The West digs for the next energy battle

Source: The post is based on an article “The West digs for the next energy battle” published in the Live Mint on 20^th July 2022.

Syllabus: GS 3 Infrastructure; Energy

Relevance: Green Energy Transition

News: In the recent summit meetings of the US-EU in Brussels, the EU Council, the G-7, and NATO, it was noticed that energy security figured prominently.

Reasons for the prominence of energy security theme in these meeting

In recent months, Russia’s war on Ukraine and the Western economic sanction imposed on Russia, have led to a new era of the “weaponization of energy” openly.

At the G-7 Summit, the Organisation for Economic Co-operation and Development report on the security of the supply of raw materials was highlighted. The report cautioned that the green energy transition will require a quantum leap in the use of critical minerals, many of which are more geoeconomically concentrated than oil. For example, lithium, bismuth, cobalt, nickel, and rare earth production is concentrated in just three countries.

The transition to Electric Vehicles Technology would require batteries for storage. This could increase lithium demand by 40 times, and cobalt by 30 times by 2040.

Issues with Chinese Dominance

At present, China threatens to use its dominant position in the green energy sector as a weapon.

China is endowed with critical minerals: China controls 50% of global rare earth mining.

Since the 2000s, China has been investing in the solar photovoltaic (PV) industries. The PV sector was subsidized as a strategic sector. In 2022, the International Energy Agency warned that 80% of all the world’s manufacturing stages related to PV, from polysilicon to ingots, wafers, cells, and modules are in China. It has focused on the vertical integration of the industry.

China has invested heavily in all the supply chain links for solar and wind energy. Further, it has plans to do the same for all green energies.   For Example:

China’s Green Finance Committee has reported that China is expected to invest $75 trillion by 2050 in carbon neutrality financing. The investment will range from zero-carbon electricity, hydrogen fuel cells, and carbon capture to many more. The investment will be equivalent to over 10% of China’s gross domestic product every year.

The Western Response

The US/NATO wants to decouple with China in many fields of normal economic and sci-tech cooperation.

At the US-EU Energy Council, it was stated that reliable, affordable, and secure energy can only come from a decarbonized energy mix based largely on renewables”.

The US and EU announced to have “laid the foundations for the rules-based international order”. Further, it was stated that “some of the rules need an update” with high priority given to “protect the planet” and “foster green growth”.

About the Mineral Security Partnership

It is a venture which was announced during a major mining conference in Toronto. It is aimed to bolster critical mineral supply chains. It has also been described as “metallic NATO”.

Members: There are eleven partner countries – US, Canada, Japan, Germany, France, UK, Finland, Norway, Sweden, Korea, Australia along with the European Commission. Some of the countries are geologically well endowed, some are players in mining, some have strengths in refining, processing and trading of minerals, and some lead the R&D on metallurgy for alternatives.

The Mineral Security Partnership has the potential to influence future investments, technological development, and trade flows in energy raw materials.

About NATO’s new Strategic Concept at Madrid

NATO aims at “mitigating strategic vulnerabilities” to counter China’s attempts “to control key technological and industrial sectors, critical infrastructure, strategic materials and supply chains.”

NATO and its invitees to the meeting i.e., Japan, Korea, and Australia are poised to give a new Asian focus to alliance planning.