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Sultan Al Jaber from the United Arab Emirates is optimistic: Following the decision of the World Climate Conference in Dubai, the President of COP28 believes it is still realistic for countries to achieve the Paris Climate goals by 2050. On Wednesday, they agreed to move away from fossil fuels such as coal, oil, and gas.
To limit global warming and achieve climate neutrality by 2050, all nations must accelerate the expansion of wind and solar energy and further electrify mobility. However, this poses a problem: Future technologies are incredibly resource-intensive.
For instance, an electric vehicle requires six times more minerals on average compared to a combustion engine vehicle. A report by Swiss bank UBS also highlights that an offshore wind turbine at sea requires nine times more minerals than a conventional gas power plant. As a result, the demand for minerals for new power generation units has increased by 50% since 2010 with the stronger adoption of renewable energy.
The situation becomes even more problematic when considering the water-intensive nature of mining and the emissions it releases. Additionally, geopolitical risks associated with the extraction of finite resources add to the challenges. Therefore, the UBS analyst team, led by Phineas Glover, emphasizes: "Net Zero requires not only an energy transition but also a resource transition."
Ehsan Khoman, Chief Analyst for commodity markets at MUFG Bank, adds in a conversation with Handelsblatt: "The key to the net-zero target is green technologies, and we lack crucial metals." He emphasizes that addressing this issue is essential if the climate goals are to be taken seriously. The demand for the following resources is expected to increase significantly in the coming years – assuming, of course, that climate goals are implemented.
This bluish-silver metal is obtained as a byproduct of aluminum and is very rare. It is mainly used in semiconductor manufacturing, a fundamental component of microchips. Gallium is also crucial for solar cells. The UBS analysts predict that demand for gallium will increase ninefold by 2050 from the current production levels. However, gallium is considered one of the greatest risks in achieving the net-zero goal. According to UBS, no other resource could be as strongly affected by price fluctuations and structural supply gaps. Gallium has low recyclability, low reserves, and poses risks of supply interruptions. Currently, about 90% of supplies come from China, and new export regulations from Beijing add strong geopolitical risk to its availability.
Lithium is primarily used for electric vehicles powered by lithium-ion batteries. Under the Net-Zero scenario, UBS expects demand for the battery metal to increase tenfold by 2050. While lithium, mined in places like Chile and Australia, faces lower geopolitical risks than gallium, it is obtained in very dry mining regions, posing a water risk. Despite the expected supply risks and increased demand, lithium prices have weakened by more than 80% from their all-time high in November of the previous year due to the ongoing supply surplus.
Traditionally used for steel production, vanadium could play a larger role in the energy transition. It is used in Vanadium-Redox-Flow batteries, employed for energy storage in wind farms and solar parks. UBS experts predict that demand for vanadium could increase sevenfold by 2050.
Graphite, with high conductivity, is used in lithium-ion batteries, making it crucial for the shift to electromobility. Under the Net-Zero scenario, UBS expects demand to increase by 2.7 times the current production by 2050. Over 60% of current supply and about 40% of reserves face high risks, with China being the largest producer and exporter.
UBS states that under the Net-Zero scenario, the cumulative demand for zinc, nickel, cobalt, and copper until 2050 would consume more than 100% of the currently known reserves. Zinc, for example, is crucial in wind power for corrosion protection. Copper, an excellent conductor of electricity and heat, is extensively used in electronics. The UBS report indicates that the demand for these metals would surpass the known reserves, especially zinc, which would require 2.5 times the existing reserves. Copper prices, despite being an indicator of economic conditions, recently fell below $8,000 for the first time since May, recovering later due to a significant supply risk with Panama's largest copper mine facing closure.
In conclusion, meeting the ambitious net-zero goals requires not only an overhaul of energy systems but also a comprehensive strategy for the responsible extraction and management of crucial minerals and metals. Geopolitical risks, environmental concerns, and potential supply chain disruptions need careful consideration in the pursuit of a sustainable future.