Image Credit: “What are critical materials and critical minerals?” Available at Yahoo Images (11/15/2024).
As the intensifying impacts of climate change bring increasingly severe and unpredictable weather patterns, the demand for critical minerals needed in clean energy technologies is growing rapidly. This pressing topic will be at the forefront of discussions at the 29th United Nations Climate Change Conference (COP29) in Baku, Azerbaijan. The focus will be on ensuring that these critical energy transition minerals play a key role in updating global trade practices, fostering economic diversification, and helping developing nations escape cycles of commodity dependence.
Developing countries that are rich in critical minerals are uniquely positioned to benefit from the dual trends of energy transition and digital economic growth. However, while digitalization can propel economic development and create new opportunities, it also presents significant environmental challenges. Increased digital activity risks accelerating the depletion of finite natural resources, placing higher energy and water consumption. Therefore, developing nations must navigate the digital transformation carefully, harnessing its benefits for sustainable growth while actively mitigating adverse environmental impacts.
A comprehensive approach is essential, advocating a shift towards a circular digital economy that prioritizes responsible consumption, renewable energy use, and effective electronic waste management. This approach aligns economic development with environmental sustainability. Minerals such as lithium, essential for electric vehicle batteries, and selenium, used in solar technology, will be particularly in demand.
The surge in the demand for critical minerals is a double-edged sword, presenting both vast opportunities and considerable challenges. The global community must collaborate to create strategic, equitable policies that guide engagement in the expanding minerals market. Commodity dependence—a condition where over 60% of a country's export revenue comes from raw materials—plagues nearly 95 developing nations, representing almost half the United Nations member states. The risk lies in failing to convert mineral wealth into broader economic benefits. Yet, mineral-rich developing countries hold the potential to transform their economies by increasing local value addition and expanding into midstream and downstream sectors, offering a hopeful path forward.
Fostering local and regional value chains promotes equitable distribution of benefits, boosts energy access, and supports sustainable economic growth. For countries to leverage their natural resources effectively and avoid the pitfalls of commodity dependence, they must urgently strive to ascend the global value chain. This involves economic diversification supported by infrastructure investments and industrial policies that promote the use of critical minerals for green industrialization. Such strategies can enhance productive capabilities, create jobs, and build local expertise.
Global cooperation is key to enabling these transitions. The international community must create conditions that support fair trade, technological transfers, and robust investment in sustainable infrastructure. A renewed focus on multilateral approaches is crucial for helping developing countries avoid the "commodity trap," where dependence on raw material exports leads to economic instability and social inequality. UN data reveals that 66% of small island developing states, 83% of the least developed countries, and 85% of landlocked nations rely heavily on commodities. Alarmingly, the number of commodity-dependent countries has increased by 15 over the past 15 years, illustrating that the problem is worsening.
Urgent action is needed to address the global investment gap in critical mineral projects. The current investment rate in these projects must be significantly increased to meet the demand for a net-zero future. According to UN Trade and Development, there are 110 new mining projects globally, valued at $39 billion, with $22 billion allocated to projects in developing countries. However, achieving the net-zero emissions goal by 2030 will require a substantial increase in investments, potentially up to $450 billion. The shortfall in funding—particularly for copper and nickel, which comprise 36% and 16% of the gap, respectively—poses a serious threat to our progress.
Some nations have made strides in adding value locally. For example, by processing cobalt locally, the Democratic Republic of the Congo has nearly tripled the value of its exports, reaching $6 billion in 2022, up from just $167 million for unprocessed cobalt. However, such successes need to be scaled across developing countries to build resilience and economic stability. A fair and inclusive trade system is not just necessary, it's imperative for these countries to participate effectively in the global value chain. The current trade regime, challenged by rising protectionism and subsidy-driven industrial policies that favor wealthier nations, needs urgent reform. Relying on trade regimes shaped by geopolitical competition could lead to a fragmented and inequitable system, highlighting the need for systemic change.
To transform the global trade landscape, the world must push for a multilateral update to the trading system through the World Trade Organization and the United Nations. This effort should link trade policies directly with development goals, ensuring that mineral-rich developing countries can harness their resources equitably and sustainably.
Focusing on justice and equity is vital for leveraging critical energy transition minerals. The UN Secretary-General’s Panel on Critical Energy Transition Minerals, supported by agencies including UNCTAD, UNEP, and other international bodies, has emphasized the importance of incorporating people-centered and planet-friendly policies. This involves promoting fairness and sustainability throughout the entire value chain, from extraction and refining to manufacturing and recycling. The panel has recommended establishing a high-level advisory group to foster shared learning, policy alignment, and multi-stakeholder dialogue among resource-rich nations.
UNCTAD's role in this landscape is to support mineral-rich developing countries by promoting local value addition, job creation, and economic diversification. The organization advocates for transparent, accountable frameworks across the mineral value chain and champions global traceability and due diligence standards. UNCTAD aims to help these nations enhance their processing and manufacturing capacities by facilitating access to technology, expertise, and financial support.
Moreover, UNCTAD continues to press for reduced barriers to global markets and guides member states in navigating complex international trade rules. The organization’s support extends to establishing governance frameworks that attract responsible foreign investment and ensuring that revenues from mineral exports are reinvested into national development strategies that align with sustainability and equity.
In conclusion, developing a resilient and inclusive global minerals market requires coordinated international action. With comprehensive strategies that promote value addition, equitable benefit-sharing, and sustainable practices, developing nations can harness their critical mineral resources for long-term prosperity, contributing to both global climate goals and local economic empowerment.
Comments