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The importance of natural resources and critical raw materials

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The importance of natural resources and critical raw materials

Natural resources play a central role in the modern global economy due to their direct relevance to the dual processes of the energy transition and the digital transformation. Critical raw materials (CRMs) are integral to both the energy transition and the digital transformation.

This is a joint article by: Eva Zimianiti, Emily Wallerstrom and Kylar Cade.

Natural resources play a central role in the modern global economy due to their direct relevance to the dual processes of the energy transition and the digital transformation. Information and communication technologies are rapidly growing, allowing non-tangible worlds to take shape; yet their very existence is grounded in the exploitation, design and governance of tangible resources – at a time when environmental conservation and protection are issues of immense concern. As the effects of our careless exploitation of nature over decades begin to dawn upon us, attention is turned to the promise of sustainable development for a greener, brighter future. The simultaneous pursuit of sustainability and digital progress puts into focus particular natural resources, like critical raw materials, and pushes us to search for solutions in previously little explored parts of the earth – including the depths of the oceans.

Critical raw materials (CRMs) are integral to both the energy transition and the digital transformation. They are necessary for the production of everyday digital tools, offering properties such as light weight and use-friendly size to our portable devices;[1] and they are a prerequisite for the energy transition, needed as they are for the construction of solar panels, wind turbines, and electric vehicles – to name but a few.[2] Accordingly, it is of little surprise that demand for CRMs is expected to increase dramatically in the following decades. At the same time, the rising importance of CRMs acts as a geopolitical force that can shape national and international strategies, presenting opportunities for collaboration but also a potential source of tension between different actors across the globe. For example, given the EU’s limited potential to extract CRMs within its territories, import dependence is bound to increase exponentially, creating concern over supply risks.[3] The global market for CRMs depends heavily on China, which alone controls 100% of global heavy rare earth elements (HREEs), 91% of global magnesium supplies, 94% of gallium, 86% of tungsten, 85% of light rare earth elements (LREEs), 83% of germanium, 79% of phosphorus, and 76% of global silicon metal. A major supplier for over twenty different types of CRMs, China is undoubtedly the leading power in the global CRMs market, enjoying thus extensive diplomatic advantages thanks to its privileged position on the international stage.[4]

Closely linked to the global interest in CRMs is the momentum surrounding the potential contribution of green hydrogen to the energy transition. Produced through electrolysis, using CRMs-based technologies, green hydrogen is wholly sustainable and has – according to the International Energy Agency (IEA) – the potential to save 830 million tonnes of CO2 emissions annually.[5] However, the production of green hydrogen is costly (it is estimated that green hydrogen pipelines are 10-50% more expensive than fossil fuel ones) and infrastructure is not yet adequately developed to support its large-scale production.[6] Indeed, at present, the proportion of hydrogen produced through electrolysis (‘green hydrogen’) is negligible, compared to that produced through fossil fuels (‘grey hydrogen’): ‘Of the 75 million tonnes of hydrogen produced annually worldwide, historically 98% uses fossil fuels’, leading to the release of more than 800 million tonnes of carbon emissions.[7] The graph below illustrates the distribution of hydrogen production at the end of 2021:

[Graph created with statistics from IRENA[8]]

Contrary to the relatively narrow distribution of CRMs which – as mentioned above – is controlled largely by China, green hydrogen projects are being implemented across the world. For example, Australia aims to be a global hydrogen leader by 2030, with its government having invested more than $500 million to the development of hydrogen hubs.[9] In the north of Africa, Egypt is aiming to play a leading role in the green hydrogen market, aspiring to become the largest exporter in the region; and with its already significant levels of solar and wind resources, the country enjoys a comparative advantage in the sector.[10] In Latin America, Chile entertains high ambitions too, aiming to be the world’s cheapest producer of green hydrogen; promisingly, the country is included in the list of international actors that could emerge as green hydrogen exporters, published by the International Renewable Energy Agency (IRENA).[11] Finally, China’s green hydrogen production power is also on the rise: although in 2020, it had less than 10% of global electrolyser capacity installed, by 2022 the figure had risen to 30% (200MW) and it continues to grow.[12]

The shift in focus from fossil fuels to renewable energies has not only resulted in a redirection of interest into specific natural resources; it has also expanded the geographical scope of energy-related actions, moving beyond the limits of the land and into the space of the oceans. If interest in the high seas was previously limited to transportation and fishing opportunities, nowadays the ‘ocean is increasingly understood as essential for achieving sustainable development, including climate and biodiversity goals’.[13] For example, it is estimated that through sustainable management oceans could produce up to 6 times more food and 40 times more renewable energy than current levels, whilst helping to reduce greenhouse gas emissions in order to keep the world within the temperature limits specified by the Paris Agreement.[14]

