As the world starts to pursue its climate goals more seriously, a global push is underway to increase the manufacture and uptake of electric vehicles. Those vehicles need batteries, which in turn need minerals such as lithium and cobalt. Estimates vary, but many experts predict that the demand for those minerals could rise to many multiples of current production levels over the coming decades – and that surge in demand will have significant implications for several countries that are home to large reserves.
For these countries (among them the Democratic Republic of Congo, the world’s largest cobalt producer, and the “lithium triangle” countries in the South American Andes), projections of rapidly rising demand could herald abundant new public revenues and industrial opportunities. Yet at the same time, the prospect of a sharp increase in demand carries significant challenges for governments and companies alike – including exacerbated risks of corruption and human rights abuse. That will be especially true if mineral-producing countries prove unable to scale-up while simultaneously addressing critical governance challenges.
With the demand for such battery minerals already increasing, many of the actors involved in this sector have rightly focused on addressing the acute issues of violent conflict and human rights abuses. But it’s also important to broaden the conversation to address the sector’s underlying governance.
Among the group were representatives from across the spectrum – automakers, mining companies, battery manufacturing and processing companies, standard-setting investor bodies, civil society organizations, and policy experts. And despite the variety of perspectives at the table, our discussions identified many shared problems and opportunities.
In particular, it became very clear that all parties – from mineral-rich countries at the beginning of the supply chain to car manufacturers at the other end – face a common set of interrelated uncertainties, among them:
how quickly the electrification of transportation will happen
which new technologies will drive it, and the impact of evolving technologies on the need for various raw material inputs
where those materials will come from
how shifts in prices, regulations, and subsidies will shape markets
Together, these unknowns make strategic decision-making a challenge for stakeholders along the entire electric vehicle supply chain, with a particular impact on the long-term planning essential to the good governance of finite natural resources.
One clear priority that emerged was the importance of sharing information. Players across the supply chain face information deficits and misconceptions. Producer governments often don’t clearly understand different market scenarios and what they mean for mineral demand, an information gap that can hinder their efforts to develop effective policies to maximize national value from mining. Battery companies and automakers, meanwhile, often have only patchy and unverified information about what is happening in supplier countries, making it difficult for them to set their strategies for engagement with in-country actors and maximize the benefits of their participation in international initiatives.
This makes it particularly timely that data-driven efforts like the Extractive Industries Transparency Initiative are currently exploring the role of transparency in energy transition debates.
Our discussions also revealed areas of divergence. While all participants cared about responsible and sustainable supply chains, the scale and complexity of supply chain governance makes it challenging to determine where to devote resources.
Governments, companies and other actors ARE confronted with myriad priorities:
The conversation also identified some open questions, especially around market-based incentives for change. Who should drive demand for the improved management of battery minerals – consumers or automakers? Would either be willing to pay a premium for such improvements? What kind of verification of adherence to rigorous standards would facilitate such market pressures, and what body would undertake such verification with sufficient independence? Do investors and environmental, social and governance (ESG) standards have a role to play in incentivizing change?
In the coming months, CLEE and NRGI will wrestle with these and other questions associated with the EV supply chain, and will continue soliciting further inputs from across the supply chain. As producer countries and companies seek a path of growth and development amidst significant uncertainty, multi-stakeholder brainstorming will be critical to strengthening existing efforts and helping build a more sustainable route forward.