Sustainable Finance Paper2
Balancing Demand and Sustainability
The Environmental Impact of Core Minerals in New Energy Technologies
Executive Summary
The research investigated that the global shift towards sustainability and renewable energy is generating more and more demand for essential minerals such as lithium, cobalt, nickel, etc. which requires the environmentally accepted extraction methods to reduce the environmental implications. It becomes important to create a balance between an increase in the mineral supply chain and reducing carbon emissions for better global green transition
Rising Demands of Minerals: Clean energy technologies are projected to increase the demand for core minerals which raises the need for sustainable mining to avoid any environmental implication.
Fluctuations Price and Production: The cost and supply of essential minerals are subject to market fluctuations, with the prices projected to increase in response to an increase in demand which will affect the affordability of clean energy.
Carbon Emission Challenge: The increase in carbon emission due to the increase in the production of essential minerals for clean energy requires environmentally accepted extraction methods to reduce the environmental implications
Introduction
The current scenario highlights that the world is shifting towards renewable energy to address climate change. Due to that reason, the demand for core minerals is increasing which is required for new energy technologies such as lithium for batteries, cobalt for electric vehicles, and earth elements for wind turbines. The increase in demand for core minerals indicates a major challenge in ensuring the sustainable and environmentally friendly mining and processing of these minerals (IEA- International Energy Agency, 2024). The extraction of the essential required minerals involves significant environmental concerns which include the destruction of natural habitats like forests, water pollution, and carbon emission. All these concerns outweigh the environmental benefits of switching to renewable energy. Therefore, the initiative for a sustainable energy future not only depends on the adoption of renewable technologies but also on the environmental responsibility of the minerals that generate them. This research aims to explore the significant relationship between the increasing demands of all the required essential minerals and their impact on the environment. The study will be going to investigate the demand dynamics of core minerals, significance of sustainable practices, and the important role of policy change in ensuring a sustainable supply chain for minerals required for energy transition.
Predicted Demand Dynamics and Need of Sustainable Practices
The above table and graph highlight the share of core minerals used in clean technologies from the total demands of these minerals and the ratio is projected to 2050 and covers the net-zero emission by 2050. According to the graph, the demand for core minerals like copper, cobalt, lithium, nickel, and neodymium for clean technologies is expected to increase significantly. The projections highlighted in the above table also indicate an important point regarding the energy sector there will be a significant increase in usage of lithium, cobalt, and nickel for clean technology. The demand for lithium for clean technology in 2025 is at 76% and is projected to hit its peak demand at 91% approx. by 2030 and keep maintaining the level till 2050 (IEA- International Energy Agency, 2021). Similarly, cobalt which is an important element for EV batteries also recorded an increase in demand for clean technologies by 49% in 2025 to its peak at 58% by 2035 which indicates that there will be an upward trend of EV vehicles in the automobile sector. This prediction reflects the increase in commitment towards green technologies.
The importance of core minerals that are being used in the production of clean energy is increasing in the same way as the usage of clean energy becomes more involved in our daily lifestyles. For example, it can be seen in the above table that demand for nickel is going to increase from 41% in 2025 to 65% in 2035 which indicates its important role in long-term energy storage solutions and future technologies. However, these positive trends also come with some implications for the environment which requires to change in the mining and processing practices of these minerals. The best practices to achieve this goal will be to bring technological advancement in mineral processing and the development of alternative materials. In this case, Neodynium which is used for wind turbines shows an increase in its demand from 345 in 2025 to its peak of 51% by 2035. Overall, the above data not only highlight the increase in the adoption of clean technologies which is evident by the increase in demand for core minerals, but also reflect the need to bring sustainable practices for mining of these minerals to remove the implications on the environment. Therefore, it is important to integrate sustainable practices during the mineral supply chain to maintain a balance between the increasing demand for minerals and the preservation of the environment.
Market Dynamics: Price Volatility and Production Scale up
The previous section highlights the increase in demand for core minerals which are essential for core minerals to fulfill the demand of clean and green technology. From the year 2017 to 2022, the demand for clean technology was one of the main reasons for the increase in demand for core minerals. The demand for lithium in these 5 years increased by 3x, with a 70% increase in demand for cobalt, and a 40% increase in demand for nickel (IEA- International Energy Agency, 2023). Due to an increase in the demand for core minerals, the extraction and mining of these minerals also scaled up. The high demand for the minerals also increased the price of the essential minerals in the market. The market size of all the important energy transition minerals over the last 5 years reached $ 320 billion in 2022 which was similar to the market size of iron ore mining. The above chart highlighted the extensive investigation of 20 global mining businesses that have a significant presence in the extraction of all the essential minerals used for energy transition and the research was driven by the increase in demand and adoption of clean and green energy technologies.
