NEWSLETTER by Alessia Falsarone
There is one important element to the Critical Raw Materials Act published in March by the European Commission. Beyond seeking to strengthen the supply of key raw materials and critical minerals after the disruptions created by the energy crisis. Beyond moves to relaunch mining activities in the region. Beyond competitive practices. It calls for a pragmatic approach to circularity of minerals and defining more clearly the technical hurdles that make recycling efforts not enough.
So far this year, a handful of geopolitically relevant agreements strengthening critical minerals sourcing have been signed outside of the EU. Nearly all of them addressing the relevance of adopting a circular economy strategy to reduce the demand for, and environmental impact of, virgin material extraction and related processes. The US and Japan. Canada and the UK. Saudi Arabia and the UK.
Is digging new mines really the only option?
| The Science of Impact
Critical minerals are minerals that have two characteristics:
- They are essential for modern technologies and industries, and have high economic relevance, and
- They have risks of their supply being disrupted
Their production process involves exploration, mining, processing, manufacturing, and widespread end-use products, which are all affected by geopolitical tensions, human rights violations, and environmental stress.
The result? A vastly complex value chain.
The annual list of critical minerals published by the International Energy Agency (IEA) is a helpful reference.
>>click here to zoom in | Credit to WWF and SINTEF (2022). 2050 net zero scenario pathways by the IEA (2021)
Note on terminology: there are different terms used to refer to minerals essential for modern technology developments. The most commonly used are critical raw materials, critical minerals (many are metals), and rare-earth elements (a specific subgroup of metallic elements which are essential for high tech). For the purposes of this newsletter, we use the term “critical minerals” (CM) to encompass them all.
| Circularity Roadmaps Explained
When it comes to roadmaps addressing opportunities to enhance the circularity of critical minerals, it’s important to notice that they are usually written as bilateral trade agreements, with the export dependence of a country vs. another at their core. They also tend to address only aspects of the circular economy mostly associated with the responsible use and sourcing of minerals, leaving the reduction of demand for primary minerals aside.
The recent perspective of the Netherlands Enterprise Agency (RVO) on CM opportunities in Australia is one example of that. Released earlier this year, it follows the Netherlands’ National Raw Materials Strategy and prioritizes securing critical raw material supply chains in Australia as a valuable partner for the clean energy transition “due to its critical mineral deposits and marked improvement in ESG practices”.
On the other end, Australia holds deposits for a majority of the CM identifies by the IEA (no.1 global position for lithium and no.2 for cobalt), and it’s focused on developing a solid minerals mining and processing industry, seeking collaboration with international partners through off-take agreements and supply contracts. The Critical Minerals Strategy released by the Australian Government in 2022, places a strong effort on building government-to-government and industry-to-industry links with key international players. Not a surprise when we think of how spread out the CM value chain is:
- The Netherlands imports (semi)-finished goods (downstream)
- Australia focuses on exploration and mining
- Malaysia and the US handle refining and processing*
*Yes, China dominates the critical mineral refining industry.
Where does the circular economy come into play in the current quest for securing CM supply chains and adopting the lens of bilateral trade agreements on a developing scenario for mining and processing capabilities?
And more importantly, can we increase the supply of the CMs that have been identified as key to the transition to a low carbon economy without having to dig new mines?
>>click to zoom in | “The Circular Economy and Critical Minerals for the Green Transition” report (2022) by the WWF and Sintef
A landmark report by the WWF and SINTEF finds that the demand for the top CMs affecting the energy transition can be reduced by nearly 60% from now to 2050 when adopting circular economy strategies and funding critical technology innovation. Most importantly, most of the mineral needs for the green transition can be supplied by recycled minerals. But technology choices have a direct effect on mineral demand to begin with.
The government organization Geoscience Australia along with regional academic research hubs have launched the “Atlas of Australian Mine Waste“, a digital map that shows the location of mine waste sites across Australia, including a wide range of mineral information and data relevant to each site. More to come from Jane Thorne and the team at Geoscience Australia as they look to keep expanding the geological information about mine waste itself and analyze the origin of each site’s waste (including which companies operated in the area).
| Investing in the Circular Economy
Investments from foreign companies and governments are deemed essential in mineral-rich countries such as Australia to achieve the planned scale-up of supply chains such as EV batteries. Mining companies are looking specifically for co-investments to avoid bearing the majority of the risk before the start of the project through off-take agreements and supply contracts.
An example of co-investment is Tesla, who stated in 2021 that it would deploy $1 billion AUD a year on battery raw materials from Australia. One of the attractions in Australia, besides its mineral deposits, is its expertise in mining. Ford and Toyota are also co-investing in critical mineral processing in the region.
