Economic Survey: Critical minerals are strategic choke-points in energy transition

Metals like lithium, cobalt, nickel, copper and rare earth elements have become new strategic chokepoints in shaping the contours of a low-carbon economy, Chief Economic Advisor V. Anantha Nageswaran stated in the latest Economic Survey.

He explains, this is because they have an influence on energy security, industrial competitiveness, and geopolitical power, as has been observed through several trade restrictions on export of critical minerals by source countries.

Further, the Chief Economic Advisor states as demand for such minerals spur, advanced economies are responding by promoting “standards-based critical mineral markets” that emphasise sustainability, traceability and governance.

It states, while the standards may be necessary, compliance entail “substantial costs”.

Further, according to the CEA, the existing dynamics could prompt three broad challenges for developing countries. The first of these entail presenting barriers because of the associated upfront costs and ongoing expenses that “can be quite steep”.

The other relates to potential “narrowly defined or asymmetrically enforced standards”. They could trap developing countries in the lowest-value segments of supply chains, exporting raw materials whilst the value-added processing and manufacturing continue being concentrated in advanced economies, the CEA observes.

“Sustainability premiums that tend to raise mineral prices without parallel support for finance, technology and capacity building will increase costs to transitioning globally and disproportionately impacting emerging economies,” the CEA stated.