Energy policy expert Jason Bordoff says the energy transition is one of the greatest economic opportunities since the Industrial Revolution, World Economic Forum reports.
Investment in renewable energy reached a record $1.3 trillion in 2022, a 70 per cent increase from 2019. This is expected to rise further in the coming years as the global community seeks to reduce greenhouse gas emissions and limit global warming to 1.5°C compared to pre-industrial levels.
Speaking at a special World Economic Forum session on global co-operation, growth and energy for development, Bordoff, founding director of the Centre for Global Energy Policy at Columbia University’s School of International and Public Affairs, said the growing push for renewable energy could shift the centre of global power.
From economic opportunity to the urgent need for sustainable investment in green infrastructure, here is Bordoff’s take on the changing geopolitics of the energy transition.
What is needed for the transition
Bordoff explained:
“We’re going to need a lot of critical minerals for this transition, and you’re going to have certain countries that naturally have an abundance of those. Today, the largest suppliers of oil and gas – the US, Russia and Saudi Arabia – each produce somewhere between 10 and 20% of world supply.”
However, production of critical minerals such as lithium, nickel, cobalt, copper and rare earth elements is now concentrated in individual countries, with these countries sometimes producing more than half of the world’s supply of these elements, Bordoff said. He also added:
Mining today is concentrated in certain places. More than half of cobalt comes from the Congo. More than half of lithium comes from Australia. More than half of rare earths come from China. So there’s a certain number of countries with a very significant position today.
Critical minerals are growing in demand
But while clean energy is growing at an “extraordinary rate,” it is nowhere near the scale needed to reduce emissions and demand for fossil fuels to meet the goals set out in the Paris Agreement, Bordoff said.
This is why the need for these essential minerals is likely to grow. Demand for lithium is widely predicted to increase tenfold or more, according to a World Economic Forum report on future demand for essential minerals.
Bordoff said some countries, such as China, have realised the economic opportunities that come from being at the forefront of green technologies, so they dominate the supply chain for these technologies. He added:
China has a very dominant position today, not in the mining, but in refining and processing. So they have a critical role in the supply chain, but it’s not one based in geologic abundance the way oil is. You can theoretically build refining and processing capability anywhere, so that dominance can be eroded over time with policies to build industrial capability elsewhere. We have not yet started searching around the world or mining at the scale and speed we need. There are a lot of these metals and minerals around the world. It’s just that today, the production of mining tends to happen in certain places rather than others.
Potential geopolitical risks
Bordoff said the wider adoption of green technologies and the transition to a zero-emissions economy will bring geopolitical risks and challenges. He noted:
Today, we’re in a world where some of the geopolitical risks, like conflict and economic fragmentation, are making the transition harder. If we’re not careful about how we go about this transition, it can actually make some of those geopolitical problems worse. This is not a reason to slow down the transition. We need a much, much faster transition. But we need to be really thoughtful and mindful about the foreign policy, national security, and geopolitical implications of this transition. If we’re going to make sure that we don’t trip ourselves up along the way.
Bordoff called on governments and multilateral organisations to join forces to ensure that the capital needed for sustainable deployment of green technologies is deployed quickly, while minimising the risk of geopolitical fragmentation.
He also spoke of supporting countries that have an abundance of the metals and minerals needed for the energy transition. Bordoff added:
I think developed countries need to do a lot more than they have to make a lot of that assistance and finance available.
Bordoff summarised that tax mechanisms, regulation and mandates to enable investment in clean energy can help realise the opportunities of the energy transition, and ensure that companies get even more value from clean energy than from hydrocarbons.
