The European Union has unveiled a new critical minerals strategy, and the US has published several strategies and executive orders on securing critical minerals. When European Commission President Ursula von der Leyen recently met US President Joseph Biden at the White House, she urged transatlantic cooperation.
Expect a bumpy road.
Demand for critical minerals is soaring. There won’t be sufficient supply for stakeholders wishing to carry out net zero policies. While the EU and US should be applauded for starting to cooperate, the two will end up fighting over limited supplies.
Chemical elements such as lithium and cobalt and rare earth metals such as lanthanum, didymium, erbium, and terbium are critical components for batteries, turbines, and countless other parts across the green economy’s emerging value chain. They are as central to the current energy transition as oil and gas were to the previous industrial revolution.
China now dominates. Consider lithium, key to producing batteries for electric cars. At present, Europe produces no battery-grade lithium, with 44% of the world’s supply and 60% of lithium processing coming from China. Prices are already soaring, reaching $62,000 per ton, more than five times the average cost of production. Although projects to extract lithium in Europe are moving forward, they will be slow to go online and insufficient to make the continent self-sufficient.
China is already winning the race to exploit Africa’s lithium reserves. A lithium war looks set to erupt between Western allies in South America, each hoping to get the most from the region’s Lithium Triangle. Chile, Argentina, and Bolivia host more than 75% of the world’s supply beneath their salt flats.
The proposed EU critical minerals law represents a strategic roadmap identifying the risks associated with supply chain disruptions, price volatility, and gaps in strategic stocks. Admitting and addressing these vulnerabilities represents progress. During her trip to Washington, European Commission President von der Leyen won an important US concession to allow some European-produced minerals to qualify for subsidies under the Inflation Reduction Act, the protectionist US clean tech effort which rang alarm bells in Europe.
Yet what is missing in their common quest to ensure steady supplies of critical minerals is how the EU and the US wish to slice the cake. It is one thing to recognize each other’s production priorities. It is another to decide how to split a limited supply. As the quest for critical minerals accelerates, it is inevitable that the allies find themselves at loggerheads. The race for minerals is Darwin’s selection of the fittest.
The recent US deal with Japan on battery minerals highlights the challenge of minerals cooperation. It fails to address the question of how the parties will tackle political situations of getting the most supplies for themselves. At the end of the day, deals on paper tend to dissolve when confronted by hard geopolitical interests.
No perfect solution exists for tackling the future minerals competition. Guidelines should be agreed upon to govern situations of mineral shortages, with priority distribution determined on the basis of the purpose of their use. Information on stockpiling should be circulated among allies, possibly under the umbrella of the currently considered OECD forum devoted to critical minerals.
Modern geopolitics is now much less about territory and more about controlling data flows and cyberspace and harvesting renewable energy. It is about enhancing one’s technological edge and efficiency. Reliable access to critical minerals is crucial for both Europeans and Americans. For the sake of their transatlantic bond, it is necessary to anticipate squabbles for those rocks – and manage the inevitable competition to extract them.
Maciej Bukowski, LL.M. is a former chief expert at Poland’s Ministry of Climate and Environment and an analyst at the Institute of New Europe, a Polish think tank. He is a Ph.D. candidate at the Jagiellonian University and a former Denton Fellow at CEPA.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.