Leading Economies’ Industrial Policies Risk Reinforcing Inequities in Mineral Value Chains

The first half of 2025 have seen a flurry of actions by countries aiming to capture more economic activity within their borders, including in relation to the mid- and downstream stages of mineral value chains. The U.S. has announced an investigation that could lead to tariffs on processed mineral imports. In response to U.S. tariffs on other imports, China has restricted rare earth mineral exports.  The European Union (EU) has announced the first tranche of strategic mineral processing projects in Europe that will receive support under its Critical Raw Materials Act. Given the pace of activity, a casual observer may get the impression that these government policy actions around mineral value chains are new and only the result of recently increasing trade conflicts. But they are also the latest in a series of actions by various countries aimed at establishing or strengthening their position within mineral value chains.

To support policymaking on mineral value addition in mineral-producing countries, including to provide a better understanding of the competitive landscape, we have surveyed the policies that governments have adopted in recent years (compiling them in this database). We have focused on the copper, lithium and nickel value chains, and identified 123 policies adopted by different countries up to April 2025 that target these value chains (see below for details on our methodology).

High-income countries are using more tools to support mineral value addition

High-income mineral-producing countries—including Australia, Canada, EU member states and the U.S.—have adopted considerably more value-addition policies than low- and middle-income countries. The average high-income producer country has introduced five policies during the surveyed period, while the average middle-income country (excluding China) has introduced two policies, and the average low-income country has introduced only one. China’s policy toolkit is difficult to fully assess due to information challenges, but the country has implemented active industrial policies to support its mineral value chains since the 1980s. High-income non-producing countries have also been active in the past five years. Countries such as France, Germany, Japan, South Korea and the U.K. have introduced an average of five policies during this time.

While counting policies has limitations in revealing countries’ intent, this greater activity by high-income countries reflects the multipronged strategies that many are pursuing. Most policy instruments can be broadly categorized as restrictions and penalties, incentives, or enablers (for more on the different policy categories, see here). During the period under consideration, high-income countries and China predominantly used incentives and enablers (though, as noted above, China introduced export restrictions for several minerals other than copper, lithium and nickel).

Many of these high-income country policies involve the use of public funds to, among other measures: provide direct financial support to value addition facilities in the form of grants, concessional loans, subsidies and sovereign guarantees; invest in energy and transport infrastructure; establish training programs to fill skills gaps; invest in research and development to encourage innovations that could provide a competitive advantage; and stockpile minerals to ensure adequate supply for the country’s mid- and downstream industries. For example, the U.S. has provided concessional loans to several domestic projects, including USD 700 million to a planned lithium refinery, the EU Commission has committed funding of EUR 1.8 billion over the next two years to support European battery manufacturers, and Canada has established a Critical Minerals Infrastructure Fund of CAD 1.5 billion to support projects across the value chain. While we have not counted partnerships as policies, partnerships between high-income countries have also been used to channel public funds to processing projects.

Figure 1. Copper, lithium and nickel value-chain policies introduced by countries of different income status

While low- and middle-income mineral-producing countries benefit from access to minerals, their generally greater infrastructure constraints and weaker industrial base constitute a disadvantage in pursuing mineral value addition. A supportive policy environment is therefore particularly important for such countries. However, given their greater financial constraints, middle- and low-income countries tend to rely on restrictions and penalties, which may require less government spending to implement than policies based on incentives and enablers. Several governments, including Nigeria and Tanzania, have started issuing mining licenses only to companies that commit to value addition. Other governments restrict the export of unprocessed minerals—including Indonesia, Namibia and Zimbabwe—or charge higher taxes on them.

Some low- and middle-income countries also have incentives and enablers in their toolkit. However, these often come in the form of tax incentives or regulatory support, rather than financial support. For example, Madagascar offers a lower royalty rate for processed exports, Indonesia applies lower taxes to value addition projects and the Democratic Republic of the Congo (DRC), Zambia and Tanzania are establishing special economic zones. The DRC and Zambia are also attempting to cooperate on developing a battery value chain. Colombia and Mexico have established, or plan to establish, state-owned enterprises, including to develop value chains.  

The differences in the policies used by countries of different income status mirror a broader trend of high-income countries pursuing more active industrial policies that tend to use public funding, while other countries rely on trade restrictions. That said, high-income countries and China are increasingly also considering restrictions on technology exports. For example, the Chinese government is currently considering imposing export controls on lithium refining and cathode technologies.

Grounding the policy choice in cost-benefit analysis

This competitive landscape of value addition policies underscores the need for mineral-producing countries to adopt clear strategies grounded in robust economic feasibility and cost-benefit analysis to develop domestic mid- or downstream activities. Such analysis is necessary to determine which projects are feasible, desirable and a priority, and how the policy approach used to advance them may change that calculus.

