Renewable energy, which has the raw materials for the transition within reach

WLWhat we understand, perhaps, from the war in Ukraine: it is short-sighted to rely too much on a single source of energy. Especially if that source is stuffed with nuclear weapons and pressure on Europe’s borders. Thus began a frantic race to free us from Russian gas, oil and coal. We’re off, but it’s going to be a tough and expensive trip. Moreover, the Russian contribution is fundamental, especially in the field of gas. Moscow, at a European demand of about 400 billion cubic meters per year, included about 130. Before the crisis, it supplied up to 160. As expected, the United States, which is one of the largest natural gas producers in the world, has the candidates to offer us, At least in part, a replacement. Biden promised to immediately increase US exports to Europe by 15 billion cubic meters per year, ensuring that At least 50 billion dollars by 2030. It doesn’t seem like a feasible plan, at least according to analysts. “If Europe continues to import LNG from the United States in the first quarter average, it will import at the end of 2022 more than 15 billion cubic metres,” explained Massimo de Oduardo, Vice President of Gas at Wood Mackenzie. Energy Research Corporation.

The US is also trying to stabilize the oil market, speeding up domestic production and demand – with mixed fortunes – from major foreign players doing more. If nothing else, thanks to Western encouragement, Aramco Saudi ArabiaThe largest oil company in the world increases investment to 40-50 billion dollars a year. At some point, the Biden administration also began to persuade Nicolas Maduro, the tyrant of Venezuela, as well as an international pariah, but at the head of a country that in 2005 supplied 4% of the world’s crude oil. Then Biden, seized by bipartisan insults, backed out (“You can’t swap one bloody dictator for another,” they must’ve told him).

climate crisis

However, the gist does not change: governments around the world are rushing to find as many fossil fuels as possible, no matter how polluting the environment or painful for pride. There is also An unexpected return to coalDirty fuel par excellence. In March, the price of a ton reached $ 400, while at the beginning of 2022 it was less than $100. But the competition to get it is very difficult, because we are also trying to move away from Russia. The same goes for oil. Traders often move away from Moscow, regardless of the ban, because they fear that doing business with Russian companies will lead to logistics obstacles, reputational damage and legal troubles. Since the beginning of April, 1.5 million barrels per day of Ural oil has struggled to find buyers, according to calculations by the International Energy Agency.

Meanwhile, the environment is damaged. A recent report from the Intergovernmental Panel on Climate Change (IPCC), the UN’s intergovernmental panel on climate change, says the time window for reaching the UN climate goals is fading. Emissions must peak by 2025. Otherwise, keeping global warming growth below the two-degree limit, the goal of the Paris Accords, becomes impossible. According to many, only one real lesson can be drawn from the war: we must free ourselves from all fossil fuels, not only from Russian fuels, towards the freedom of clean sources (even nuclear power seems to be back in fashion), but above all renewables. The problem is This liberation Eden doesn’t really exist. Green energy needs its fuel. If we want to have a world without net emissions by 2050, by that date wind and solar should account for 70% of energy production, compared to 9% in 2020. All this translates into a huge demand for metals – cobalt, copper, nickel , etc. -Critical to power all green technologies, from electric vehicle batteries to energy supplies from renewable energy sources. It is estimated that the market for those minerals will increase nearly sevenfold by 2030. However, the New World has something similar to the Old World: the raw materials that will make it work are unevenly distributed. Some countries are blessed with enormous deposits, others are less fortunate.

Where are the green goods

Such a transition would bring significant gains to a number of nations – in some poor or authoritarian cases – which may soon be known as the “Green Goods Superpowers”, as defined ineconomic. According to the British League, this club has a good chance of earning more 1.2 trillion dollars a year By 2040. Production, just like hydrocarbons, will be highly concentrated: the top ten countries will have a market share of more than 75% of all transition minerals. In some cases, these are democracies, like Australia – very fortunate, has all the minerals you need – or Chile, which in the Atacama Desert hosts 45% of the world’s lithium reserves and 25% of its copper deposits. Then the poorer democracies, perhaps more susceptible to the distorting effect of sudden influxes of money. For example, Indonesia, which is located on the nickel mountains, and Peru, where there are at least a quarter of the world’s silver reserves and copper is abundant. About 15% of nickel is produced in the Philippines, and 10% in Russia. Mexico has more than 20% of the world’s silver supply.

Among the dictatorships, China stands out, which has a lot of copper and large amounts of aluminum and lithium. China also produces half of the supply of rare earth elements, the most powerful group of minerals needed for a green and digital economy. It hosts, for example, more than 60% of the global annual availability of graphite (which is used for batteries) and vanadium (a superconductor). But the Chinese advantage is not limited to this: Beijing will also assert its dominant position in the processing and refining of these important minerals. Another high resource country is the Congo, which holds 46% of reserves and 70% of global cobalt production.

