Securing The Energy Transition: Building Resilient Critical Mineral Supply Chains
Author: Tobi Olasunkanmi OIaoye
Photo Credit: Abdul Sanderson
Executive summary
The global energy transformation has spotlighted the importance of key minerals such as lithium, cobalt, nickel, graphite, and rare earth elements. These minerals are indispensable to clean energy; lithium and cobalt are essential to electric vehicle batteries. The extraction and processing of these minerals are largely centralized in only a few states, particularly China. This geographic concentration creates strategic dependencies that threaten decarbonization timelines, global economic security, and geopolitical stability. To reduce these risks, this brief suggests the establishment of a Critical Minerals Partnership (CMP) between the United States, the European Union and Japan, and other like-minded partners to coordinate demand signals and harmonize domestic content regulations. The CMP could also engage in blended finance creation to increase non-Chinese refining and recycling capacity and foster inclusive producer alliances with major resource-exporting states to prioritize ESG-based regulations and revenue disclosure. There is no time to lose: global demand for these minerals is increasing, and efforts to coordinate industrial and financial policy have a small window to act before the rising costs of climate action become too great to counter.
The Problem
Clean energy technologies are significantly more mineral-dependent compared to fossil fuel-based systems. The International Energy Agency states that in scenarios compliant with the Paris Agreement, mineral demand in various clean energy sectors may quadruple by 2040 (IEA, 2021). Lithium, cobalt, and nickel are critical minerals for electric vehicle battery packs, wind turbines require rare earth elements in their magnets, and power electronics and energy storage systems need graphite and nickel (IEA, 2021). This increase in dependence may heighten vulnerability in global supply chains.
Concentration risk is a primary concern. More than 80 percent of rare earth and battery minerals are refined in China (IEA, 2022). The recent export ban on gallium and germanium (Reuters, 2023) is an example of how mineral trade can be used as a geopolitical tool. China imposed ban in retaliation for US and allied restrictions on semiconductor exports to China (Hamdani & Belfencha, 2024). Other producers, such as the Democratic Republic of the Congo (DRC), Indonesia, and Chile, likewise have incentives to either impose export bans or renegotiate contracts to increase profits. Further, weak environmental, social, and governance (ESG) policies in mining areas pose risks concerning child labor, ecological degradation, and insufficient regulation.
Key stakeholders and interests
The global energy transition does not merely imply a change in technology; it is a complicated political and economic process influenced by actors with conflicting interests. Consumer governments seeking to achieve net-zero and industrial targets require secure and affordable access to important minerals. Policy instruments, including the US Inflation Reduction Act (IRA) (IRS, 2023) and the EU Critical Raw Materials Act promote internal manufacturing and seek to minimize strategic reliance on monopolistic vendors. These policies have achieved early progress, the IRA has fostered significant investment in domestic battery manufacturing.
Meanwhile, producer states are interested in maximizing national revenue, facilitating local value addition, and protecting resource sovereignty. Nonetheless, they may need to strike a balance between industrial interests and ensuring investor trust, while responding to environmental and governance issues. Private sector stakeholders, including mining companies, refiners, and motor and battery producers, seek predictable regulation, stable investment environments, and sustainable supply chains. Multilateral development banks may play a role in facilitating funding, de-risking initiatives, and ESG policy implementation. Local communities and civil society organizations may seek to promote environmental protection, social justice, and equitable distribution of profits generated by extraction operations.
Such conflicting interests create the potential for structural conflict between consumer security, producer sovereignty, and global efforts to ensure sustainability as the effects of human-caused climate change compound.
Analysis: Why the problem persists
Efforts to diversify refining capacity are financially demanding and lead time intensive, and thus, substituting existing capacity it in the short run is extremely hard. The building of competitive refining facility requires capital expenditures in the hundreds of millions of dollars and highly specialized technical expertise.
Export controls pose an additional risk. They create uncertainty in international markets and makes decarbonization more expensive and complicated in the importing economies. Financial barriers also play a role: refining and processing in midstream are extremely capital-intensive and fluctuating commodity prices do not bode well for private investment prospects. Weak governance or application of ESG principles in certain countries can further discourage potential investors.
