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According to energy analyst and historian Daniel Yergin, the “era of big shovels” is what will replace the age of big oil. Meaning that in the low-carbon economy, those that can process the massive quantities of copper, lithium, and other critical minerals needed for the energy transition will be the new power brokers. Lithium is actually one of the most abundant minerals on the planet, but the infrastructure required to mine it and separate it from the earth is enormous and expensive. Currently, this is a space where China dominates.
Leaders on both sides of the Atlantic are very aware of this fact. To begin addressing this, the European Commission will soon announce the European Critical Raw Materials Act. President von der Leyen was in Washington D.C. last week to discuss a limited trade agreement with President Biden pertaining only to critical raw materials. This deal would also have the benefit of making EU firms eligible for the subsidies allocated in last year's U.S. Inflation Reduction Act. The IRA, which has stirred emotions on both sides of the Atlantic, has language allowing for subsidies and tax breaks for electric vehicles only if they're assembled in North America, and the materials are sourced from countries with which the United States has a free trade agreement. Despite close ties, that does not include the U.K., Japan, or the EU. The new pending EU-U.S. agreement on raw materials will hopefully avert another trade war, but it will not be an act of Congress. So, as we've written before, relations between the U.S. and EU remain functional only because Presidents Biden and von der Leyen want them to be. A change in leadership on either side could bring back the contentious days of the previous administration.
New trade deals, tax schemes, and state aid for the green economy sound great on paper. Yet, the bottom line is that if the EU wants to succeed in both its goals of ending fossil fuel use and not becoming beholden to Asian superpowers while it does it - Member States have to start mining. For example, cobalt is the ingredient that keeps batteries from overheating, and only one country in the EU, Finland, produces it. 70% of the world's cobalt is sourced from the Democratic Republic of Congo, where Chinese interests own almost all the mines, and the cobalt is processed by "big shovels" in China. There has been some positive news, a massive deposit of rare earth minerals was recently discovered in Sweden. Volkswagen will build a battery plant in Canada, the exact type of "friend-shoring" the U.S. IRA and U.S.-EU negotiations were designed to create. However, this plant won't produce any batteries until, at the earliest, 2027. The potential new mines in Sweden will take a decade to develop.
EU countries are now demanding more specific answers from their leaders on how and where the required materials for the region’s green energy plan RePowerEU will come from. Voters cannot settle for empty rhetoric about the circular economy or vague answers about building new relationships in Africa. The enormous scale of the metals needed to make the low-carbon economy can't be an afterthought. If not from China, people must develop real answers to where it will all come from. The EU, U.S., U.K., Japan, Australia, and South Korea are all working towards an alliance of like-minded countries to tackle this issue. Still, the Biden Administration recently blocked the development of what would have been the largest copper mine in the country at Bristol Bay, Alaska, over environmental concerns. How will similar contradictory circumstances play out in Europe?