Petrostats and the new superpowers

Already from these numbers – only one country produces the vast majority of the world’s supply of cobalt, another half of the supply of lithium, and another half of the rare earth elements – we can understand the coercive power that some countries may have. In contrast, the three largest oil producing countries – Russia, Saudi Arabia and the United States – each account for only 10% of global supply. Weaker countries, such as the Congo, may be reluctant to apply pressure with their “mineral” power, but other countries, such as China, have already shown a willingness to do so. Proof of this is what happened in the summer of 2010: Beijing, due to increased friction in the East China Sea, blocked exports of important minerals to Japan and thus affected some key sectors of the technology industry.

But this does not mean the end of the influence of the gods Petrostat. Over the next 10-20 years, the energy transition will provide these countries with an opportunity to wield significant geopolitical and economic power (as long as they do not venture into nefarious foreign policy plans, such as war). This force, Megan L. O’Sullivan and Jason Bordoff write in an article about foreign affairs, will increase before decreasing. Their thesis, at first glance, has an air of paradox. Shouldn’t a global economy powered by renewable energy take the burden off those who export hydrocarbons? In the long term, things will work this way, the researchers reflect, but only towards the end of the transition period, when the world will reach and exceed its net carbon dioxide emissions target. By that time, petro-states could still avoid decline by adapting their economies to the new model. Then there is another factor to consider: Oil and gas will not disappear, even in a decarbonized world. It will be used less, but someone will still have to produce it. In the meantime, the desire to reduce pollution leads to less oil supply than demand. Or even decreases as demand continues to rise, as happened in 2021. All this will lead to cyclical shortages, which in turn will lead to volatility and higher oil and gas prices.

oil future

Petrostat will benefit from it. It is estimated that in 2050 – if the planet truly reaches net zero emissions – about a quarter of the oil and half of the gas used today will be traded. The last producers standing will be those who are able to contain costs. They will provide an increased share of the shrinking pie. according toeconomicAnd “low-cost” OPEC members, including Iran, Iraq and Saudi Arabia (plus Russia), will see their market share increase. From 45% today to 57% in 2040. This will leave them with a lot of geopolitical influence, at least until the demand for hydrocarbons drops to lower levels. Other countries, such as the United States, Brazil and Canada, are set to earn less from fossil fuels, but will be able to compensate for this by taking advantage of massive mineral deposits.

However, some petrostats seem ready to diversify, or at least try. Saudi Arabia, for example, says it wants to attract $170 billion in mining investment by the end of the decade. It also focuses on hydrogen and is one of the first countries to market it across borders, along with Australia, Chile and Japan. Which would allow us to set standards and certifications for this fuel from the start: a huge advantage.

What hinders investments?

As for minerals, the problem is that there are not enough of them. Getting them off the ground is a long and complicated process that requires a lot of money. Here’s what could prevent the emergence of new green superpowers: a lack of investment. It is estimated that the construction of the major mines that have been commissioned in the past decade has taken, on average, 16 years. But new ones will have to be built, and quickly, to meet all the demand in the coming decades. According to Wood Mackenzie’s calculations, the world will have to spend $2 trillion by 2040 on exploring and producing green minerals. This means, explainseconomicwhich only to extract enough copper and nickel will be needed 250-350 billion dollars in expenditures Capital account before 2030. The question arises: If the market is so promising, why is there not enough investment?

One reason is that the mining giants, burned by previous collapses in raw materials, seem to be more cautious. They do not trust them, and are waiting for the price to rise again. They tend to distribute profits to shareholders rather than reinvesting them. Perhaps the difficulty is due to its limited purchasing power, as even large mining companies cannot finance more than one large project at a time. Therefore, the entry of various actors is expected to cause a shock to the sector. For example, Tesla, whose car batteries are based on rare metals, promised to buy future nickel production from mines in Australia, Minnesota and New Caledonia. Private equity firms and state-backed entities tasked with securing energy supplies can also participate in the race. In this, China appears to be way ahead of everyone else. In Kolwezi, in the cobalt territory of the Congo, the Beijing groups captured most of the large commercial deposits, as well as many smaller mines. The same thing happened in Indonesia, where Chinese miners cleared forests to extract nickel. And when hydrocarbons are needed, Russia will supply them. Because of its isolation, Moscow will increasingly turn to the Chinese market to offload its supplies, thus favoring an eventual alliance with Beijing.

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