The assertiveness of producer-state increases the complexity. Countries like the Democratic Republic of the Congo and Indonesia have export bans which are meant to encourage local industrialization. Nevertheless, such policies will lead to volatility in supply across the globe and investor anxiety. Meanwhile, environmental degradation, water pollution, and human rights concerns are issues that weaken the credibility of the green transition, especially without the harmonization of international ESG standards.
Unlike China’s ban, DRC and Indonesia restrictions are primarily motivated by development goals and the desire to move up the value chain and derive more economic benefit from their resources.
Policy recommendations
Consumer governments and their partners should develop strategies based on diversification and sustainability to mitigate persistent weaknesses in critical mineral supply chains. To create resilience and legitimacy in the energy transition, coordinated alliances, innovative financing, and development of positive producer engagement must replace fragmented national efforts.
Recommendation 1: Establish an Allied Critical Minerals Partnership (CMP)
A CMP would serve as a coordination mechanism among major consumer governments such as the United States, European Union, Japan, South Korea, Australia, and Canada, offering an alternative to a protectionist trade alliance. Its mandate should include harmonizing industrial policies, publishing a joint 5-10 year demand outlook, organizing domestic-content demands, and structuring data sharing. The CMP would reduce uncertainty for investors by transmitting predictable and harmonized demand signals while eliminating unnecessary duplication or relocation of projects. Collective coordination through the partnership would strengthen negotiations with producer states and processing hubs, potentially facilitating more balanced and sustainable deals. G7 members and Australia, collectively the world’s largest mineral-importing economies, could lead the implementation with the ministry of finance, energy, and industry. Multilateral development banks can assist in providing technical analysis. To alleviate the impression of exclusivity, producer countries must be treated as associate partners, and open participation and benefit sharing systems must be incorporated so as to avoid triggering geopolitical counterreactions.
Recommendation 2: Introduce Blended-Finance Refining and Recycling Facility (BFRRF)
A committed BFRRF could leverage public assurances, concessional and climate funds of multilateral development banks, and private co-investment by automakers and battery manufacturers. Investments should target allied or neutral jurisdictions and producer nations that are dedicated to good governance and transparency. Financing may be made conditional on quantifiable ESG standards or outcomes related to the distribution of benefits. The development of battery recycling facilities would also decrease reliance on primary extraction and increase the security of supply in the long run.
Implementation Pathway
Once established, the CMP should hold a summit in the first six months to decide on guiding principles and issue a five-year demand outlook. The governance structures of the BFRRF should also be completed and pilot refining and recycling projects should be initiated over 6-18 months. Standardized ESG monitoring frameworks should be established to increase transparency. In the medium-term (18-36 months), stakeholders should seek to certify, launch transparency scorecards, and connect subsidy access to established CMP standards in order to increase diversification, recycling, and stability of supply chains.
Conclusion
The energy transition is already redefining the geopolitics of international relations. As mineral processing becomes more strategic, suppliers seek to assert specific demands or negotiate more favorable trade deals, while industrial policy conflicts with climate and sustainability priorities. A targeted, time-limited coalition effort that combines synchronized industrial policy with blended finance mechanisms and partnerships of inclusive producers would reduce dependency risk, maintain climate priorities, and elevate social and environmental norms.
References
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Hamdani, M., & Belfencha, I. (2024). Strategic implications of the US-China semiconductor rivalry. Discover global society, 2(1), 67.
International Energy Agency (IEA). (2021). The role of critical minerals in clean energy transitions. Paris: IEA. https://www.iea.org/reports/the-role-of-critical-minerals-in-clean- energy-transitions. (Accessed 07 October 2025).
International Energy Agency (IEA). (2022). World energy outlook 2022. Paris: IEA. Energy Transitionhttps://www.iea.org/reports/world-energy-outlook-2022. (Accessed 07 October 2025).
U.S. Internal Revenue Service (IRS). (2023). Inflation Reduction Act of 2022: Provisions and incentives. Washington, DC: IRS. http://irs.gov/inflation-reduction-act-of-2022. (Accessed 07 October 2025).
Reuters. (2023, July 4). China to restrict exports of chipmaking materials as US mulls new curbs. https://www.reuters.com/markets/commodities/china-restrict-exports-chipmaking- materials-us-mulls-new-curbs-2023-07-04/. (Accessed 06 October 2025).
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