A key area of interest – and contention – in the ocean space is deep-sea mining (DSM). On the one hand, it is argued that DSM could help meet the rising demand for metals such as copper, nickel and cobalt, needed to produce green technologies. However, reservations over potential environmental damage caused by mining operations continue to divide policymakers, with the fundamental concern resting on the lack of sufficient and baseline scientific data and knowledge about the deep sea and deep seafloor to guide policymaking and regulation. Accordingly, it is feared that mining operations could set off unintended but detrimental problems, such as the release of sequestered carbon. Additionally, DSM could negatively affect fisheries and tourism,[15] an issue of particular importance for Small Island Developing States (SIDS) in the Pacific, where fisheries and tourism account for 80 and 20 per cent of GDP respectively.[16] Considering the costs, benefits, and uncertainties of mining operations, countries across the world have taken different positions regarding DSM. For example, whereas France is in favor of a ban on DSM, the UK and China wish to allow the practice; SIDS are just as divided, with Nauru being in favor of DSM, whilst Fiji and Vanuatu have called for a precautionary pause.[17]

Technological advancements amplify opportunities for green development, opening new possibilities for sustainable activity across lands and oceans. The intersection between the green transition and digital transformation is reflected in their mutual reliance on natural resources, especially critical raw materials, and the innovation and adaptability required to secure these through cost-effective, sustainable policies. The geopolitical repercussions of these processes are already becoming evident as different actors establish strategic partnerships to secure the resources required for both sustainable and digital development. Finally, the interplay between the energy transition and the digital transformation – both bound by the limits of our planet’s natural resources – serves as a reminder that even in a digital age, natural resources continue to play a role in determining the economies and power structures of our global societies, facilitating the accumulation of different types of just as powerful resources: data and information.

Bibliography

‘About the Catapult’, Green Hydrogen Catapult, n.d., https://greenh2catapult.com/.

‘Critical Raw Materials: Ensuring Secure and Sustainable Supply Chains for EU’s Green and Digital Future’ (European Commission – Press Release, 16 March 2023), https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1661.

‘Egypt Green Hydrogen S.A.E’, European Bank for Reconstruction and Development (EBRD), 15 March 2023, https://www.ebrd.com/work-with-us/projects/psd/53558.html.

‘Global Hydrogen Review 2023’, International Energy Agency, 2023.

‘Green Hydrogen: An Alternative That Reduces Emissions and Cares for Our Planet’, Iberdrola, n.d., https://www.iberdrola.com/sustainability/green-hydrogen.

‘Growing Australia’s Hydrogen Industry’, Australian Government | Department of Climate change, Energy, the Environment and Water, n.d., https://www.dcceew.gov.au/energy/hydrogen.

‘Hydrogen’, International Renewable Energy Agency (IRENA), n.d., https://www.irena.org/Energy-Transition/Technology/Hydrogen.

‘Hydrogen’, International Renewable Energy Agency (IRENA), n.d., https://www.irena.org/Energy-Transition/Technology/Hydrogen.

Brönner, Ute, Maike Sonnewald, and Martin Visbeck. “Digital Twins of the Ocean Can Foster a Sustainable Blue Economy in a Protected Marine Environment.” The International Hydrographic Review 29, no. 1 (2023): 26–40. https://doi.org/10.58440/ihr-29-a04.

Directorate-General for Internal Market, Industry, Milan Grohol, and Constanze Veeh. Study on the Critical Raw Materials for the EU 2023: Final Report. Publications Office of the European Union, 2023. https://data.europa.eu/doi/10.2873/725585.

Industry Directorate-General for Internal Market et al., Report on Critical Raw Materials and the Circular Economy (LU: Publications Office of the European Union, 2018), https://data.europa.eu/doi/10.2873/167813.

John Bartlett, ‘Chile’s Bet on Green Hydrogen’, International Monetary Fund (IMF), December 2022, https://www.imf.org/en/Publications/fandd/issues/2022/12/country-case-chile-bet-on-green-hydrogen-Bartlett.

Mehta, Angeli. “Policy Watch: After Fraught Global Meeting, Future of Deep-Sea Mining Still Hangs in Balance.” Reuters, August 3, 2023. https://www.reuters.com/sustainability/policy-watch-after-fraught-global-meeting-future-deep-sea-mining-still-hangs-2023-08-03/.

Stuchtey, Martin R, Adrien Vincent, Andreas Merkl, Maximilian Bucher, Peter M Haugan, Jane Lubchenco, Mari Elka Pangestu, and Lubchenco, Jane. “The Blue Compendium.” Essay. In Ocean Solutions That Benefit People, Nature and the Economy, 783–906. Springer International Publishing, 2023. https://doi.org/10.1007/978-3-031-16277-0_20. (“Published under license from the World Research Institute.”)

