The U.S. is 100 percent import-reliant on 14 minerals and metals that are essential for defense technologies, consumer goods and clean energy technology, and 50 percent or more reliant for another 30, according to the U.S. Geological Survey. These numbers go beyond the recent headlines on rare earths to illustrate fundamental building blocks of the energy transition: lithium, cobalt and nickel for batteries, and materials for solar power and wind turbines. In many of these areas, China has become the dominant world player. The issue is not geological resource constraints, but on whether domestic focus on mining production, processing and manufacturing should be prioritized.
In response to these trends, on May 2, 2019, Senator Lisa Murkowski of Alaska released her American Mineral Security Act into the Senate. This follows other, similar bills over the past few years. In the run-up to this one, she said that, "energy and mineral security are the building blocks of a robust economy." The energy part of that equation is not new to the political realm.
Energy security has, for decades, been high on the agenda of politics and defense, but less so for minerals and metals. In April, Murkowski, along with Senators Joe Manchin and Shelley Moore Capito of West Virginia released a bill in a related genre—the Rare Earth Element Advanced Coal Technologies Act. Much of the framing of both bills is around fighting Chinese dominance.
In May, Chinese state media put out some statements indicating a ramp-up of language around using rare earths supply as a strategic counter to the Trump administration's latest tariffs. The "tools" China has, according to the article, include, "cutting the number of rare-earth mining licenses, raising market access standards for miners, reducing exports of primary rare-earth products, and restricting outbound and inbound investment in related industries." The primary industries mentioned in these Chinese articles are linked to the defense industry, but rare earths are used in many other critical sectors including energy (think oil refining, electric vehicles and wind turbines).
A recent article in Foreign Policy covers some of these issues in the context of an increasingly interconnected world. That essay notes the previous use, in 2010, of limiting rare earth exports to Japan. It is around that time that the price of rare earths spiked and were thrust squarely into the public's attention.
Also imminent is the final report on critical minerals in the U.S. under Executive Order 13817 of 2017. The principal impetus for that order is straightforward: "The United States is heavily reliant on imports of certain mineral commodities that are vital to the Nation's security and economic prosperity. This dependency of the United States on foreign sources creates a strategic vulnerability for both its economy and military to adverse foreign government action, natural disaster, and other events that can disrupt supply of these key minerals." In early June, with little fanfare, the Department of Commerce issued a “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals.” It usefully proposes six action areas across the value chain, including areas of trade, workforce education, R&D, trade, and domestic production.
These issues of supply threats, international relations, security and the related analysis is has been intensely analyzed and addressed in in energy policy—especially in relation to oil. The 1967 and 1973 oil embargoes had global ramifications, and helped usher in an era of oil security that we largely still occupy. The recent big change in energy security has been due to the shale revolution. The U.S. has become the largest producer of crude in the world, and one of the largest exporters of natural gas, through a combination of technology development and supportive regulations and policy. That trend has not gone unnoticed in the mining sector.
About a year ago, in May 2018, the USGS came forward with a draft list of 35 critical minerals. Many of the minerals are essential for the defense or aerospace sectors, and of course, many for energy. The links to energy are increasing as the energy transition—a move toward a low-carbon, battery and solar energy–intensive energy system—continues apace. It also appears clear that whatever form the energy transition takes, it will be more mineral-intensive than in the past.
But how do we measure security or criticality in a meaningful way? The methodology used in the U.S. list essentially boils down to if it is deemed "essential" and if it is estimated to have a supply chain risk. Neither of those hurdles is precise, so proxies are used. That is typical in security assessments of all kinds.
The main proxies are import dependence and production concentration (measured by something called the Herfindahl-Hirschman index, or HHI). The methodology was developed in 2016, and updated in 2017. That used a geometric average of three indicators of supply risk, production growth and market dynamics.
The U.S. is not the only country or region to consider mineral criticality. Japan, the European Union and the Australians have all produced critical minerals lists. Interestingly, Australia's list is not focused so much on their own needs, but which minerals they have deposits of that others consider critical. The European Commission's list started in 2011, and has been revised three times since then. Its methodology, as with the U.S., looks at supply risk and economic importance, and also the Worldwide Governance Indicators.
There does not appear to be any use of the powerful precedents of the measurement efforts around energy security, which has evolved considerably since the 1970's and the various oil crises that took place in the following decades. There is likely something to be learned from both the political and technical approaches to measuring and addressing energy security for the minerals sector—especially now as they become more entwined than ever.
What has become clear over decades of energy security analysis is that a reliance solely on import dependence does not account for the economic impacts of energy supply, nor many other factors, and thus is only one of many elements that need be considered for robust decision making in energy security and resilience. In its formal derivations, energy security requires a rigorous aggregation of dozens of variables that impact energy flows in the real world. One assessment, for example, noted at least 45 separate definitions of energy security presented in the academic and policy literature over the past decade.
Several have used the "four A's" to describe energy security, namely: availability, reliability, affordability and sustainability. Availability refers to the ability for consumers and users to secure energy that they need. It requires an extensive commercial market, buyers and sellers trading goods, parties that agree on terms, as well as sufficient physical resources, investments, technology, and legal and regulatory frameworks to back them up. Others have gone "beyond" these four A's toward a definition of energy security as "low vulnerability of vital energy systems." Most studies and metrics focus on the supply side, but supply side security needs are tightly coupled with the other pillars of energy policy and security, namely environmental considerations, governance and regulation, affordability and industrial competitiveness.
The future will likely bring more globally interdependent markets and systems. As a result, it is useful to further encourage new quantitative and qualitative approaches to the issues of security and criticality—in both minerals and energy. Additionally, some of the tools developed during the early oil shocks, such as the development of the International Energy Agency, the Strategic Petroleum Reserve, and sending the Navy's Fifth Fleet to protect key supply choke points (such as the Strait of Hormuz), are now being considered to protect access to critical materials.
Finally, policy must take into consideration issues across the supply chain from raw materials through final manufacturing in an interconnected world. A narrow focus on domestic “dominance” will not be sufficient, nor useful in addressing mineral criticality. The lessons from the energy sector are attractive as an analogy—a thoughtful application in a very different sector is required.