting demand, while reducing reliance on China, would require significant investment from the slow-moving mining industry to boost supply.
Copper alone requires $250bn of growth capital by 2030 to meet demand, according to Mike Henry, chief executive of BHP, the world’s largest mining company. To date, $40bn to $50bn has been spent on boosting supply.
China’s control also extends to mining the raw materials for rare earths and graphite, creating even greater challenges for western economies to pivot to other suppliers should relations with Beijing deteriorate.
China has displayed a willingness to politicise supply chains, introducing restrictions on key chipmaking materials gallium and germanium in August in response to Dutch plans to limit the sale of high-end semiconductor manufacturing equipment to Chinese firms.
EU commissioner Thierry Breton followed the US warning by stating that Brussels needs to reverse the trend towards relocating industry outside of the bloc to decarbonise because of the “new geopolitics of supply chains”.
“We are now clear in the EU that we cannot replace a fossil fuel dependency with a raw material one,” he said. “We know someone can weaponise against us these dependencies.
“We paid the high price in Europe on this,” he added, referring to the costs associated with EU member states having to cut their reliance on Russian oil and natural gas.
He added that the EU is in the process of finalising critical mineral partnership deals with the Democratic Republic of Congo, Australia and others in a bid to diversify its sources of supply.
Despite the need to diversify critical mineral sourcing, the IEA found in a report published in July that critical minerals supply had actually grown in terms of concentration in the hands of fewer countries in recent years.
