UK Risks National Security and Net Zero Ambitions Without Urgent Action on Critical Minerals

Although the UK Government is aware of the need to establish a secure supply of critical minerals to achieve its economic, net zero and defence ambitions, it will need to refine its approach to change the geopolitical status quo in the near term, writes Jack Green-Morgan, Political Consultant for Energy, Utilities and Net Zero at Dods Political Intelligence.

Context

Critical minerals such as lithium, cobalt and nickel are relatively scarce, but have a wide range of uses. They are particularly important for the technologies needed to transition to net zero, such as electric vehicle batteries, and in modern defence equipment such as missile and navigation systems. In a world undergoing the transition to net zero and increasingly threatened by conflict, there is a growing demand for these minerals. For example, the IEA estimates that “the world is currently on track for a doubling of overall mineral requirements for clean energy technologies by 2040.”

The UK faces problems meeting its demand for critical minerals because it does not produce enough minerals domestically to meet its needs. Mineral deposits and refining capacity are also highly concentrated abroad. For example, for each of the 18 critical minerals identified in the UK Critical Minerals Strategy, “the top three producer countries control between 73 and 98 percent of total global production.” The UK’s supply vulnerabilities are increased further because the “vast majority of critical minerals are concentrated in countries that are autocratic, non-aligned, or actively hostile” to the UK. This creates the risk of unpredictable supply shortages and price shocks which can negatively impact industry and the economy.

There are also concerns over how critical minerals are obtained, due to the environmental and social impacts of the mining industry in some areas. For example, the mining and refining of critical minerals can involve environmental degradation and the use of underpaid or forced labour. Many countries do not want to source minerals derived from environmentally or socially harmful practices because they support environmental protection, sustainable economic development, fair labour laws, and global trade based on “fair competition.”

In this context, the UK wants to address its current vulnerabilities and establish a secure supply of ethically produced critical minerals, which will be needed for future economic and national security, and for the transition to net zero.

However, the scale of the challenge faced by the UK was highlighted in the Critical Minerals Strategy, which said that “the UK currently relies on complex and delicate global supply chains for its rapidly growing demand for critical minerals to fuel its net zero future.”  

The UK Government have taken steps to address this, including by producing a Critical Minerals Strategy, which summarises the UK critical minerals policy based on three pillars: to accelerate the UK’s domestic capabilities, collaborate with international partners, and enhance international markets. This was followed by the Critical Imports and Supply Chains Strategy in January 2024, which outlines that the UK will, among other things, remove critical import barriers and develop the UK’s response to global supply chain shocks.  

However, following a review of the Government’s policy on critical minerals, the Foreign Affairs Committee published a report in December 2023 which found that the Critical Minerals Strategy was “too broad to be helpful as a guide to industry” and did not “convey the sense of urgency and need for immediate, decisive action.”  

The committee said that “the cost of failure would be the loss of key industries.”

Insight

Although the UK Government is aware of the need to establish a secure supply of critical minerals to achieve its economic, net zero and defence ambitions, it will need to refine its approach to change the geopolitical status quo in the near term.

Without sufficient domestic reserves to meet demand, the UK has rightly identified that it is best placed to use international leadership to address challenges around critical mineral supply. However, the currently proposed measures are unlikely to tip the balance away from the Chinese domination of the industry.  

On the positive side, the ambition to use diplomatic levers to diversify supply chains and promote positive ESG developments in the sector will help with both security of supply and improve the ethical extraction and refining of some of the minerals which reach the UK. The government has also empowered itself to reduce the concentration of critical mineral extraction or refining abroad, using the National Security and Investment Act to intervene in the acquisition of critical mineral-related assets linked to the UK economy.  

However, the limited UK influence over the activities of major producers and refiners- which the Foreign Affairs Committee identified as actively hostile in some cases- means that this approach is inherently limited.  

It is also notable that unlike the US and the EU, the UK has not set targets for domestic production or refining, or for industry to meet targets to use domestically produced or refined minerals. Without legislation comparable to the US and the EU, who introduced rules-of-origin and domestic production targets in the Inflation Reduction Act and Critical Raw Materials Act respectively, it is unlikely that UK will rapidly establish a domestic supply chain. This will leave industry reliant on imported critical minerals, along with the accompanying supply reliability and ESG risks.  

The UK Government has also not introduced systematic state subsidies for critical minerals. For example, while China and the US subsidise critical mineral refining, the UK has committed to merely “highlight the advantages” of other economic incentives such as Freeports, Industrial Clusters, and support for Energy-Intensive Industries.

More broadly, the supply and price volatility which threatens the UK’s reliable access to critical minerals tends to deter investment in industries which require critical minerals, such as battery manufacturing. It is important to be attractive to investors in an increasingly competitive market, and it also necessary to attract investment into the industries needed for the UK Government to meet its economic, national security and net zero ambitions.  

In this context, without further intervention, the UK is unlikely to address the inherent vulnerabilities in its critical minerals supply chain. However, with the Department for Business and Trade producing an update to the Critical Minerals Strategy in 2024, there is still time for more focused policy interventions to address these challenges. Therefore, it will be vital for Ministers to heed the advice of the Foreign Affairs Committee and take immediate and decisive action in this policy space.

For further information on critical minerals, the global state of play, and UK policy, please read the report Vital but Vulnerable: UK Critical Minerals Policy

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