Mineral-Rich Developing Countries Can Drive a Net-Zero Future

Renewable technologies such as battery storage systems, low-carbon hydrogen, solar panels, wind turbines as well as the required expansion of transmission infrastructure, rely on minerals and metals. The energy transition is expected to massively boost demand for these minerals and metals.

The recent Minerals for Climate Action report shows that demand for minerals such as graphite, lithium, and cobalt could increase fivefold by 2050 to meet the growing demand for clean energy technologies. Approximate estimates indicate that more than 3 billion tons of minerals and metals will be needed to realize the Paris Agreement's goals of net-zero greenhouse gas emissions by 2050.

At the same time, the war in Ukraine has disrupted commodity markets, sending energy prices spiraling upward. In turn, high energy prices have increased the cost of producing metals and minerals, driving up the cost of renewable energy.

How will the world meet high mineral demand to build a renewable energy future?

The answer lies in mineral-rich countries in the developing world.  

Over two-thirds of the world's known lithium reserves are in Argentina, Bolivia, and Chile—also known as the "lithium triangle." The Democratic Republic of Congo holds the world's largest cobalt reserves; bauxite reserves are highly concentrated in Brazil, Guinea, Indonesia, and Jamaica.

This growing mineral demand is expected to require an estimated $1.7 trillion in global mining investment. Attracting a share of this investment to low and middle-income countries could contribute to economic growth, jobs, and local development.

While this is a tremendous opportunity, it must be done well and responsibly.

This is no easy task. Higher demand for copper and nickel—combined with the declining ore grades in these minerals—could increase by 50 to 100 percent annual GHG emissions associated with their production.

To attract investors, developing countries need to embrace robust environmental, social, and governance standards that protect communities, and the environment. Developing countries will also have to plan and invest strategically to decarbonize their production and ensure their competitiveness in a low-carbon economy. But decarbonization of the value chain is also expected to reshape mineral supply chains and create new opportunities for value addition via processing and manufacturing.

"The world is changing; consumers are changing. The consumers of future [renewable] technologies at the forefront want responsibly produced products," said Demetrios Papathanasiou, World Bank Global Director for Energy and Extractives, at Mining Indaba 2022. "This means that all inputs, whether mineral, plant, or a service input, need to be responsibly supplied," he concluded.  

Discussions at Mining Indaba 2022 reinforced the message that the responsible, low-carbon sourcing of minerals has become critical to stakeholders along the commodities value chain in Africa and beyond. A well-functioning and sustainable mining sector starts with a strong legal, regulatory and contractual framework that encourages competition and spurs economic development in local districts.

This approach is at the heart of the Climate-Smart Mining Initiative, which was launched jointly in 2019 by the World Bank and IFC to help resource-rich developing countries conduct sustainable mining, processing, and recycling of minerals needed for low-carbon technologies and other critical sectors while minimizing climate and material footprints along their value chain.

The initiative has helped raise awareness about the exponential demand growth in minerals needed for the energy transition, the growing push to decarbonize the mining sector to enhance competitiveness, and the respective implications for developing countries and the private sector. The Initiative has also developed a framework aimed to guide governments and companies as they develop policies, legal frameworks, create incentives and build capacity, required to seize the opportunities arising from renewed mineral demand.    

The opportunities for growth around the green energy transition multiply and mineral-rich developing countries can play a crucial role in realizing a low-carbon, inclusive, and resilient future.