The energy transition could shift the global power centre. This expert explains why

The clean energy transition “is going to be one of the greatest economic opportunities since the Industrial Revolution”, according to global energy policy expert Jason Bordoff.

In 2022, investments in renewables reached a record high of $1.3 trillion, a 70% increase from the pre-pandemic levels of 2019. This is expected to surge further in the years ahead as the world races to cut greenhouse gas emissions and limit global warming to 1.5°C above pre-industrial levels.

Speaking at the World Economic Forum’s Special Meeting on Global Collaboration, Growth and Energy for Development, Bordoff, the Founding Director of the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs, said this increasing pursuit of renewables could shift the global power centre.

From the economic opportunities to the urgent need for sustainable investment in green infrastructure, here is Bordoff’s take on the evolving geopolitics of the energy transition.

“We're going to need a lot of critical minerals for this transition, and you're going to have certain countries that naturally have an abundance of those,” Bordoff explained. “Today, the largest suppliers of oil and gas – the US, Russia and Saudi Arabia – each produce somewhere between 10 and 20% of world supply.”

However, the production of critical minerals, like lithium, nickel, cobalt, copper and rare earth elements, is currently concentrated in specific countries, with those countries sometimes producing more than half of the world’s supply of those elements, Bordoff added.

“Mining today is concentrated in certain places. More than half of cobalt comes from the Congo. More than half of lithium comes from Australia. More than half of rare earths come from China. So there's a certain number of countries with a very significant position today,” he said.

However, Bordoff says that while clean energy is growing at “an extraordinary rate”, this is not close to the scale and magnitude needed to drive down emissions and fossil fuel demand to reach targets set in the Paris Agreement.

The need for these critical minerals is, therefore, likely to surge. For example, widely used projections see lithium demand increase ten-fold or more, according to a whitepaper from the World Economic Forum on the future demand for critical minerals.

Bordoff said that certain countries, such as China, have recognized the economic opportunity that comes from being on the front foot with green technology, so are in a dominant position in the supply chain for this technology.

“China has a very dominant position today, not in the mining, but in refining and processing. So they have a critical role in the supply chain, but it's not one based in geologic abundance the way oil is. You can theoretically build refining and processing capability anywhere, so that dominance can be eroded over time with policies to build industrial capability elsewhere," he said.

“We have not yet started searching around the world or mining at the scale and speed we need. There are a lot of these metals and minerals around the world. It’s just that today, the production of mining tends to happen in certain places rather than others.”

Bordoff warned that greater adoption of green technology and the transition to a net zero economy would bring geopolitical risks and challenges with it.

“Today, we're in a world where some of the geopolitical risks, like conflict and economic fragmentation, are making the transition harder. If we're not careful about how we go about this transition, it can actually make some of those geopolitical problems worse,” he said.

“This is not a reason to slow down the transition. We need a much, much faster transition. But we need to be really thoughtful and mindful about the foreign policy, national security, and geopolitical implications of this transition. If we're going to make sure that we don't trip ourselves up along the way.”

Bordoff called on governments and multilateral organizations to come together to enable the rapid deployment of the capital needed to sustainably roll out green technology, while ensuring minimal risk of geopolitical fragmentation.

Speaking about supporting countries that have an abundance of the metals and minerals needed for the energy transition, Bordoff added: “I think developed countries need to do a lot more than they have to make a lot of that assistance and finance available.”

Bordoff concluded that tax mechanisms, regulation and mandates that enable investment in clean energy can help realize the energy transition opportunity and also ensure companies see even greater returns from clean energy as from hydrocarbons.