Mitigating climate change requires an in-depth transformation of our energy system

The Paris Agreement marked a turning point in the fight against global warming. It commits all the signing countries to reduce their greenhouse gas emissions and keep average global warming below two degrees compared to the pre-industrial era. To achieve this goal, the Intergovernmental Panel on Climate Change (IPCC) recently restated that net anthropogenic emissions of CO2 must be significantly reduced from their current level. The goal is clear: the world must not exceed the remaining carbon budget. This global goal has resulted in the definition of carbon neutrality targets that have since been adopted by the European Union (by 2050) and many countries such as China (by 2060), the United States (by 2050), and the United Kingdom (by 2050).

Achieving these targets without a major global shock to global development (population and wealth) implies a drastic reduction in the economy's energy intensity and the CO2 content of the energy used globally[1]. In this perspective, the massive electrification of processes coupled with the decarbonization of the electricity production sector appears as the backbone of many scenarios developed by countries and international organizations. This is the reason why many developed countries announced ambitious decarbonizations of their grids, like the US, which targeted 100% clean generation by 2035.

Clean energy is not infinite – at least from a resource perspective

The substitution of the entire global power plants fleet currently running on fossil fuels[2] by clean assets implies a complete transition in a 20-year timeframe. Renewable energy technologies like solar and wind are often advanced as the key to reducing emissions in the electricity sector, which is today the single largest source of CO2 emissions. For instance, the most recent scenario[3] of the International Energy Agency identifies more than 600 GW of solar PV and 340 GW of wind capacity additions per year. In the detailed pathway to net zero, almost 90% of global electricity generation in 2050 comes from renewable sources. This ambitious shift in the world's energy base towards clean generation technologies is nevertheless limited by the physical capacities of the world’s productive system to provide the necessary elements at the same pace. Indeed, if the world energy supply was previously based on hydrocarbons, decarbonized electricity production technologies are mainly derived from diffuse and lesser dense energy sources. For the same service, they require more resources to be implemented. This aspect is primarily translated by increased material and energetic consumption for the constitution of the production capital.

Therefore, the fight against global warming will impose a new economic paradigm on us: replacing in barely three decades the need for coal, oil, natural gas - on which global economic development has been based since the industrial revolution, with the increasing use of metals. In other words, substituting abundant, cheap, and convenient resources, whose combustion produces significant greenhouse gas emissions (GHG), with other raw materials whose demand is already increasing considerably. As an example, the latest onshore wind turbines require nearly 120,000 tons of steel, 5,000 tons of nickel, 1,500 tons of copper, and nearly 300 tons of rare earth elements per GW of installed capacity. This means a factor of 10 to 50 higher[4] than the material footprint of denser conventional technologies such as nuclear or hydro, excluding the additional grid requirements renewable technologies induce. In a scenario that meets the Paris Agreement goals (NZE), the clean technologies’ share of total demand could rise significantly over the next two decades to over 40% for copper and rare earth elements, 60-70% for nickel and cobalt, and almost 90% for lithium according to the IEA. This raise in mineral resources consumption has the potential to undermine our capacity to fight climate change, create global instabilities, and raise political tensions between producing and consuming countries.

Substituting our current addiction to fossil fuels by an increased dependency on minerals imposes a risky outlook for fighting climate change

First, the state of reserves and the economic and technical limits to production could prevent us from meeting the growth in demand. The prices of certain products could soar, increasing the cost of technologies and slowing down the mass deployment of these technologies. For instance, doubling the cost of lithium increases the battery costs by 6% on average[5] while materials account for more than 20% of renewable energy technologies’ overnight capital costs[6]. Major industrials across the world have already raised this issue: "Unfortunately, at the same time as we are seeing record demand for solar, our industry is contending with increases in steel and shipping costs that are unprecedented both in their magnitude and rate of change", recently started James Fusaro, CEO of Array Technologies Inc. In addition to the dawn of a probable commodity super-cycle, manufacturers are increasingly exposed to geopolitical risks related to the concentration of reserves and production. For example, the Democratic Republic of Congo represents 60% of the world's cobalt production[7] while Chinese companies control much of the extracting and processing infrastructure of critical materials in the world.

In addition, mining and refining processes are very energy, water, and chemicals intensive, which often raise questions about hidden environmental costs. Developing clean technologies without improving upstream processes could cause weaken the consensus around the energy transition. Another example is the land requirements and conflicts of use: in America and Europe, growing local opposition to new projects slows down their development and raises questions on the acceptance of clean-energy policies. Indeed, wind and solar generation facilities require more than 100 times as much land for the same amount of electricity produced[8] compared to conventional or nuclear power plants. The comparison with nuclear is even more severe when accounting for upstream mining and processing as well as indirect requirements for transmission lines.

Finally, if the raw resources constraints have recently gained geopolitical consideration with the post-Covid supply chains disruptions, the issue of decreasing net energy returns remains rarely addressed. Despite recent progress, intermittent renewable technologies still offer low energy returns (EROI, i.e. the ratio between the energy produced and the energy consumed beforehand to produce this energy)estimated between 3 and 8 for solar PV and between 5 and 15 for wind when conventional generation, nuclear and hydropower reach values above 40[9]. The substitution of energy-dense assets by technologies with poor net energy output will thus increase the weight of induced feedback demand effects that were previously negligible. The direct consequence is a reinforcement of the demand and an increased materials consumption that could reach up to 20% by 2050.

