Material Supply Risks for the Energy Transition: A Quantitative Analysis of Resources, Production Concentration and Geopolitical Risks

Abstract: The Paris Agreement aims to limit the global temperature to below 2°C above the pre-industrial level. In order to achieve this target, almost 200 countries committed to Nationally Determined Contributions to reduce their greenhouse gas emissions. Diverse strategies are applied to achieve the necessary emissions reductions. One such strategy is large-scale renewable energy deployment. Certain key minerals are needed to produce green technologies such as electric vehicles and wind turbines. This thesis is concerned with the minerals cobalt, lithium and rare earths which are key components of lithium-ion batteries and/or permanent magnets used in many green technology applications. The academic community is aware that these critical materials are largely found in fragile and undemocratic states. The question is how the energy transition may be impacted by the fragile state of critical mineral producing countries. Therefore, this thesis aimed to investigate the supply and geopolitical risks on the critical materials market in the short- and medium-term. An analysis of the markets and a projection of their future development were conducted through maximum depletion rate modelling, the calculation Herfindahl-Hirschman indexes and risk-weighting country index scores. The results showed that the mineral markets are projected to remain highly concentrated which points to a continued vulnerability to risks emanating from individual production countries. The study found that the kinds of risk categories impacting a market depend on the distribution of market shares among countries. As production constraints arise in individual countries, the risk portfolio of the market changes. The study also concluded that countries like China that invest in mining projects abroad can contribute to the risks of a mineral that they are not producing themselves.