Home » Why Canada could be the answer to China’s clean tech dominance

Why Canada could be the answer to China’s clean tech dominance

Any critical minerals strategy will have to take into account the long time between discovery and production — 16.5 years by some estimates — and the political and environmental costs of mining and processing.

Canada has the minerals required for electric vehicles, solar panels and other clean-energy technologies. The United States wants them.

One big topic when President Joe Biden sits down this week with Canadian Prime Minister Justin Trudeau will be how the U.S. can help Canada ramp up production of lithium, cobalt, magnesium and other minerals so it can compete with China, which now dominates the market.

Economic dependence on the minerals will grow significantly as the United States and other countries make a hard pivot toward reducing carbon emissions. Without an alternative, there is concern that China could cut off Western customers just as their demand for critical minerals is ramping up.

“We’re going to need American help and financing in both mining and developing and refining them, and we’ll want to get credit under the Paris Climate Agreement for what we’re doing,” said Colin Robertson, a former Canadian diplomat now at the Canadian Global Affairs Institute.

Resource-rich Canada is viewed as a natural partner in an effort to ease dependency on China. Last year, Ottawa joined the U.S.-led Minerals Security Partnership with eight other countries and the European Union. Canadian resources could also come into play as Biden and European Commission President Ursula von der Leyen move ahead with efforts to bolster critical minerals supply chains.

Canada is hoping for an infusion of U.S. government cash that would help jump-start private sector investment to develop new mines and processing facilities. That could include direct funding through a Cold War-era law meant to bolster U.S. national defense.

Any strategy will have to take into account the long time between discovery and production — 16.5 years by some estimates — and the political and environmental costs of mining and processing.

“There are going to be lots of conversations around critical minerals,” Canadian Natural Resources Minister Jonathan Wilkinson told reporters Wednesday on the eve of Biden’s visit. “It’s an area that’s really important, and that is not just cobalt and lithium and graphite, it’s also things like uranium and nuclear fuel cycle.”

While there is potential for the United States to be a globally significant lithium producer, in other areas, such as nickel and graphite, there is likely to be “some real, sustained import dependency moving forward,” said Brad Simmons, a former Energy Department official who is now senior director for energy and resources at BowerGroupAsia.

The Paris-based International Energy Agency estimates that demand for critical minerals could increase by 400 percent to 600 percent by 2040, depending on how aggressively governments move to reduce carbon emissions that contribute to global climate change.

Much of that is driven by the transition to electric vehicles, which require six times (or 600 percent) more mineral inputs than a conventional car. However, an onshore wind facility also requires 9 times (or 900 percent) more mineral resources than a gas-fired plant.

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But ramping up production quickly is not easy. The same IEA report found an average gap of 16.5 years between the discovery of a mineral resource and its first production.

Two countries — Congo and China — accounted for some 70 percent and 60 percent of global production of cobalt and rare earth elements, respectively, in 2019. And China’s dominance of global refining is around 35 percent for nickel, 50 to 70 percent for lithium and cobalt, and nearly 90 percent for rare earth elements, according to the IEA.

Chinese companies also have made substantial investments in overseas assets in Australia, Chile, Congo and Indonesia, giving them more of a power hold.

Canada is the only Western nation that has an abundance of cobalt, graphite, lithium and nickel, which are essential for electric vehicles and their batteries. It also is the world’s second-largest producer of niobium, an important metal for the aerospace industry, and the fourth-largest producer of indium, a key input in semiconductors and many materials needed for advanced vehicle manufacturing, according to Canada’s “critical minerals strategy” released last year.

Still, Ottawa has been looking for a stronger signal that the United States is willing to help Canada develop its critical minerals processing sector, which would create more jobs and income than just mining the minerals, said Christopher Sands, director of the Canada Institute at the Wilson Center, a policy think tank based in Washington.

“The U.S. is likely to be reliant on other nations for critical mineral supply, but that doesn’t mean it has to be reliant on unfriendly nations.”

Timothy Fox, Clearview Energy Partners

“Canada is not interested in just a raw export of those minerals,” agreed Louise Blais, a senior adviser to the Business Council of Canada. “We would like to see them leveraged in a continental way into our supply chain to reinforce our manufacturing sector.”

One possibility is for Canada to receive money under the U.S. Defense Production Act to help develop its critical minerals sectors, Sands said.

That would help Canada attract more private sector investment, especially if the Pentagon were to make a commitment to stockpile certain critical minerals produced in Canada to safeguard against a Chinese embargo.

Biden directed the Defense Department to utilize the Cold War-era DPA nearly a year ago to support the production and processing of minerals, including lithium, nickel, cobalt, graphite and manganese. But additional action has yet to emerge from the directive, said Timothy Fox, vice president and research analyst at ClearView Energy Partners.

“It’s about near-shoring and friend-shoring,” Fox said, adding: “The U.S. is likely to be reliant on other nations for critical mineral supply, but that doesn’t mean it has to be reliant on unfriendly nations.”

Jeff Jurgensen, a Pentagon spokesperson, said in a statement the department continues to utilize authorities under the DPA to ensure the “resilience” of critical supply chains, including electronics, energy storage and minerals and materials.

Through authority under the law, the department “may ensure we have the materials and technologies necessary to maintain and strengthen our national security,” Jurgensen said, adding that Canadian industry is eligible to apply for funding through a current funding opportunity.

The key question going forward is whether the United States and the other governments will provide enough “government financing and de-risking tools to catalyze the investments that are needed to get to the supply growth that we all know is needed for the energy transitions,” Simmons said.

Canada also is concerned about subsidies contained in the U.S. Inflation Reduction Act to attract electric vehicle battery production to the United States, to the detriment of other countries that also want to develop the industry but don’t have as deep pockets, Sands added.

However, that $369 billion in clean energy programs contained in the legislation — along with similar initiatives now being developed by the European Union — is helping to drive the global critical minerals boom.

In response to those pressures, the Canadian government laid out a strategy that identified 31 critical minerals that it wants to help develop and unveiled a budget last year that included $3.11 billion for the sector. Separately, legislation making its way through Parliament that would tighten rules to prevent foreign state-owned companies from scooping up Canadian raw materials firms.

Shortly after Biden’s trip to Ottawa, the Trudeau government will lay out its latest budget plan, and hopes are high that it will include significant additional funding.

“A lot of folks in the sector are keen to see what sort of details or any additional dollars that will be outlined and build off of last year’s federal budget,” said Mary Anne Carter, a principal at Earnscliffe Strategies, a Canadian public relations and advisory firm.

In the U.S., mining industry officials say every tool will be needed to increase security and move away from China — but they also are concerned that the Biden administration’s continued embrace of foreign suppliers comes at the expense of increasing supply domestically.

Katie Sweeney, executive vice president and chief operating officer at the National Mining Association, said solutions will need to include strategic alliances, like with mineral-rich Canada, but should also include increased production and processing in the U.S.

She added that while much of Canada has been mapped, more needs to be done in the U.S., and she pointed to efforts by the Biden administration to delay or sideline domestic mining, including the recent order to protect a large swath of Minnesota lakes and wilderness.

“While we talk a lot about how we need these minerals, we are not doing as much on policy to get them out of the ground,” Sweeney said.

Source: Politico

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