New standards needed for clean energy technology supply chain

New standards needed for clean energy technology supply chain

The US and European governments have found that China’s relative dominance in key clean energy technologies is tainted with forced labour, environmental harm, and unfair trade practices. The Biden administration is considering whether to impose sanctions because of these human rights violations, and the EU seeks to integrate human rights in its Green Deal. Second, China currently dominates the sourcing, production, and processing of key clean energy minerals worldwide, and is the undisputed clean tech manufacturing leader. Beijing controls some 70 per cent or more of lithium-ion battery metals and processing, 90 per cent of the rare earth elements needed for both high technology weapons systems and offshore wind turbines, and produces three-quarters of the world’s solar panels. The G7 leaders must take this opportunity to address these issues and answer the calls of governments and the business community to build a more resilient supply chain. French finance minister Bruno Le Maire was pointed on this issue: “We have to decrease our dependence on a couple of large powers, in particular China, for the supply of certain products” and “strengthen our sovereignty in strategic value chains.”

Consider the scale of the challenge before us. In the last 5,000 years, humans produced about 550m tons of copper. We will need to produce that much again in the next 25 years to electrify the globe. Meeting the Paris targets will require an unprecedented deployment of clean energy technologies at scale. This policy-induced demand will trigger a corresponding and exponential demand for several critical minerals. The International Energy Agency projects that we would need to quadruple current mineral requirements for clean energy technologies by 2040 and increase them six-fold to achieve net-zero by 2050.

Yet, today’s supply chain is wholly inadequate to meet tomorrow’s needs. First, the largest reserves of metals and minerals required for renewable technologies are found in weak states with poor governance records, according to the International Renewable Energy Agency. The World Economic Forum notes the high human and environmental toll on extracting minerals for batteries, including child labour, health and safety hazards in informal work, poverty and pollution. As such, this G7 may be more consequential than a simple gathering of western powers reading high-level talking points. Rather, this year’s gathering may set the contours of a new global economy.

The G7 leaders have an opportunity to define a clear standard that integrates our shared values, rather than inadvertently reward market participants who trample them. Frank R Fannon served as the inaugural US Assistant Secretary of State for Energy Resources and is currently managing director of Fannon Global Advisors and a senior adviser to the Center for Strategic and International Studies As the Financial Times has noted in the past, the multi-country, US-led Energy Resources Governance Initiative provides a foundation for responsible mineral development. Clean energy companies are beginning to rethink and redesign their supply chain commensurate with the scale of future demand. Yet, leading democracies have not yet sent a clear and collective signal that prioritises a transparent and free clean energy market.

Striving to remedy the tragedy of the horizon when it comes to climate change is important. Yet free nations must do so while also addressing the tragedies of today. The G7 leaders should reorient toward a clean energy economy based on shared values. In his thought-provoking BBC Reith Lectures, Mark Carney, former Bank of England governor, and current adviser to the UK Presidency of COP 26, argues that policymakers and business must overcome the immediate news cycle, political election, and quarterly reporting period to address “the tragedy of the horizon”. He believes that through greater transparency, and climate-related financial disclosure mandates, society can begin to value the future. Yet, in so doing, we must also consider the lack of values and transparency in today’s supply chain.

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