7.5 Risk mitigation of supply shortages

Technological, political, social, environmental and market risks make the critical materials subsector one of the highest risk subsectors in the mining sector. Policy makers can adopt several strategies to mitigate these risks.

Developing a circular economy

The current economic model in the mining industry is linear: extract, process, manufacture, manage and dispose of waste. The circular economy seeks to close the loop, by conserving resources after they are used and reintroducing them to the life-cycle of a certain product.

Mined resources can be conserved in several ways. The first is by reusing a product that has reached the end of its technical lifespan when possible (Box 7.2). For example, lithium-ion batteries whose capacity has declined by 70%–80% of their initial capacity can still be used for stationary energy storage applications in the electricity grid. If there is no viable option for reusing a product, it can be remanufactured, by using primary, secondary and repaired materials (Gaustad et al., 2018). A third option is recycling.

Developing a circular economy, product innovation, strengthening research and international co-operation, and promoting international governance are different strategies that policy makers can adopt to mitigate risks

BOX 7.2 End-of-life management of solar photovoltaic technology

IRENA projects that waste from global cumulative solar PV projects will increase from 0.2 Mt in 2021 to 4 Mt in 2030, almost 50 Mt in 2040 and more than 200 Mt by 2050 (Figure 7.14). G20 member countries will contribute almost 90% of this waste.

Solar PV panel waste can be restored, reused and recycled, providing additional raw materials and creating value. Under IRENA’s 1.5°C Scenario, more than 17.7 Mt of raw materials could be recycled from solar PV panel waste by 2050, creating about USD 8.8 billion of value.

Addressing solar PV waste challenges and unlocking the full potential of a circular economy requires a comprehensive and sound policy framework that has to be put into place now, before waste becomes a problem, through government-led regulations, industry-led initiatives and public-private partnerships. The policy framework should include regulations based on clearly defined recycling responsibility, standardisation and certification; data collection and reporting systems; financial and fiscal policies; research, development and demonstration of recycling technologies; and public awareness-raising.

Source: IRENA (forthcoming-e).

FIGURE 7.14 Projected cumulative waste from solar photovoltaic projects under IRENA’s 1.5°C Scenario through 2050

Waste (Mt)

250

200 212 Mt

150

100

50

0

2021 2025 2030 2035 2040 2045 2050

Source: IRENA (forthcoming-e).

These concepts can reduce demand for primary minerals and prevent toxic materials from entering the environment. Recycling solar PV modules, wind turbines and batteries are all feasible from a technical viewpoint. However, recycling methods need to be improved and further developed. In battery recycling, for example, cost-effective methods are needed to recover additional minerals in the battery (such as plastics and graphite) (IRENA, 2020k).

In the short and medium term, primary materials are projected to continue dominating supply while the capital stock of the relevant technologies is built up. Timely planning and policies can yield the critical stock of materials needed to permit future recycling. Although recycling will make only a limited contribution in the short and medium term, in the long term, as demand increases, recycling is expected to play a significant role in the supply of critical raw materials, especially for lithium, neodymium and dysprosium. In the case of these materials, developing the technologies and infrastructure needed to process the accumulated stocks will also be necessary.

For other materials, such as nickel and copper, policies to increase recycling could help reduce demand. In 2018, nearly 8.5 Mt of copper was recycled from scrap materials, and one-third of nickel supply was sourced from recycled materials (Copper Alliance, 2020). Half of used copper materials are currently wasted. Higher material prices are likely to increase the economic viability of copper recycling. Crafting policy interventions to increase the recycling rates of these materials could help reduce supply risks. Increasing and harmonising recycling data can also have beneficial impacts, by showcasing how efficiently materials are being recycled, providing valuable information for recycling R&D and providing information relevant for policy interventions (IRENA, 2020k).

Adoption of circular business models and investment in R&D on circular technologies have the potential to catalyse economic growth through innovation. Investments are also needed to build and increase the capacity to analyse material trade flows at the sectoral level. Tracking and analysing materials in the technosphere can shed light on the importance of materials and drive investments in recycling infrastructure. Circular economy models can also create jobs, as repair, maintenance, remanufacturing, reuse and recycling are more labour intensive than extraction and traditional manufacturing processes (OECD, 2021b).

Recycling of new materials such as lithium, neodymium, and dysprosium is critical in developing a circular economy within decades or a century, but it is not likely to have much impact in the coming years. The near-term question, therefore, is not primary production or recycling, but both together. Preparation for the post-2050 era will be beneficial, but it will not affect the supplies available to the global economy in the immediate future. For this reason, other short- and medium-term strategies must be considered

Recycling of new materials such as lithium, neodymium, and dysprosium is critical in developing a circular economy within decades

Spurring product innovation and material substitution

Innovation can help design products that reduce or eliminate the need for critical materials and allow them to be recycled when they reach the end of their lives. Some technical solutions exist, but they often result in lower technical performance or higher costs. It is important to understand the trade-offs before making decisions. As technological development continues to evolve, government research, improved designs and close collaboration can help accelerate these solutions.