Thompson, Kirsten F, Kathryn A Miller, Duncan Currie, Paul Johnston, and David Santillo. “Seabed Mining and Approaches to Governance of the Deep Seabed.” Frontiers in Marine Science 5 (2018). https://doi.org/10.3389/fmars.2018.00480. (https://www.frontiersin.org/articles/10.3389/fmars.2018.00480/full)

World Bank and United Nations Department of Economic and Social Affairs. The Potential of the Blue Economy: Increasing Long-Term Benefits of the Sustainable Use of Marine Resources for Small Island Developing States and Coastal Least Developed Countries. World Bank, Washington, DC, 2017.

  1. Industry Directorate-General for Internal Market et al., Report on Critical Raw Materials and the Circular Economy (LU: Publications Office of the European Union, 2018), https://data.europa.eu/doi/10.2873/167813.

  2. Ibid.

  3. ‘Critical Raw Materials: Ensuring Secure and Sustainable Supply Chains for EU’s Green and Digital Future’ (European Commission – Press Release, 16 March 2023), https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1661.

  4. Directorate-General for Internal Market, Industry, Milan Grohol, and Constanze Veeh. Study on the Critical Raw Materials for the EU 2023: Final Report. Publications Office of the European Union, 2023. https://data.europa.eu/doi/10.2873/725585.

  5. Quoted in ‘Green Hydrogen: An Alternative That Reduces Emissions and Cares for Our Planet’, Iberdrola, n.d., https://www.iberdrola.com/sustainability/green-hydrogen.

  6. ‘Hydrogen’, International Renewable Energy Agency (IRENA), n.d., https://www.irena.org/Energy-Transition/Technology/Hydrogen.

  7. ‘About the Catapult’, Green Hydrogen Catapult, n.d., https://greenh2catapult.com/.

  8. ‘Hydrogen’, International Renewable Energy Agency (IRENA), n.d., https://www.irena.org/Energy-Transition/Technology/Hydrogen.

  9. ‘Growing Australia’s Hydrogen Industry’, Australian Government | Department of Climate change, Energy, the Environment and Water, n.d., https://www.dcceew.gov.au/energy/hydrogen.

  10. ‘Egypt Green Hydrogen S.A.E’, European Bank for Reconstruction and Development (EBRD), 15 March 2023, https://www.ebrd.com/work-with-us/projects/psd/53558.html.

  11. John Bartlett, ‘Chile’s Bet on Green Hydrogen’, International Monetary Fund (IMF), December 2022, https://www.imf.org/en/Publications/fandd/issues/2022/12/country-case-chile-bet-on-green-hydrogen-Bartlett.

  12. ‘Global Hydrogen Review 2023’, International Energy Agency, 2023.

  13. Brönner, Ute, Maike Sonnewald, and Martin Visbeck. “Digital Twins of the Ocean Can Foster a Sustainable Blue Economy in a Protected Marine Environment.” The International Hydrographic Review 29, no. 1 (2023): 26–40. https://doi.org/10.58440/ihr-29-a04.

  14. Stuchtey, Martin R, Adrien Vincent, Andreas Merkl, Maximilian Bucher, Peter M Haugan, Jane Lubchenco, Mari Elka Pangestu, and Lubchenco, Jane. “The Blue Compendium.” Essay. In Ocean Solutions That Benefit People, Nature and the Economy, 783–906. Springer International Publishing, 2023. https://doi.org/10.1007/978-3-031-16277-0_20. (“Published under license from the World Research Institute.”)

  15. Thompson, Kirsten F, Kathryn A Miller, Duncan Currie, Paul Johnston, and David Santillo. “Seabed Mining and Approaches to Governance of the Deep Seabed.” Frontiers in Marine Science 5 (2018). https://doi.org/10.3389/fmars.2018.00480. (https://www.frontiersin.org/articles/10.3389/fmars.2018.00480/full)

  16. World Bank and United Nations Department of Economic and Social Affairs. The Potential of the Blue Economy: Increasing Long-Term Benefits of the Sustainable Use of Marine Resources for Small Island Developing States and Coastal Least Developed Countries. World Bank, Washington, DC, 2017.

  17. Mehta, Angeli. “Policy Watch: After Fraught Global Meeting, Future of Deep-Sea Mining Still Hangs in Balance.” Reuters, August 3, 2023. https://www.reuters.com/sustainability/policy-watch-after-fraught-global-meeting-future-deep-sea-mining-still-hangs-2023-08-03/.

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