It may come as a surprise to some, but the coming transition in our energy systems from fossil fuels to renewable sources will require a significant increase in mining operations worldwide. New, greener technologies such as electric vehicles, solar panels, and wind turbines, as well as modern consumer goods like smartphones, all require a range of metals and minerals as crucial components of their manufacturing. Examples include the necessity of cobalt and lithium in batteries for smartphones and energy storage, common metals like aluminum and copper for solar panels, and rare earth elements (REEs), a group of 17 metals used for medical and defense equipment. Demand for many of these metals is projected to grow by over 50% in just the next few years, raising concerns about the security of supply as the world accelerates towards a low-carbon future. This has led many countries to identify lists of minerals deemed critical for national and economic security.
Currently, much of the extraction and refinement of these metals is dominated by China. This is particularly the case for REEs, as China accounts for more than 60% of global production. From a Western point of view, this is problematic on several fronts. Firstly, because several Western countries are engaged in economic disputes with China, there could be an embargo on these critical metals on which they rely, as was attempted with Japan in 2010. Second, China’s economic apparatus is such that the production and extraction of minerals are usually accompanied by large state subsidies, making prices more competitive on world markets than operations elsewhere. Third, China to date has put very few environmental regulations on its mining operations, which has come at the detriment of the environment and has increased emissions.
As consumers, businesses, and governments become more environmentally conscious, there is an opportunity for other producers to take advantage of the high demand for REEs and other critical minerals. Canada is one of the best-placed nations globally to do so. Already an important player in terms of mineral production value, Canada also has large reserves in several critical minerals along with world-leading sustainable mining regulations that have been adopted by other countries.
If Canada wishes to continue having natural resources as a mainstay of its economy, increased mining of critical minerals necessary for the energy transition would be a smart decision. Mining already accounts for 5% of Canadian GDP and could be poised to contribute more, especially as the large oil and gas sector faces continued opposition and an uncertain future. Several factors could determine the success of the mining sector in Canada, including untapped reserves and government investment. Pursuing these could allow Canada to become a true leader in this crucial industry.
As mentioned, China is dominant in the extraction and production of REEs and other critical minerals. Much of its production and refinement comes from importing these materials. In the case of cobalt, China accounts for 77% of global imports, where it is later refined and then used in the assembly of smartphones and other electronics. To maintain this domination, China is investing heavily overseas and has signed exclusive mining rights in African countries with large mineral deposits, such as the Democratic Republic of Congo, which has 50% of the world’s cobalt reserves alone.
This trend, which has seen Chinese-controlled mining operations in Africa double in the past decade, is worrisome from an environmental and human rights point of view. After heavily developing its REE industry with few regulations, China has had to confront the environmental consequences. This includes chemical-ridden tailing ponds leftover from mines that seep into groundwater and threaten population centres. Only now is China starting to enact some regulations and moving to shut down illegal mines over environmental concerns. However, this is not the case for its overseas investments. China does not take into consideration the environmental damage of its imports. This ultimately has an effect on total global emissions given China’s dominant market share in this space.
Additionally, mining operations in places like the DRC are known to have serious human rights concerns, such as the use of child labour, and are a driver of local conflict. Despite this, China does not appear to have any reservations about acquiring exclusive access to these minerals and maintaining its majority share in their production. Combined with state efforts to keep prices artificially low, these environmental and social costs speak to the need for other countries to develop alternative sources of essential minerals to avoid further damage.
Sustainable Mining in Canada
The environmental negligence seen in China and elsewhere in the mining of critical minerals and metals would simply be far less likely to occur in Canada. While this can have the negative effect of driving up commodity prices domestically, there are several advantages to having stringent environmental rules for Canadian mining going forward. In recent years, many businesses have become more aware of the notion of ESG (Environmental, Social, and Governance) when investing and purchasing items in the supply chain. Although Canadian natural resource extraction practices are still not perfect themselves, its globally recognized Towards Sustainable Mining framework makes it well placed to attract further investment in this regard.
Tough environmental protocols have also incentivized the Canadian mining sector to become innovative in its mining operations. Canadian mines were among the first to begin using wind power to provide electricity to mines in remote locations that were not connected to the main grid, replacing dirty and expensive diesel generators. Mines connected to the main grid often have access to sustainable energy sources such as hydro and nuclear power, providing Canadian mines with a further advantage. Combined with innovative technologies like carbon capture, many Canadian mines are now seeking to become carbon-neutral in their operations. Such is the case with the production of nickel in Canada, a critical component for electric vehicles, where in one case a Canadian mine’s emissions were 93% less than the average from the world’s leading producer, Indonesia.
Canada’s success in mining innovation, along with its large reserves in a number of critical minerals, has led to close partnerships with allies. Just last year, Canada and the US finalized a joint action plan on critical mineral collaboration, with the US seeking to secure the supply of metals from a reliable partner. Currently, American supply is reliant on imports for a number of metals including REEs and graphite, both of which have been identified as critical to national security and for which China is the primary supplier. The goal of the plan is to create more localized supply chains and to promote investment in the exploration and extraction of these resources. State measures such as this could help Canadian producers, who on top of foreign competition are often subject to the boom and bust nature that many commodities face.
With climate change and ESG taking centre stage around the world, Canada’s mining sector is well-positioned to move up the ladder of significant world producers. In order for the transition to green, low-carbon technologies to occur, the mining of metals and minerals is essential. Canada already leads the way in minimal environmental impact from these practices and should seek to increase its share, because if it occurs elsewhere, the environment suffers. However, to compete with China and to avoid the risks associated with investing in these volatile commodities, strong state support, and smart policies will be needed. If successful, mining could be a boom to Canada’s economy in an industry that will prove vital for decades to come.