Betting on energy-dense sources and energy efficiency is a significant factor of resilience

To palliate for this externality and reduce the risks of conflicts around resources, several solutions and initiatives must be implemented to mitigate resources availability risks and ensure the viability of countries’ emissions reductions strategies. First, managing the demand side of the equation is the most effective way to close the gap. Promoting energy diversification with clean and dense energy sources is the first lever to increase resilience of future capacity expansion plans and would reduce mineral resources consumption. Then, promoting energy efficiency measures to reduce and flexibilise the demand through end-user response will reduce the need for new capacity additions and reserve margin requirements.Managing the demand for electricity and raw materials has also the potential to help mitigate the depletion of affordable reserves: as primary stocks are depleted, the marginal extraction cost and amount of energy needed for extraction increases.

Anticipating the rapid growth of waste volumes, countries should promote effective recycling and innovation policies to enable more efficient material use. A revision of market mechanisms to reward strong environmental and social performance could also lead to greater diversification among supply sources by putting minerals from secondary reserves at a competitive price range. This will result in significant environmental benefits as most of the pollution externality of clean technologies is concentrated in extraction, processing, and manufacturing steps. Imposing environmental and social standards along the value chain could therefore help avoid environmental dumping.

Finally, policymakers must send strong signals regarding the speed of energy transitions and the growth trajectories of major clean energy technologies to ensure investment in necessary extractive activities. For instance, the recent French government announcements provided an ambitious roadmap to 2050 and were consequently followed by indications to incentivize domestic production of critical minerals[10]. Countries also have a significant role to play in fostering investment in the mineral supply chain to support supply diversification. For instance, Europe, highly dependent on imports of minerals and refined products, is already exposed to the Chinese hold on minerals reserves and value chains. Developing domestic and foreign extracting industries is not only necessary to keep up with the demand related to clean technologies but could also help mitigate prices increases by diluting the market power of monopolistic players.

Fostering international coordination and cooperation is a noticeable, global win-win strategy

Given the magnitude of the task, responsible resource management calls for action on an international scale. The creation of an International Minerals Agency would make it possible to establish a shared assessment of reserves across countries and organize a dialogue between producers and consumers, bringing transparency and visibility to an opaque sector as well as global socio-environmental standards. In addition, coordinating investment programs with other international organizations, governments, and the industry would induce significant development opportunities for developing countries while improving the supply perspectives.

Closing the gap between the world’s strengthened climate ambitions and the availability of critical minerals deserves integration of energy resources management challenges in national integrated strategies. Beyond questioning the feasibility of current energy strategies, it also raises concerns over the goals of the transition. If CO2 is the primary factor, the scope of reducing anthropic pressure on our ecosystems spans beyond it: impact on ecosystems at large, including changes in land uses, soil & water pollution, and circularity of resources use should be integrated to provide policymakers with a holistic sustainability assessment of clean energy strategies.

In short, to build tangible and long-term sustainability, countries must avoid the carbon tunnel vision and should consider comprehensive energy strategies designed around resilience and resource efficiency.

Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.

References:

[1] According to the “Kaya” equation, the total level of emissions can be expressed as the product of four factors: population, GDP per capita, energy intensity of the economy and the CO2 content of the energy consumed. With a growing global population and economic development, reducing CO2 emissions requires significant energy efficiency and clean energy measures to compensate for the increasing first two terms of the equation.

Source: K Yamaji et al., An integrated system for CO2/energy/GNP analysis: case studies on economic measures for CO2 reduction in Japan. Workshop on CO2 reduction and removal: Measures for the next century. Vol. 19. International Institute for Applied Systems Analysis Laxenburg, Austria. 1991.

[2]More than 2/3 of the 27 PWh of global electricity produced in 2018 was from coal and natural gas. Source: Key World Energy Statistics 2020, IEA.

[3] IEA (2021), Net Zero by 2050, IEA, Paris https://www.iea.org/reports/net-zero-by-2050

[4] Wales, M., Thiollier, P. L., & Concordel, A. (2021). Énergies bas carbone : l’empreinte matière comparée. Revue Générale Nucléaire, (4), 26-29.

[5]IEA (2021), The Role of Critical Minerals in Clean Energy Transitions, IEA, Paris https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions

[6] Concordel, A. & Thiollier, P. L., (2021). Materials and energy contents of the energy transition.

[7] Raphaël Danino-Perraud, « Géoéconomie des chaînes de valeur : les matières premières minérales de la filière batterie », Études de l’Ifri, Ifri, août 2021.

[8]Based on the direct land requirements defined as the facility land footprints. Source: NEI (2015). Land Requirements for Carbon-Free Technologies.

[9] Wales, M., Thiollier, P. L., & Concordel, A. (2021). Énergies bas carbone : l’empreinte matière comparée.Revue Générale Nucléaire, (4), 26-29.

[10]In a video published by "Les Echos," the Minister of Ecological Transition stated that "if we want to enter a society in which we will emit less greenhouse gases, we must assume the consequences: we need materials like lithium."