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Critical minerals

Why are they vital for the green economy?

Critical minerals are integral to our economy and the energy transition.

Critical minerals are used in everyday life for a wide variety of purposes. This includes technology in our homes such as mobile phones, laptops and LED bulbs, to green energy infrastructure such as solar panels, wind turbines and electric vehicle batteries.

They are indispensable to a low-carbon economy and as a result, demand for them is estimated to increase four-fold by 2040.

We do not, however, have the current capacity to meet this demand and must scale up production, explore alternative supply chains and look at ways they can stay in life for longer.

So, what are critical minerals and what is their role in our net zero journey?

Five things you need to know about critical minerals

There are currently 18 minerals deemed critical and of unique importance to the UK economy. Many are produced in small volumes and cannot be substituted in the products they are used in. The list is constantly under review to reflect the dynamic nature of the market and global supply chains.

Some important examples are cobalt, lithium, rare earth elements (REEs), graphite and silicon. Lithium and cobalt are notably used in electric vehicle batteries, silicon in solar panels and REEs in wind turbines.

View full list of critical minerals.
The world is becoming more digitally advanced, and the use of technology is integral to this.

More importantly, we are moving to cleaner energy sources to decarbonise our energy system – known as the energy transition.

Both of these trends need increasing amounts of critical minerals. An onshore wind plant requires nine times more than a gas-fired power station, and an electric car requires six times more than a traditional car.

For these reasons - doing what we can to increase supply through UK mining and refining and improving our circular economy, will be important.
It is estimated that by 2040 we will need four times as many critical minerals as we do today.

In a low-carbon economy:

  • electric vehicles will be a common form of transport
  • solar panels, wind farms and nuclear power will provide the electricity we need
  • green hydrogen will heat our homes and fuel heavy industry and transport.
  • energy storage will be needed for our electricity grid and for our homes.
Critical minerals are integral to all of these technologies.
Critical minerals are not evenly distributed around the world.

They are often found in large concentrations in specific countries. For example, 69 per cent of global cobalt production comes from the Democratic Republic of Congo (DRC) and 87 per cent of total lithium production comes from Chile, China and Australia.

They are also processed in few places. For example, just three nations control between 80 – 99 per cent of the processing of lithium, REEs and cobalt.

Environmental, social and governance (ESG) issues are also common where many critical minerals are extracted or processed. For example, child labour, forced labour and corruption were the most publicly reported governance related risks in the supply chain between 2017 and 2019. In addition, there are a host of environmental issues such as land degradation, habitat damage and water stress – copper and lithium are particularly vulnerable due to their high water requirements.

ESG issues and the monopolies of supply mean that the supply chain is opaque, complex and susceptible to disruptions and price volatility.

Companies need to diversify the supply chain in a way that is more responsible and sustainable.
The picture is fast improving.

In July 2022, the UK government created its first critical minerals strategy to secure a sustainable supply of critical minerals. It aims to reposition the UK as a skills innovation leader and international dealmaker.

Companies in the UK are starting to make positive steps to securing the supply of critical minerals. For example, Green Lithium is building the UK’s first merchant lithium refinery, and Pensana is developing a rare earth separation facility – one of three outside of China.

However, the UK does not have the domestic resources to internalise all aspects of its critical minerals supply chain, neither is it desirable to do so.

As demand increases, securing a resilient and sustainable supply of critical minerals will be crucial to UK industry and national security.

To understand more about what the UK government strategy suggest and how business can help make it a success, read our summary of the strategy.

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