Caveat on Technology Innovation: the development of low-carbon technologies with low or no critical minerals is still in its early stages. Governments are providing research grants to boost this development and ensure the success of the new technologies to reduce the demand for critical minerals. Many more are needed.
How can private sector investors address due diligence of responsible mining and sourcing of CMs while also advancing their circularity?
Carlota Esguevillas and the team at EdenTree Investment Management have provided an example in the review of their investment in Imerys, a French integrated mineral solutions company rather than a pure-play mining company, operating over 100 deposits worldwide and mine over 30 different minerals used by industries such as electric batteries, construction, and food production.
The site visit of the company’s largest China Clay (Kaolin) mine in Cornwall provided an opportunity to test the company’s efforts with the by-products of the mining operations (a large part of the London 2012 Olympic Stadium was built with by-products from the mine that Carlota visited), and the closed-loop recovery of minerals.
There is also an increasing number of use cases where the ability of companies to add circularity strategies to their existing operations is more economical than creating an entire new process from scratch. Alessandra Hool from the ESM Foundation discusses it as part of the proceedings of the International Round Table on Materials Criticality.
>>click to zoom in | Credit to Mineral Economics volume 35, pages 325–335 (2022)
One important takeaway from the study: yes, the dependence of companies on CMs can be decreased by increasing material efficiency through product lifetime extension and recycling. Yet, recycling is not a silver bullet. It requires innovative technologies and strong R&D capacity, as well as growing demand and predictable raw material prices. Design for recycling improves recyclability, but collaboration among stakeholders is needed to establish transparent material flows.
Going forward, private sector investors may be better off placing more of their efforts in assessing the value of that stakeholder collaboration in bilateral CMs agreements to ensure that any new processes are technologically viable and economically sustainable.
| You don’t want to miss this week
From Rotterdam to Singapore, and Barcelona, this week offers new opportunities to connect with fellow circularity practitioners both in person and in hybrid mode.
Discover, grow and leave your mark!
〉April 19th-20th: Go Circular Business Summit (Rotterdam). Go Circular is an ideal venue to forge partnerships in the plastic circularity realm, covering the entire value chain from (petro)chemical businesses to brand owners. As global authorities work towards a legally binding treaty on plastics, the event features enlightening case study sessions and presentations by distinguished speakers: Monique De Moel for the Port of Rotterdam, and Tjaco Twigt for Sea The Future on setting up non-obvious collaborations; Heikki Färkkilä of Neste, and Kevin J. Quast (Honeywell Plastics Circularity Business) and Felix Jakob (Schenck Process EU) on the role of digital tools for advanced recycling in the plastics ecosystem.
〉April 20th: Circular Economy in a Sustainable World: Electronics and ICT (Singapore). Hosted by KPMG Singapore’s ESG Banking Centre of Excellence Research & Insights (Walter Kuijpers) and MioTech (Fay Wu). The first session, Current and Future Trends of Circular Electronics, will feature change-makers actively working to transform the Singapore economy towards a more circular world. The second session, Growing and Funding Circular Electronics: Perspectives from Companies and Financial Institutions, will highlight insights from electronics start-ups and financial institutions on how businesses can close the financial gap in the circular economy market.
〉April 20th-21st: Circular Economy & Sustainable Businesses @ EU-Startups Summit (Barcelona). The summit is an annual gathering of over 2,000 founders and investors across Europe. This panel discussion will explore the possibilities for the circular economy, what’s fueling its development, and, open up a fascinating discussion about sustainability, impact and successful scaling. Joining the conversation will be Namrata Sandhu, the Co-Founder and CEO of Vaayu, Rob Cassedy, the CEO of Wallapop, Jamie Crummie, the Co-Founder of Too Good To Go and Sacha Michaud, the Co-Founder of Glovo.
| Update from UChicago Circular Economy and Sustainable Business
On April 19th we will be welcoming Owain Griffiths to our practitioner series. Owain has been leading Volvo Cars in its global transformation to becoming a circular business, ensuring that the entire lifecycle of Volvo’s vehicles is optimized for circularity. From closing material loops to understanding impact beyond CO2 to consider water and biodiversity, and developing the 2040 circular business plan, Owain has experienced firsthand how complex circular transformations are across all aspects of business strategy, global operations and supply chain redesign.
Off to another impactful week!
| about
Alessia Falsarone is executive in residence, practitioner faculty at the University of Chicago, where she leads the Circular Economy and Sustainable Business program. The article is based on the author’s newsletter A Week of Circularity from the innovation knowledge hub.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
