These years G7 The meeting is the middle of a play in three acts – after President Biden’s Summit of Climate Leaders and before the Parties’ Climate Change Conference in Glasgow.
According to UN Climate Minister Patricia Espinosa, the decisions of the G7 in the next few weeks will have a huge impact on the success of COP26, a truly green recovery from the pandemic, and on whether nations achieve their long-term goals of the Paris Agreement.
As such, this G7 can be more momentous than a simple gathering of Western powers reading high-level topics of conversation. Rather, this year’s meeting can determine the contours of a new global economy.
Achieving the Paris goals requires unprecedented use of clean energy technologies on a large scale. This policy demand will create a corresponding and exponential demand for several critical minerals. The International Energy Agency Projects that we would have to quadruple and six-fold the current demand for minerals for clean energy technologies by 2040 to reach net zero by 2050.
Consider the scale of the challenge ahead. Humans have produced around 550 million tons of copper in the past 5,000 years. We will have to produce as much again in the next 25 years to electrify the globe.
However, today’s supply chain is completely inadequate to meet tomorrow’s requirements. First, according to the International Renewable Energy Agency, the greatest reserves of metals and minerals required for renewable technologies are in weak states with poor governance. The World Economic Forum notes that the extraction of minerals for batteries has a high impact on people and the environment, including child labor, health and safety risks associated with informal work, poverty and pollution.
Second, China currently dominates the sourcing, production and processing of major clean energy minerals worldwide and is the undisputed leader in clean technology manufacturing. Beijing controls about 70 percent or more of the lithium-ion battery metals and their processing, 90 percent of the rare earth elements required for both high-tech weapon systems and offshore wind turbines, and produces three-quarters of the world’s solar panels.
The US and European governments have found China’s relative dominance in key clean energy technologies of Forced labor, Environmental damage and unfair trading practices. The Biden government is considering sanctions for these human rights violations, and the EU is trying to incorporate human rights into its Green Deal.
G7 leaders must take this opportunity to address these issues and respond to calls from governments and business to build a more resilient supply chain. The French Finance Minister Bruno Le Maire was warned: “We have to reduce our dependence on some great powers, in particular China, for the supply of certain products” and “strengthen our sovereignty in strategic value chains”.
In its thought-provoking BBC Reith lectures, Mark Carney, former Governor of the Bank of England and current Advisor to the UK Presidency of COP 26, argues that policymakers and businesses need to get past the immediate news cycle, political election and quarterly reporting period to tackle “The Tragedy of the Horizon”. He believes that through greater transparency and climate-related disclosure requirements, society can begin to value the future. But we also have to take into account the lack of values and transparency in today’s supply chain.
It is important to resolve the tragedy of the horizon in terms of climate change. However, free nations must do so while addressing today’s tragedies. The G7 heads of state and government should reorient themselves towards a clean energy economy based on shared values.
As the Financial Times has noted in the past, the US-led one is cross-border Energy Resource Governance Initiative forms the basis for responsible mineral development. Clean energy companies are starting to rethink and redesign their supply chain to accommodate future demand. Yet leading democracies have not yet sent a clear and collective signal that a transparent and free market for clean energy is a priority.
The G7 heads of state and government have the opportunity to define a clear standard that integrates our shared values, rather than inadvertently rewarding market participants who trample them.
Frank R. Fannon was the U.S. First Deputy Secretary of State for Energy Resources and is currently Managing Director of Fannon Global Advisors and Senior Advisor to the Center for Strategic and International Studies
The Commodities Note is an online one cIndustry commentary from the Financial Times