The companies who were involved in the extraction and mining of lithium recorded a 50% increase in the spending for the process which was followed by companies that focused on copper and nickel. Moreover, it was also investigated that the companies in China increased their investment spending in 2022 after considering the huge demand for energy transition core minerals (IEA- International Energy Agency, 2023). Due to the reasons of high spending by the players involved in the extraction and mining of minerals, and the increase in demand for minerals discussed above, the price of the minerals also increased. The previous section mentioned that there will be an increase in the demand for minerals for clean energy and due to the same reason, the prices are expected to increase and remain volatile in the future.
Carbon Emissions: The Environmental Cost of Mineral Extraction
Table 4 Energy and Process Co2 Emissions, https://www.iea.org/data-and-statistics/data-product/global-energy-review-co2-emissions-in-2021
As discussed in the previous section, the increase in demand for minerals for energy transition brings an environmental cost in the form of carbon emission. The above tables indicated that global carbon emissions decreased in 2020 which could be due to a decrease in industrial activity due to the pandemic but again it recorded an increase in 2021. The increase in carbon emissions highlighted the challenges during the increase in mineral production. The U.S. and the European Union recorded the highest decrease in carbon emission in 2020 whereas in 2021, India recorded the highest carbon emission with a sharp 10.7% increase in India in 2021 (IEA- International Energy Agency, 2022). The increase in carbon emissions comes with several environmental challenges and the policies and initiatives taken by the authority of the particular country regarding emission reduction bring more difficulty to the companies involved in mineral extraction. Therefore, the mining and processing industries must bring the initiatives to reduce the carbon impact after projecting the increase in demand for essential minerals going to use for clean technologies like nickel, lithium, cobalt, etc. The 6% increase in global emissions in 2021 highlighted the immediate need to bring some efforts that guarantee that adopting clean and green technology does not result in an increasing carbon footprint.
Conclusion
This research aims to explore the significant relationship between the increasing demands of all the required essential minerals and their impact on the environment. The research investigated that the demand for the essential minerals used for green technologies is going to increase in the coming years. Due to the increase in demand and cost of extracting and mining essential minerals like cobalt, nickel, lithium, etc., the would be an increase in the price of the minerals which will be going to make the clean technologies expensive. Moreover, the emission of carbon (CO2) is also expected to increase as indicated by the increase of 6% carbon emission in 2021 after the world recovered from the pandemic. The increase in carbon emissions while increasing the extraction and mining of essential minerals for clean and green energy makes it a challenge for the players involved in this sector to maintain sustainability. Therefore, the shift towards sustainability not only requires the adoption of clean energy but also requires commitment towards environmentally friendly extraction methods that reduce carbon footprints.
References
IEA- International Energy Agency. (2021, May). Net Zero by 2050 Scenario. Retrieved from IEA- International Energy Agency: https://www.iea.org/data-and-statistics/data-product/net-zero-by-2050-scenario
IEA- International Energy Agency. (2022, March). Global Energy Review: CO2 Emissions in 2021. Retrieved from IEA- International Energy Agency: https://www.iea.org/data-and-statistics/data-product/global-energy-review-co2-emissions-in-2021
IEA- International Energy Agency. (2023, July 11). Capital expenditure on nonferrous metal production by 20 major mining companies, 2011-2022. Retrieved from IEA- International Energy Agency: https://www.iea.org/data-and-statistics/charts/capital-expenditure-on-nonferrous-metal-production-by-20-major-mining-companies-2011-2022
IEA- International Energy Agency. (2023). Critical minerals market sees unprecedented growth as clean energy demand drives strong increase in investment. Retrieved from IEA- International Energy Agency: https://www.iea.org/news/critical-minerals-market-sees-unprecedented-growth-as-clean-energy-demand-drives-strong-increase-in-investment
IEA- International Energy Agency. (2024). The Role of Critical Minerals in Clean Energy Transitions. Retrieved from IEA- International Energy Agency: https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/executive-summary