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For decades, the world’s largest group of oil producers has exerted a huge influence on the American economy and the popularity of the US president through control of global oil supplies, with the decisions of the Organization of the Petroleum Exporting Countries determining what US consumers pay. the pump.
As the world transitions to cleaner energy sources, the control of materials needed to power that transition is still possible.
China now dominates global processing of the critical mineral that is now in high demand to make batteries for electric vehicles and renewable energy storage. In an effort to gain more power over the supply chain, US officials have begun negotiating a series of agreements with other countries to expand America’s access to key minerals like lithium, cobalt, nickel and graphite.
But it remains unclear whether the partnership will succeed, or if it will be able to produce anything close to the supply of minerals the United States has projected it will need for a variety of products, including electric cars and batteries to store solar power.
Leaders of Japan, Europe and other developed countries, who met in Hiroshima, agreed that the world’s dependence on China for more than 80 percent of mineral processing makes the country vulnerable to political pressure from Beijing, which has a history of arms supply chains. in times of conflict.
On Saturday, leaders of the Group of 7 countries reiterated the need to manage risks posed by vulnerable mineral supply chains and build more resilient sources. The United States and Australia announced a partnership to share information and coordinate standards and investments to create more responsible and sustainable supply chains.
“This is a big step, from our perspective – a big step in the fight against the climate crisis,” said President Biden on Saturday as he signed the agreement with Australia.
But figuring out how to access all the minerals the United States needs is still a challenge. Many mineral-rich countries have poor environmental and labor standards. And although speeches at the G7 emphasized alliances and partnerships, rich countries still compete for scarce resources.
Japan has signed a critical minerals agreement with the United States, and Europe is in the midst of negotiations. But like the United States, the region has a greater demand for critical minerals to feed its own factories than supplies to spare.
Kirsten Hillman, Canada’s ambassador to the United States, said in an interview that the allied countries have an important partnership in the industry, but they are also, to some extent, commercial competitors. “It’s a partnership, but it’s a partnership with a certain level of tension,” he said.
“It’s a complicated geopolitical economic moment,” Ms. Hillman added. “And we’re all committed to getting to the same place and we’re going to work together to do it, but we’re going to work together to do it in a way that’s also good for our business.”
“We need to create a market for products that are produced and made in a way that is consistent with our values,” he said.
The State Department has moved forward with a “mineral security partnership,” with 13 governments trying to boost public and private investment in critical mineral supply chains. And European officials have encouraged a “buyer’s club” for critical minerals with G7 countries, which could set certain labor and environmental standards for suppliers.
Indonesia, which is the world’s largest nickel producer, has floated the idea of joining other resource-rich nations to create an OPEC-style producer cartel, an arrangement that would try to shift power to suppliers of the mineral.
Indonesia has also approached the United States in recent months to seek similar deals with Japan and the European Union. Biden administration officials are considering whether to grant preferential access to Indonesia, through an independent deal or as part of a US-negotiated trade framework in the Indo-Pacific.
But some US officials have warned that Indonesia’s lagging environmental and labor standards could allow materials to flow to the United States that undermine the country’s new mines, as well as its values. The deal could also spark stiff opposition in Congress, where some lawmakers have criticized the Biden administration’s deal with Japan.
Jake Sullivan, the national security adviser, hinted at the trade in a speech last month, saying that conducting negotiations with critical mineral-producing countries would be necessary, but would raise “difficult questions” about labor practices in those countries and in America. broader environmental goals.
Whether America’s new agreement will be a critical minerals club, more comprehensive negotiations or something else is unclear, Mr Sullivan said: “We are trying to figure it out now.”
Cullen Hendrix, a senior fellow at the Peterson Institute for International Economics, said the Biden administration’s strategy to build a more secure international supply chain for minerals outside of China has so far been “rather inconsistent and insufficient to achieve that goal.”
Mineral demand in the United States has been largely driven by President Biden’s climate legislation, which provides tax incentives for investment in the electric vehicle supply chain, particularly in the final assembly of batteries. But Mr Hendrix said the legislation appeared to be successful in quickly increasing the number of domestic mines that would supply the new plant.
“The United States cannot do this alone,” he said.
Biden officials agreed that securing a secure supply of the minerals needed to power electric vehicle batteries is one of the most important challenges. US officials say global lithium supply will only need to increase 42-fold by 2050 to meet rising demand for electric vehicles.
While innovations in batteries may reduce the need for certain minerals, today, the world faces a dramatic long-term shortage by any estimate. And many officials say Europe’s reliance on Russian energy after the invasion of Ukraine has helped illustrate the dangers of foreign dependence.
The global demand for these materials is fueling a wave of resource nationalism that may only increase. Outside the United States, the European Union, Canada and other governments have also introduced subsidy programs to better compete for mines and new battery factories.
Indonesia has progressively increased its ban on exporting raw nickel ore, which requires it to be processed first in the country. Chile, a major producer of lithium, nationalized its lithium industry in a bid to better control how the resource is developed and distributed, as did Bolivia and Mexico.
And Chinese companies are still investing heavily in acquiring mines and refinery capacity globally.
Now, the Biden administration appears wary of cutting deals with countries with better labor and environmental records. Officials are exploring changes needed to expand US capacity, such as a faster permitting process for mines, as well as closer partnerships with mineral-rich allies, such as Canada, Australia and Chile.
On Saturday, the White House said it plans to ask Congress to add Australia to the list of countries where the Pentagon can fund critical minerals projects, a criteria that currently applies only to Canada.
Todd Malan, chief external affairs officer at Talon Metals, which proposed a nickel mine in Minnesota to supply Tesla’s production in North America, said it would add key allies like Australia, which has high production standards in terms of the environment, labor rights and Indigenous participation. , to that list as a “smart move.”
But Mr. Malan said expanding the list of countries that would benefit under the administration’s new climate law beyond countries with similar labor and environmental standards could undermine efforts to develop stronger supply chains in the United States.
“If you start opening the door to Indonesia and the Philippines or other places that don’t have common standards, we will see that there is no enthusiasm in Congress to give incentives to domestic supply chains and friends for batteries. ” he said.
However, some US officials argue that the supply of critical minerals in rich countries with high labor and environmental standards will not be enough to meet demand, and that failure to make new agreements with resource-rich countries in Africa and Asia could leave The United States is high. vulnerable.
While the Biden administration wants to speed up the permitting process in the United States for new mines, getting approval for the project could still take years, if not decades. Auto companies, a major employer in the US, have also warned of shortages of battery materials and argued for arrangements that would offer flexibility and lower prices.
The G7 countries, together with countries with free trade agreements of the United States, produce 30 percent of the world’s lithium chemicals and about 20 percent of refined cobalt and nickel, but only 1 percent of natural flake graphite, according to estimates. by Adam Megginson, price analyst at Benchmark Mineral Intelligence.
Jennifer Harris, a former Biden White House official who worked on the critical minerals strategy, said that the country needs to develop and allow domestic mines faster, but the United States also needs a new framework for multinational negotiations that includes major countries. mineral exporter.
The government could also set up a program to store minerals like lithium when prices fall, which would give miners more assurance that they would find a purpose for their products, he said.
“There’s a lot to be done if it’s a ‘both/and’ world,” he said. “The challenge is that we have to be responsible for pulling more rocks out of the ground yesterday.”
Jim Tankersley contributed reports from Hiroshima, Japan.
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