An important component of product innovation is the substitution of critical materials by materials that are more abundant. For instance, as previously noted, permanent magnets are widely used in wind turbine and EV designs, but viable alternatives exist. They include wound rotors and induction rotors, which some major manufacturers have used to eliminate the need for REEs. Other examples include adjusting battery cathode materials to reduce or eliminate the need to use cobalt and the replacement of copper used in cabling with aluminium. In commercial sintered neodymiumbased magnets, neodymium is usually partially substituted by other rare earth elements including praseodymium, dysprosium and terbium. Because neodymium and praseodymium co-exist in ore and the two elements have similar physical and chemical properties, it is more economic to manufacture alloys composed of both elements (Advanced Magnets, 2018).

Such substitution cannot happen overnight, however, and equipment manufacturers and governments need to carefully consider whether they want to accept the risk of new supply dependencies when using alternative materials.

Innovation can help design products that reduce or eliminate the need for critical materials

Strengthening research and international cooperation

Research in many areas could help reduce supply risks. For example, efforts are underway to reduce the REE content of permanent magnets. The silver content of solar PV has significant room for improvement in materials efficiency. Suppliers typically seek such solutions to reduce manufacturing costs. Private and government research can play a crucial role in accelerating this process.

Other areas of research include developing new mining technologies, expanding domestic sources of critical materials, improving material and processing efficiency, accelerating product innovation and finding alternative materials, developing recycling technologies, and improving the sustainability of mining and processing operations, among other areas. Close collaboration and the sharing of data could avoid duplication of research efforts and speed results. Focusing on these areas of R&D could increase productivity and cost-effectiveness across the value chain while improving the supply of critical materials.

Strengthening research and international co-operation can increase productivity and cost-effectiveness across the value chain while improving the supply of critical materials

Promoting international governance

National governments must consider the supply and demand of critical materials when designing their energy transition plans. It should not be left to the market alone to deal with import dependencies; governments should take an active role in crafting strategies to reduce risk and ensure the adequate supply of necessary materials.

Most major economies have dedicated research groups for critical materials and are closely following developments in this area. These efforts lack unity, however, and often obstruct one another. Countries with abundant resources must outline the way in which they want to extract their resources, crafting strategies that have a positive economic and social impact through the efficient management of resources (Gatimu, 2015).

Access to critical materials is increasingly becoming an issue of geopolitical concern. Wellfunctioning markets require a high level of transparency that allows for effective management of critical materials supply at the global level. For this reason, a global critical materials strategy is required. International agencies—especially IRENA, the sole international energy transition organisation with truly global membership—can bring countries together on this topic and facilitate the management of supply. Providing a structured global dialogue and facilitating free trade and the diversification of suppliers are fruitful responses to geopolitical challenges.

Recommended policies

Governments need to be proactive in dealing with their critical material dependencies, and they need to develop strategies for managing them in the future. In addition to the strategies highlighted in this chapter, the policies described below could help secure the supply of critical materials:

• Increase market transparency, track current supply in more detail, develop scenarios for future demand, allow public prices, assess mining developments and ensure that international quality standards are met.

• Do a better job of projecting demand growth in order to support the development of new mines.

• Improve regulatory approval for domestic exploration and mining projects, and ensure the environmental and social acceptance of new mining projects by local communities.

• Integrate circular economy components in product design to consider end-of-life reuse and recycling.

Mandate minimum amounts of recycled content in new products, increase the role of standardisation to improve recycling and adopt analysis frameworks to understand critical material flows.

• Ensure the diversification of supply by developing mines in different parts of the world and increase domestic production.

• Mobilise investment to develop the necessary human capital and skills required across the sector, and invest in the mining, processing and infrastructure required to sustain a sufficient and sustainable supply of critical materials.

• Increase international co-operation on issues across the value chain that affect all economies.

Sharing information, increasing trade and making mutually supported investments, among other actions, would improve conditions in the global market.

• Engage international co-operation to set standards to ensure the sustainability and social responsibility of sourced minerals.

• Structure a global dialogue to address the geopolitical issues affecting critical materials, in order to foster greater transparency and facilitate the effective management of critical materials at the global level.

• Facilitate R&D on improving material and product efficiency, finding alternative materials, improving the efficiency of material mining, processing and manufacturing, and advancing recycling technologies.

• Plan and develop a stock of critical materials for recycling. Improve resource efficiency, improve waste management and reduce demand for primary materials by recycling.