The lines that follow offer some generic reflections that I think are essential to understand the close relationship between energy and geopolitics, as well as the inevitable change that the latter is going to experience with the urgent need to mitigate the consequences of climate change, an objective that requires the transformation of the current energy system.
As a starting point for any analysis on energy geopolitics, it is convenient not to lose sight of the direct relationship that exists between energy and human development.
Energy is the ability to make a change, to transform a reality. A simple definition, but with a deep meaning. Don't progress and development precisely imply change and transformation? The nearly twenty million inhabitants of the state of New York consume the same electricity in a year as the almost 800 million people in sub-Saharan Africa. What world do you want to belong to?
The numbers show that today the degree of development of a country is matched to the energy consumption of its citizens. The so-called human development index -HDI, measured by life expectancy at birth, adult literacy level, schooling level and gross domestic product per capita- is proportional to the primary energy demand per person. Countries outside the Organization for Economic Co-operation and Development (OECD), the select group of industrialized countries, typically show the lowest human development indices and lowest energy consumption.
The level of development that we enjoy today in the first world is coupled with an energy consumption per person per day that is about sixty times greater than that used by our ancestors some ten thousand years ago. Technological and social development is the result of the availability of energy, so that the successive historical stages require multiplying the consumption of the preceding one by a certain factor. For example, the first industrial revolution, at the end of the 19th century, meant tripling consumption compared to the levels of the Middle Ages and something similar has happened since the aforementioned revolution to the present day.
What has been exposed allows us to understand in all its meaning a classic pun that affirms that, in geopolitics, power is power. An expression that we can translate by energy is power or, even better, by power is power, power being understood as the amount of energy used per unit of time.
Before the industrial revolution, the development of human societies was limited by the rate at which they were able to take advantage of solar radiation and its transformations when it hit our planet. Average crop yields were low, causing chronic malnutrition and recurrent famine, while energy storage was severely constrained by the low energy density of biomass. Even so, ancient societies were able to gradually increase per capita energy use, harnessing water and wind and deploying a growing labor force, mostly made up of slaves and animals.
The large-scale extraction and combustion of coal, oil, and natural gas meant a fundamental change in the type and intensity of energy uses. Mother Nature has made possible, through photosynthesis and a long and complex geological process, the storage of solar energy in the chemical bonds of the hydrogen and carbon atoms that make up the molecules of hydrocarbons or fossil fuels.
This solar heritage has given us access to highly concentrated energy resources that are easy to store and that have been able to be used at an increasing rate. The use of fossil fuels has allowed humans to overcome the limits to energy consumption imposed by the low efficiency of photosynthesis and by the low yields of water and air currents. As a result, and thanks to the contribution of hydrocarbons, global energy consumption has increased to unprecedented levels: the use of primary energy (biomass, fossil fuels, renewables and nuclear) has multiplied almost sixty-fold, going from just over from 10 exajoules in 1750 to 619 exajoules in 2019.
From 1950 to 2019, the world has multiplied its energy consumption by more than five, reflecting the aspiration of the inhabitants of the planet to live better and, also, the growing energy needs derived from the growth of the world population. During the period of time mentioned, the world GDP has multiplied by a factor close to seven and the world population by more than two. All this has been possible thanks to fossil fuels, which in 2019 represented almost 81% of the total primary energy consumed in the world: oil (30.9%), gas (23.2%) and coal (26 .8%).
With all these facts in mind and applying the motto of energy is power, it is not surprising that during the last two centuries energy geopolitics has revolved around fossil fuels. Thus, very succinctly, we can say that the relationship between Western Europe and China changed decisively in 1839, when, in the first Opium War, Great Britain deployed coal-fired steamships. An event that opened the doors of China to the European powers. Later, already in the 20th century, oil turned the US into the first world power, marking the decline of the European empires. And for the past decade, the US and Russia have been competing with each other to sell gas to Europe, just as they did for oil at the turn of the last century.
Our civilization is overly dependent on energy sources rich in carbon, whose burning in increasing quantities has placed humanity facing an unexpected challenge: the high amounts of carbon dioxide (CO2) and other greenhouse gases (GHG) emitted into the atmosphere are overheating the planet. A true emergency situation that is translating into a large international mobilization to mitigate the already palpable effects of this phenomenon that, in the medium-long term, is expected to be catastrophic.