For countries without a clear current comparative advantage, some policies are likely to be insufficient to encourage value addition and may come at significant cost, at least in the short term. Export restrictions on raw commodities, for example, have rarely succeeded in increasing domestic processing—except in contexts where key success factors, such as market power, are already present. More often, such measures have led to a decline in mining activity. For example, Indonesia’s export restrictions on nickel led to companies constructing smelters, while similar restrictions on bauxite reduced bauxite production.

Incentives are likely to be more effective if sufficiently high to make projects commercially viable.  However, some incentives may carry opportunity costs that could outweigh the potential benefits of value addition, particularly for countries with constrained public finances. For example, NRGI analysis found that Ghana’s pursuit of a lithium refinery could generate limited benefits and cost around USD 500 million in foregone government revenue from the corresponding lithium mining project.

Some enabling measures, such as infrastructure investment, also involve trade-offs—but design choices matter. For instance, shared-use infrastructure may raise costs but still improve the cost-benefit calculus. However, not all enablers carry significant costs. Implementing effective regulatory frameworks for mid- and downstream industries to manage environmental, social and corruption risks will be important for attracting investment. Regional cooperation, though not without challenges, can also improve the conditions for value addition.

As governments work to identify and take advantage of strategic opportunities to move along the value chain, they must account for the costs and benefits of different policy options to achieve this, and recalibrate their approach as necessary. Where the short-term costs are high and long-term benefits are likely limited, governments should consider using their finite political capital, time or money in other ways that citizens can benefit from their mineral wealth—for example, taxation of mining projects or supporting local companies to supply goods and services to them.

Partnerships to promote value addition in low- and middle-income countries benefit all parties

Rising mineral demand could be a significant opportunity for low- and middle-income producing countries to (further) develop industries based on these minerals. However, the efforts of high-income countries and China to dominate global mineral value chains pose risks for this aspiration.

Accepting such inequities would be unjust. It may also not even be in the interests of high-income countries and China. It is likely to exacerbate public frustration in low- and middle-income mineral producers, further increasing the risk of mineral supply disruptions and resulting in less global cooperation on supply chain management and other issues, such as the climate crisis. Under the right conditions, value addition in low- and middle-income countries can also reduce costs and emissions from these industries, leading to more efficient and greener value chains. Collaboration with mineral-producing countries can therefore help high-income countries compete, as the world enters a new period of great-power politics.

This means that despite the recent inward turn by some high-income countries and China, it is in their interest to pursue mineral partnerships that support low- and middle-income countries to develop mid- and downstream industries that have a reasonable chance of long-term competitiveness. Such partnerships could involve investment or other forms of financing to reduce capital costs for private investors, as well as technical cooperation, market access (including guaranteed offtake agreements) and exemptions for any future technology export restrictions.

To what extent existing mineral partnerships achieve this aim is unclear. In many cases, they are vague or lack transparency, with little information available on how they support industrial development in mineral-producing countries. There are some exceptions. For example, an encouraging development is the EU’s recent designation of two processing projects in low- and middle-income countries—a Brazilian nickel and cobalt refinery and a Zambian cobalt refinery—as Strategic Projects under the Critical Raw Materials Act. However, it remains uncertain how the EU will support implementation of these projects and secure the public and private funding needed to do so. For now, the main benefit offered to third-country strategic projects is access to an advisory board on financing.

High-income countries and China should also try to avoid distorting global trade unnecessarily through high levels of financial support to their domestic mineral-based industries. They could instead focus on policies that increase productivity, such as strengthening skills, infrastructure and research. Nor should they prevent the reasonable use of industrial policies of low- and middle-income countries. For example, some trade agreements have restricted trading partners’ policy space to offer preferential prices to domestic facilities, while high-income country tariff escalation on finished goods adds further barriers.

As competition to control mineral value chains intensifies, policy choices made today will profoundly shape future economic opportunities for mineral-producing countries. Governments should pursue strategies that are realistic, cost-effective and tailored to their unique circumstances—and foster partnerships that support low- and middle-income countries’ aspirations to move along these value chains. Doing so is not only a matter of fairness; it is a pragmatic path toward more resilient and efficient mineral supply chains for all.

This briefing draws on data from the IEA Policies and Measures Database, the OECD Inventory of Export Restrictions on Industrial Raw Materials, the New Industrial Policy Observatory and our own research. The survey covers 2019 to April 2025 for all countries, with a deeper focus on NRGI program countries and other large producers of copper, lithium and nickel since 2010. We have not accounted for policies that are not specific to mineral value chains: for example, we have not surveyed broader industrial policy that applies to several sectors. We have also only accounted for different levels of policy detail and implementation to a limited extent. 

About the authors

Thomas Scurfield is Africa senior economic analyst at the Natural Resource Governance Institute (NRGI). William Davis is an economic advisor with the Secretariat to the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). Annalena Brokering is currently working with NRGI as a Mercator Fellow on International Affairs.