Ten Red Flags for Corruption Risk in Transition Minerals Licensing and Contracting

As the world moves away from fossil fuels, there is a growing demand for renewable energy technologies—and the minerals and metals needed to build them. To reach net zero globally by 2050, the International Energy Agency estimates that the world will require six times more mineral inputs in 2040 than in 2021. For some minerals, the demand could even reach 30 times current levels. Demand remained strong in 2023, despite more volatility in prices. While the development of new technologies or policies to reduce consumption and increase circularity could have a crucial mitigating impact on this demand, the coming decades will no doubt see many new mines come online.

As demand for these essential materials booms, there is risk of a corresponding increase in corruption, with harmful impacts on communities and nature, the state budgets of mining countries, and humanity’s collective ability to realise a just energy transition. In past commodity booms, fast-paced dealmaking and the promise of windfall profits encouraged graft and self-dealing. At the same time, the scale and pace of activity hampered the ability of oversight actors to keep pace with developments in the sector, making it harder to spot corrupt behavior. These problems could easily repeat themselves in transition mineral projects, not least given the added pressure of tackling the climate crisis.

Other characteristics of the current mineral boom could further increase corruption risks. First, NRGI’s research finds that many players in today’s transition mineral supply chains are assuming new roles in different stages of the supply chain and negotiating unprecedented deals, such as in cobalt supply chains.

As offtakers and consumer product companies manage unfamiliar risks and dominate multiple stages of the supply chain, their anticorruption processes may be poorly equipped, perhaps even intentionally, to address the challenges posed in the extraction and processing of transition minerals. 

Second, reserves of key transition minerals are concentrated in countries that have struggled to control corruption. Transparency International Australia identified that as much as 94 percent of rare earth reserves and 70 percent of cobalt reserves are found in countries that score poorly on Transparency International’s Corruption Perceptions Index. Some minerals, such as rare earth elements, are found in countries with contested governments or ongoing violent conflict.

Corruption in mineral supply chains threatens a just energy transition both by increasing the risk of harms associated with mining, and delaying and disrupting the supply of minerals needed to deliver the necessary scale-up in renewable technologies required to fight climate change. Taking steps now to identify, prevent and redress corruption can help avoid the mistakes and harmful outcomes of the past, as well as new harms, lost opportunities and the reproduction of inequities.