This mitigation goes through the so-called energy transition. And this entails: 1. decoupling economic and demographic growth from the increase in CO2 emissions and other GHGs; 2. Advance at a forced march towards an economy with low energy intensity (efficient) and decarbonized (driven by a low carbon mix), and 3. Deploy, on a large scale, technologies that allow the removal and reuse of carbon from the atmosphere, promoting a circular economy of CO2. An epic task that requires a great pact or coalition, based on science and technology, that includes governments, financial entities, investors, companies and all social sectors and citizens committed to the fight against climate change.
Obviously, this task is not going to be easy or quick and, moreover, in all probability, it is going to lead to a reversal in energy geopolitics.
First of all, because the necessary decarbonization effort implies that around two thirds of the carbon reserves currently inventoried should be left untapped in the subsoil. These reserves, of which close to 63% would correspond to coal, 22% to oil and 15% to natural gas, are concentrated in four countries or regions that are major players in the current geopolitical game (North America, the Middle Middle, China and Russia), with the particularity, in addition, that 74% of them are state-owned. It is clear that the energy transition is going to be much more expensive and difficult for those countries that are large producers of hydrocarbons, particularly if their GDP derives to a large extent from their exports. And the opposite happens with the countries that are large consumers and importers. We are therefore faced with a clear conflict of interests that will undoubtedly exacerbate tensions and the geopolitical game.
Secondly, because, as we will see in more detail in the next section, the energy transition towards a decarbonized model implies an extractive transition: from hydrocarbons to minerals. And this represents a far-reaching change in energy geopolitics.
In any case, apart from the two possible future repercussions mentioned, it should be remembered that already in the 1990s, it was clear that tackling the challenge of climate change would be limited by geopolitics, and that the options for new energy sources to be developed to replace fossil fuels would have geopolitical consequences. The US refused to ratify the 1997 Kyoto Protocol because it thought that an agreement that would impose obligations on it, leaving China out, would harm its economy. Soon after, in Germany, the 1998-2005 coalition government was betting on renewables and beginning to phase out nuclear power, deepening Germany's dependence on Russian gas. At the same time, Putin was launching a two-decade strategic effort to remove Ukraine from Russia's gas transportation system.
Undoubtedly, climate change has created incentives for cooperation between geopolitical rivals, particularly between the world's two largest emitters of greenhouse gases: China and the US Thus, in November 2014, Barack Obama reached an agreement on emissions with Chinese President Xi Jinping, an essential step towards the Paris climate accord the following year. However, even this moment of cooperation did not end the geopolitical feud. The same year, Xi also reached an agreement with Putin to build the Power of Siberia gas pipeline. Opened in 2019, it is the first to transport gas east to Asia, instead of west to Europe. For China, this was at least as important as a climate deal with Washington.
Today, already in the middle of the race for the leadership of the energy transition, states are competing for the manufacture of solar panels and wind turbines, as well as for the mass production of electric vehicles. And, in this regard, it should not go unnoticed that in May 2015 the Chinese Communist Party announced a plan, Made in China 2025, whose purpose is to turn the country into a superpower in high-tech manufacturing, ensuring that 70% of the basic resources necessary for this are produced in China. Former US President Donald Trump's trade and technology war with Beijing was essentially a response to this Chinese ambition. Washington no longer conceals his concern that China dominate the geopolitics of the new energy age.
Critical minerals are those that are vital to a country's economy and development, but whose supply may be at risk due to geological scarcity, geopolitical issues, business decisions, or other factors. In this regard, and in the case of the energy transition, the following considerations should be made.
An energy system based on the so-called new technologies differs profoundly from the current one, basically fueled by coal, oil and natural gas. One of the main differences is that electricity-generating solar photovoltaic and wind installations, or electric vehicles, demand more mineral resources than their fossil fuel-powered counterparts. Thus, on average, an electric car multiplies by six the mineral raw materials used by a conventional car, and a wind power plant requires nine times more minerals than a natural gas combined cycle plant. Therefore, since 2010, as the percentage of renewables in the global energy mix has increased, the average amount of minerals needed per unit of generation capacity has increased by 50%.
