G-7 to expand cooperation on critical minerals security, supply chains
Originally posted on Spglobal.com
G-7 ministers agreed April 16 to a joint plan for critical minerals security, stressing the growing importance of the materials to the clean energy transition and the need to prevent economic and security risks caused by vulnerable supply chains.
The energy and environment ministers for Canada, France, Germany, Italy, Japan, the UK, the US and the EU pledged to boost diversification of suppliers while upholding strong environmental, social and governance standards.
"We are committed to supporting open, transparent, rules- and market-based trade in critical minerals with traceability, opposing market-distorting measures and monopolistic policies on critical minerals, and promoting dialogues between extraction, producer and consumer countries," the ministers said in a final communique after two days of wide-ranging talks in Sapporo, Japan.
Critical minerals have become a larger focus of G-7 energy ministers in recent years as part of their efforts to reach net-zero economies by 2050. Demand is expected to soar for lithium, nickel, cobalt and other metals needed for batteries and electrification technologies, but supply chains to bring the commodities to market face numerous challenges.
"We should not end up in a situation where we're too dependent on one single supplier," European Commissioner for Energy Kadri Simson told S&P Global Commodity Insights in an April 15 interview in Sapporo. "That means that we need a network, a wider partnership of trusted partners."
Andrew Light, US assistant secretary of energy for international
affairs, testifies to the US Senate on energy security Feb. 16.
Light said the US is working to build critical mineral alliances.
Source: Kevin Dietsch/Getty Images North America via Getty Images
Expanding supply diversity
The impacts of the war in Ukraine on oil and gas markets are an urgent reminder for the G-7 to address the geopolitical risks of critical minerals supply chains, Andrew Light, US assistant secretary of energy for international affairs, told S&P Global Commodity Insights in an April 16 interview.
"We're doing everything we possibly can to diversify the entire critical mineral materials and supply chains for renewable energy," said Light.
The US aims to accelerate cooperation on critical minerals with the G-7, the Association of Southeast Asian Nations, or ASEAN, and Latin American countries that hold major mineral resources and potential for refining and manufacturing capacity, according to Light.
"This is not at all a situation where China is so far ahead that we can't pull back a lot of that market if we work together," Light said. "That's the key. The United States can't do it alone, we've got to work with other countries."
Even mineral-rich Canada has an imperative to ensure that G-7 countries have access to critical minerals, Jonathan Wilkinson, Canada's natural resources minister, said in an April 16 interview.
"Canada is not going to build every battery, it's not going to build every electric car," Wilkinson said. "But we need to ensure that Germany and Japan and France and the United States have access to the critical supplies and minerals that they need. We are interested in helping them with that and we are having bilateral and multilateral conversations with all of them."
Environmental, social safeguards
The ministers from rich nations acknowledged the need to help developing countries on a number of fronts to achieve climate goals. On critical minerals, they suggested creating incentives for environmentally sound management of electrical and electronic waste, establishing domestic recycle chains and fostering recycling capacity for used lithium-ion batteries and neodymium magnets, "which will be discarded in huge quantities due to the scrapping of [electric vehicles], etc.," the G-7 plan said.
The G-7 plan promised to develop resources and supply chains responsibly through groups like the Minerals Security Partnership, whose goal is to ensure that critical minerals are produced, processed and recycled in a manner that "supports the ability of countries to realize the full economic development benefit of their geological endowments."
Arifin Tasrif, Indonesia's energy and mineral resources minister,
speaks at the Sydney Energy Form on July 12, 2022. He
attended the G-7's climate and energy talks April 15-16, 2023.
Source: Brook Mitchell/Getty Images AsiaPac via Getty Images
Major nickel producer Indonesia, which is not a G-7 member but was invited to the talks as the chair of ASEAN, echoed the need for outside investors to protect the environment and improve the population's well-being if they want to share the benefits of developing Indonesia's vast resources.
"[Indonesia has] 270 million people, and it's growing by the year," Arifin Tasrif, Indonesia's energy and mineral resources minister, said in an April 15 interview. "How can we fulfil their needs? We have to create jobs."
Tasrif said the government realizes the effect of pollution caused by past mining operations but maintains it has ramped up oversight.
"We don't want it, it will directly affect our people," he said. "So we have to make strict regulation, tight control and then apply such kind of close scrutiny to the people who are not obeying the regulation."
Canada's Wilkinson said Indonesia was welcome to join groups like the Sustainable Critical Minerals Alliance if it can demonstrate strict environmental standards, and "if it can't yet but wishes to aspirationally, then it's incumbent on countries like Canada to help them actually get there."
"I can't opine on whether they've met that test yet, but I do think that test is going to be important if they want to be a supplier not only to Canada but to the United States, Germany and France, who have all committed to only buy from countries with high ESG standards," he said.
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