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This assessment was issued to clients of Dragonfly’s Security Intelligence & Analysis Service (SIAS) on 5 April 2023.
Competition over access to the mineral resources needed for renewable energy technologies is escalating. We assess that this trend will lead to a worsening stability outlook in at least 15 source countries. The Democratic Republic of Congo (DRC), India, Madagascar, Mozambique and the Philippines are particularly unlikely to be able to manage ensuing instability. This is likely to amplify not just safety and security risks for businesses operating in those countries, but also governance and environmental risks too.
Demand for renewable energy technologies is soaring and will only continue to grow in the coming years. The International Energy Agency (IEA) predicted in January 2023 that electricity generation from solar photovoltaic and wind power will provide roughly 20% of global power generation by 2027. That in turn requires exponential growth (500% by 2050 in one estimate) in the supply and rate of production of the materials – particularly critical minerals – that enable low-carbon technologies.
Demand for critical minerals such as cobalt, graphite, lithium, nickel, and rare earth elements is already growing rapidly as a result. Specialist projections by various market analysts are already warning that there will be an insufficient supply of these critical minerals in the coming few years to meet rising demand. This will very probably lead to technology shortages in certain areas, such as for electrolysers and heat pumps. It will also lead to greater geopolitical competition as countries jostle for access.
In just one example of such competition, several major economies are seeking to reduce their reliance on China for mineral resources. Beijing currently supplies 60% of rare earth elements and dominates the processing of most critical minerals: 90% of rare earths. For the US, in particular, achieving critical mineral autonomy from China is a top priority. Therefore, over the coming year, the US will probably accelerate efforts to onshore clean technology manufacturing and form new resource alliances to shift supply chains away from China.
Critical minerals reserves and production are highly concentrated geographically. The Democratic Republic of the Congo, for example, supplies 70% of the world’s cobalt and has almost half of the total known reserves. As a result, the security and stability implications of soaring demand would also be concentrated. Most notably mining, transport and trade of mineral resources risk amplifying disputes over land, as well as contributing towards conflict financing, graft and criminality.
We have identified 15 countries with greater than or equal to 5% of global reserves for selected critical minerals where our related risk ratings are high or greater. Of these, the following are likely to be particularly negatively affected:
Operating in these countries will become more challenging due to worsening security conditions, in our assessment. All five countries are electoral autocracies, according to V-Dem Institute’s March 2023 governance ratings. Such states generally have fewer options to manage instability compared to more democratic or authoritarian states. This is because they lack the firm grip over society needed to suppress dissent or because there are fewer safety valves through which to vent grievances.
Environmental risks are also very likely to rise in source countries for critical minerals. Most have fewer capacities to ensure mining and processing activities are conducted responsibly and wider environmental standards are upheld. Environmental impacts include:
Such degradation also tends to lead to flooding, landslides and fires. And encroachment into natural areas is also linked, according to the WHO, to the spillover of zoonotic diseases to human populations.
Image: Wind turbines during the installation of the RWE Offshore Wind farm, Kaskasi, off the coast of Helgoland, Germany, on 23 March 2023. Photo by Christian Charisius/POOL/AFP via Getty Images.
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