The types of mineral resources used vary by technology. Lithium, Nickel, Cobalt, Manganese, and Graphite are crucial to battery performance, longevity, and energy density. Rare earth elements are essential for the permanent magnets vital to wind turbines and electric vehicle motors. Electrical networks need a large amount of copper and aluminum, the first of these two elements being a cornerstone for all technologies related to electricity.
The change in the energy system will therefore require a large increase in the demand for these minerals. Depending on the scenario considered, in 2040 and on a global scale, this could multiply between four and six times compared to the current one. In a scenario that meets the goals of the Paris Agreement, the share of such technologies in total mineral demand increases significantly in the next two decades: more than 40% for copper and rare earth elements, 60- 70% for nickel and cobalt, and almost 90% for lithium. Electric vehicles and battery electricity storage have already displaced consumer electronics to become the top lithium consuming technologies, while projections suggest that by 2040 they will also displace stainless steel as the largest nickel end user .
As countries accelerate their efforts to mitigate climate change and improve air quality in their cities, they must also ensure that their energy systems remain resilient and secure. However, the current international energy security mechanisms are designed to offer a rapid response to possible interruptions in supply or occasional increases in oil and gas prices. In this sense, minerals present a different and very specific set of challenges, so that those responsible for energy policies must broaden their horizons of analysis and action, considering the new vulnerabilities associated with the increasing importance of mineral supply for decarbonization. of the energy system. It would be naive to think that in an electrified system and with a great role played by renewables, concerns about price volatility and security of supply will disappear.
Said supply presents multiple weak points that are likely to increase tensions in the markets, price volatility and geopolitical play. Among these points it is worth mentioning:
• The geographical concentration of production and processing is very high. The exploitation and processing activities of many minerals necessary for the energy transition are more concentrated than those of oil and natural gas. Thus, in the case of lithium, cobalt and rare earth elements, the first three countries in the ranking of producing countries control more than three quarters of global extraction and, in some cases, a single country monopolizes more than half of the world total. For example, in 2019 the Democratic Republic of the Congo and China accounted for about 70% and 60% of the world's exploitation of cobalt and rare earth elements, respectively. And the degree of concentration is even higher for processing operations, where China has a strong presence across the board. China's share of global mineral refining is around 35% for nickel, 50-70% for lithium and cobalt, and almost 90% for rare earth elements. This high level of concentration, compounded by the complexity of supply chains, increases the risks that could stem from physical disruptions, trade restrictions or other events in major producing countries.
• The development of mining projects requires a lot of time. It is estimated that, from the moment a deposit is discovered until it is put into production, an average of sixteen years elapses. If mining companies wait for a supply shortfall to materialize before embarking on new projects, it could lead to prolonged periods of shortages and price volatility in the markets.
• The quality of resources is declining. Concerns about critical mineral resources are more about quality than quantity. There is no imminent resource shortage, but in recent years the quality of various mineral deposits has experienced a continued decline. For example, in Chile, the average grade of copper ore has declined by 30% in the last fifteen years. Extracting a metal from a lower grade deposit requires the use of more energy, which translates into increased production costs, greenhouse gas emissions and the volume of waste.
• The scrutiny of companies' environmental and social performance is increasingly demanding. The production and processing of mineral resources has a series of environmental and social impacts that, poorly managed, can harm local communities and interrupt supply. Increasingly, consumers and investors are asking companies to ensure a supply of responsibly and sustainably produced minerals. Otherwise, the market may turn its back on those that do not meet certain standards, and this could stress supply chains.
• Exposure to risks derived from climate change increases. Mining assets are highly exposed to climate risks. For example, copper and lithium exploitations are particularly vulnerable to water stress, given their high water needs, and currently, more than 50% of the production of both elements is concentrated in areas where said stress is high. On the other hand, some of the main producing regions of critical minerals are also at high risk of extreme heat or flooding, making it challenging to ensure reliable and sustainable supplies.
All of these risks are manageable, but that doesn't make them any less real. The way in which governments and companies respond to the challenge will determine whether critical minerals become facilitators of the change towards a new energy model or, on the contrary, a bottleneck in said process.
Mariano Marzo Carpio is Professor Emeritus of the University of Barcelona (UB) and director of the Energy Transition Chair UB-Repsol Foundation.
