US needs to lead the way in building a new energy supply chain


To reduce carbon emissions or advance the necessary energy transition requires a dramatic rethink of our energy and transportation systems. America must lead the way in creating a new energy supply chain literally built from the ground up.

Clean energy technologies require different minerals and metals than conventional hydrocarbon-based power and at a far greater scale. By accelerating well-intentioned climate ambition, global leaders are increasing the supply-demand gap.

For example, meeting the Glasgow Climate Declaration by 2040 would require over 7m tonnes of lithium annually — 17 times more than will be produced in 2021 — according to Benchmark Minerals Intelligence. As the IEA warned, there is a “looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions.”

Companies and countries can build their EV gigafactories anywhere they want, but they can’t alter the geology of the earth’s crust. We have to develop mineral resources where they are. Clean energy transition minerals are often located in countries with poor human rights, weak rule of law, and scant environmental protections. Growing constraints, such as water scarcity, can worsen conflict with local communities and jeopardise existing production. We must partner with resource-rich countries rather than blindly rely on an opaque supply chain that undermines our interests.

Recently, President Biden called on OPEC to increase oil output to address rising fuel prices at home. Although their influence has declined in recent years, the cartel still controls 40 per cent of global oil production. By contrast, one country — China — controls 50 to 90 per cent of the world’s clean energy minerals supply chains. Unless we take a drastically different course, the US could forfeit its climate leadership, and national security to the Chinese Communist party.

We can either increase our quiet reliance on an increasingly authoritarian regime or muster the political will to develop a responsible, resilient, and secure clean energy supply chain. The Biden administration has taken steps to identify US dependencies, and the bipartisan infrastructure bill includes some important provisions intended to address them. Yet, the US needs to take bolder action to meet our growing supply gap.

We must avoid a future scenario where the US President is forced to ask President Xi to produce more cobalt or process more lithium used for EV batteries so that we can hit our climate goals. The US has many of the minerals at home. Yet, permitting uncertainty, costly financing, and cheap Chinese commodities have marginalised US mining. We must level the playing field to recapture America’s clean energy security.

Mining and processing touch multiple federal agencies. I can attest from personal experience that if everyone is in charge, then no one is. The White House should establish a senior political position within the National Economic Council to fast track and implement America’s clean energy supply chain. This new “tsar” should have private sector experience and authority to reconcile inter-agency conflicts.

America should lead allies and partners to develop a free and transparent clean energy supply chain. The Biden administration must continue to expand the state department-led Energy Resources Governance Initiative to advance a global standard for responsible development. The US government, companies, and financiers need to require mineral supply chain disclosure as they call for emissions disclosures.

Washington can establish rules and market signals. The private sector responds to those signals, deploys capital, innovates, and executes. The US and other western leaders signalled an exponential increase in clean energy transition mineral demand. We must send a commensurate supply signal, muster the political will, and mobilise the private sector to meet the call.

Frank Fannon served as the inaugural Assistant Secretary of State for Energy Resources. He is currently Managing Director of Fannon Global Advisors, a non-resident Senior Fellow with the Atlantic Council, non-resident senior adviser with the Center for Strategic and International Studies, and a senior visiting fellow with the Center for Technology Diplomacy at Purdue.

The Commodities Note is an online commentary on the industry from the Financial Times

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