Mining and the green economy: The cost of pursuing renewable energy

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  Quantumrun Foresight
• April 15, 2022

Insight summary

The quest for renewable energy is driving a surge in demand for rare earth minerals (REMs), essential in technologies like wind turbines and electric vehicle batteries, but this pursuit comes with complex challenges. From China's market domination inflating global costs to the environmental and human rights concerns in mining regions, the balance between renewable energy needs and responsible mining is delicate. Collaboration among governments, corporations, and communities, along with investments in recycling technologies and new regulations, may be key to navigating this intricate landscape towards a sustainable energy future.

Mining context

The minerals and metals found within the earth's crust are the building blocks of renewable energy generation. For example, wind turbine gearboxes are often engineered with manganese, platinum, and rare earth magnets, while electric vehicle batteries are manufactured with lithium, cobalt, and nickel. According to a 2022 McKinsey report, to satisfy the global growth in demand for copper and nickel, a cumulative investment ranging from USD $250 billion to $350 billion will be required by 2030. This investment is necessary not only to expand production but also to replace the depleted existing capacity.

Copper, in particular, a conduit of electricity, is considered a high-priority transition metal used in renewable energy technologies. Accordingly, demand for copper is expected to increase at a rate of 13 percent annually until 2031. And with prices for these in-demand rare earth minerals (REMs) surging, the concentrated supply chains located in a handful of countries, such as Indonesia and the Philippines, have received significant investment from Chinese state-owned companies—companies that control the majority of the world's REM supply. This trend can enhance productivity and efficiency in the renewable energy sector, but it also raises concerns about the environmental impact of mining and the geopolitical implications of supply chain concentration.

The shift towards renewable energy is not just a matter of technology; it's a complex interplay of economics, politics, and environmental stewardship. The need to balance the demand for essential minerals with responsible mining practices and environmental protection is a critical challenge. Governments, corporations, and communities may need to collaborate to ensure that the transition to a more sustainable energy future is achieved in a way that respects both the planet and the diverse needs of the global population.

Disruptive impact

While the world is focused on reducing carbon emissions and embracing cleaner energy sources, thousands of hectares of land are being destroyed by open-pit mining. Biodiverse ecosystems suffer irreparable environmental damage, and indigenous communities face infringements on their human rights. Transnational mining companies, driven by rising renewable energy commodity prices, have ramped up their mineral extraction efforts, often with limited oversight and due diligence on the global stage. This focus on extracting REMs in owned sites can overshadow the adverse effects these operations may have on predominantly low-income countries and communities in regions like South America and Africa.

In copper-rich Ecuador, the increased demand for REMs has fueled competition among mining companies, leading to the purchase of large tracts of land. These companies have reportedly influenced local courts to legitimize operations that local communities have resisted. The destruction of environmental ecosystems and the displacement of communities and indigenous peoples are significant concerns. Yet, despite these challenges, corporations and governments continue to actively encourage mining companies to invest in resource-rich areas of the developing world, predominantly found below the equator. 

The pursuit of renewable energy, while essential to meeting the world's future energy needs, does come at a price that cannot be easily reversed. Governments, corporations, and communities may need to collaborate to find a sustainable path forward. This might include implementing stricter regulations, promoting responsible mining practices, and investing in technologies that minimize environmental impact. The challenge lies in aligning the urgent need for renewable energy with the equally vital need to protect the environment and uphold the rights and well-being of affected communities. 

Implications of mining and the green economy

Wider implications of mining activities in the green economy may include: 

• China's near-term continued market domination of REM resources, negatively impacting the cost of renewable energy in other parts of the world due to scarcity and inflated market prices.
• Long-term diversification of REM mining across North and South America, potentially overlooking local environmental concerns to accelerate production of renewable technologies within the Americas to meet carbon reduction targets.
• REM supply imbalances that may result in potentially negative geopolitical consequences, such as increased tensions between countries vying for control over limited resources.
• Increased investment into advanced mineral recycling technologies and facilities to harvest REM from obsolete mobile phones and laptops, thereby reducing the extent of future mining operations and contributing to more sustainable resource management.
• The development of new international regulations and standards for mining practices, leading to increased accountability and transparency in the extraction of essential minerals, and potentially leveling the playing field for smaller nations.
• A shift in labor dynamics within the mining industry, with a growing emphasis on skilled workers who understand both the technical aspects of extraction and the environmental and social considerations.
• The emergence of community-driven initiatives and partnerships between mining companies and local populations, leading to more responsible mining practices that take into account the needs and rights of indigenous and local communities.
• The potential for technological advancements in mining equipment and methods, leading to more efficient and less environmentally damaging extraction processes, but also raising concerns about job displacement due to automation.
• A reevaluation of economic priorities by governments, with a focus on balancing the immediate financial gains from mining with the long-term societal and environmental costs, leading to new policies and investment strategies.
• The potential for social unrest and legal challenges in regions heavily affected by mining, leading to increased scrutiny of corporate practices and a growing demand for ethical sourcing and corporate social responsibility within the renewable energy sector.

Questions to consider

• Do you think that mining companies have become too powerful and can influence countries' political systems?
• Do you think the public at large is sufficiently informed about how the world can achieve zero carbon emissions as well as the near-term environmental mining costs involved in achieving this goal?