10 ways the world can improve access to minerals for the energy transition

“The energy transition is essential to achieving a sustainable future, but it is also fraught with risks of a supply shortfall of critical minerals.”

That’s the conclusion of a new report from the World Economic Forum, which highlights a considerable gap between the supply and demand of critical minerals, including lithium, copper, cobalt and nickel.

Closing that gap will require the biggest ramp-up of critical mineral production in history, according to the International Energy Agency.

Securing Minerals for the Energy Transition, produced by the Forum in collaboration with McKinsey, identifies two types of risks associated with the supply-demand gap of critical minerals: the first associated with the inability to close the supply-demand gap, and the second, with efforts to close the supply-demand gap.

The report outlines five risk categories – political, economic, social, technological and environmental – by highest likelihood and impact. As highlighted in the graphic below, these risks range from insufficient capital to address supply-demand imbalances, to a rise in illegal mining and more volatile commodity prices.

To lessen the chances of such risks occurring, the report recommends 10 high-priority actions.

Mining operations can reduce their environmental impact by adopting sustainable practices that cut minerals and water use. Efficient technologies and closed-loop systems can be used to extract, process and reuse minerals.

Examples include urban mining, which allows for the extraction of rare earth elements from electronics, such as smartphones, at the end of their life.

Private and institutional investment can help increase the supply of critical minerals for the transition.

Institutionalizing environmental, social and governance (ESG) principles in foreign investments and through digital platforms can bring more investments from responsible investors.

Alternative financing instruments – financial products and services that raise capital outside of traditional channels – can help mitigate investor risks, particularly in less attractive markets.

These instruments, which could include concessional and blended finance, impact investing and green bonds, can be used by local governments and industry leaders to improve transparency, minimize risks and foster climate finance readiness.

By sharing transparent, accurate and up-to-date information on supply and demand dynamics, stakeholders can address potential shortages or excesses of critical minerals and ensure sustainable resource management.

Stable trading relationships can help with price uncertainty. Stakeholders can use financial instruments like hedging strategies or long-term contracts to provide price stability.

Price transparency measures, such as spot pricing transactions, can also help mineral markets where information between buyers and sellers is not disclosed.

Mining companies can work with local people to increase the socioeconomic benefits of their projects. They can create jobs and develop skills, promote local development, and ensure equality and inclusion.

Companies and governments could work together before a project, or an expansion of a project starts. That could help identify strategic priorities for local socioeconomic development.

To facilitate the energy transition, policymakers need to create a favourable investment climate.

Collaboration and policy discussions should be happening at a global level, involving governments as well as public- and private-sector organizations, to swiftly mobilize action.

Technological innovation and better practices can cut the need for a vital mineral or increase its supply. Collaboration between academia and industry, as well as research and development, can encourage the use of advanced technologies and methods to address shortages.

Harmonizing regional and international mining ESG standards can level the playing field for companies. However, existing frameworks need to be changed to remove roadblocks in ESG performance, reporting, and tracking.

By modernizing and standardizing permit and approval procedures, lead times can be reduced and supply strengthened.

The European Union has already made plans to cut its project approval times as part of the recent Critical Raw Materials Act – down from a potential 10-15 years, currently, to 27 months.

Improving the governance and oversight of mining projects will boost compliance with regulations, further reducing associated risks.

And such measures can’t come soon enough, the report’s authors explain in a recent summary of their findings. “As the window to a 1.5°C world degree world is rapidly closing, fast-moving collaboration on critical minerals has become an urgent priority,” warns Espen Mehlum, Head of Energy Transition Intelligence and Regional Acceleration, World Economic Forum.