Securing technology critical materials for Britain – the legal and regulatory conundrum

Introduction

Concerns about climate change and energy security are driving a global shift towards renewable energy sources and green technologies such as electric vehicles (EVs), energy storage and wind turbines. However, manufacture of these green technology products, which is crucial for achieving climate change targets, depends on the ongoing availability of various critical metals (CMs). ¹ The supply of CMs for the clean energy transition has been identified as one of the key policy challenges in the 2020s ² to achieve Net Zero and address the climate challenge. As the IEA points out, clean energy technologies require far more critical minerals to build than their fossil fuel counterparts: for example, a typical electric car requires six times the mineral inputs of a conventional car and an onshore wind plant requires nine times more mineral resources than a gas-fired plant. ³ The global shift towards green technologies has, therefore, significantly increased CM demand, alongside multiple risks that could hamper CMs supply, such as uneven geological resource reserves, patchy processing distribution and lack of substitutes. Thus, effective strategies are imperative for maintaining supplies to meet the rise in demand, improving the UK's future supply chain resilience and to meet its climate change objectives. ⁴ While other countries have been bolstering their strategic efforts in this area for the last few years, the UK has been slower to respond. It was only in the 2021 Net Zero Strategy that the UK Government began to articulate a clearer strategy surrounding critical minerals ⁵ and recognised the key role these will play in achieving environmental and economic objectives. On the 22 July 2022, the UK Government took this further and released ‘Resilience for the Future: The UK's Critical Minerals Strategy’, ⁶ the UK's first independent policy strategy in this area.

This commentary will analyse the policy challenges raised by the growing demand for CMs needed for the transition to net zero. It is crucial that the UK's strategy looks beyond merely increasing primary supply or new mining, towards strategies to ensure better stewardship of secondary mineral resources already contained in a range of products. It is important to also ensure focus on mid-stream processing. Leveraging the UK's innovation assets can potentially unlock processing primary material from new trade partners, while also encouraging a circular economy of critical materials.

Given the imperative of the climate challenge, approaches to mitigating materials criticality also need to be cognisant of the time implications of different pathways. Mitigating against minerals criticality by developing new or alternative materials may bear fruit in the longer term, and such efforts are essential to long-term sustainability goals. However, in the short term, there is an inevitable need to mobilise greater access to primary resources, and to explore which products contain accessible stocks of technology critical metals (TCMs) that could be recycled for new manufacture. In the case of, for example, electric car batteries, it may take some years to obtain significant end-of-life battery flows, given the relative newness of EVs on the market. For other materials like rare-earth magnets, however, there already exists a supply of magnetic scrap within products that have reached end of life (old computers, motors etc.) which could potentially valorise and deliver additional material to the market.

In the first section, we outline the central importance of CMs to green technologies, and the minerals demand that will be created by the net zero transition. In the second section, we explore circular economy approaches that can supplement primary supply of CMs (e.g. through recycling and/or reuse), as well as demand reduction (e.g. through optimisation of materials use and extending product life). The last section discusses the challenges and opportunities of creating effective governance mechanisms for a CMs circular economy and for new mining. We conclude that creating an enabling regulatory environment for procuring key technology metals will be key to addressing future supply threats for the UK, especially post-Brexit, and that failure to do so will put the UK at significant risk of falling behind in the global race to secure supplies.

Critical materials and green technologies

Methods for assessing material criticality vary and are usually based on a range of inputs, including data or expert judgement. ⁷ There are a number of definitions and terminologies for TCMs, ⁸ with supply risks and economic importance ranking amongst the foremost criteria for assessing criticality. ⁹ Figure 1

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Figure 1.

How the goal and scope influences which materials are critical. Redrawn from the original. ⁹⁸

A material may be considered critical if it has properties (such as being magnetic or emitting light) that are essential for a product and cannot readily be provided by other materials, (which therefore makes it economically important) and is at risk of supply disruption. ¹⁰ In 2020, the EU has published regular lists of ‘critical materials’ which are deemed to have crossed this threshold. ¹¹ Within ‘Critical Materials’ an important subset of materials is ‘TCMs’. This is a more specific and narrow term that focuses exclusively on metals important for technology applications. This term would exclude, for example, materials such as ‘Natural Rubber’ even though this is included in the EU critical materials list. Many of the chemical elements embedded in green technologies are strategically important and becoming increasingly vulnerable to supply risks; these are sometimes referred to broadly as ‘strategic elements’. Critical minerals is another widely used term, although the term ‘minerals’ can be perceived as focussing on primary supply and mining.

Additionally, there are other materials which, whilst not defined as ‘critical’, are still seen as materials of concern. For example, with the growing need for nickel in battery manufacturing, it was identified by the EU as a ‘material of concern’ to keep a watching brief over. ¹² Current political events in Ukraine have further escalated concerns over nickel supply. Interestingly, the UK Government's new strategy, discussed below, positions itself as a ‘Critical Minerals’ (as opposed to the EU's critical materials) Strategy. This new Critical Minerals Strategy in the UK ¹³ has a smaller list of key resources listed than the EU's Critical Materials Communication. The main reasons for the differences in lists are the scope of the list, methodologies applied and the geographical location of the assessor.

It is difficult to make definite estimations of the quantities of different minerals that will be required in the future, as the mineral demands vary by technology, and thus could be affected by factors such as technological innovations, optimisation of materials usage and climate policies. A good illustration is EV batteries, which currently rely on cobalt, but the ongoing development of low-cobalt battery technologies could lead to a future decline in cobalt demand. ¹⁴ However, all analyses agree that deployment of clean energy technologies will ‘supercharge’ the demand of critical materials. ¹⁵ Demand for metals and minerals needed for EVs and battery storage is projected to grow from between 10 times to 30 times the current demand by 2040. ¹⁶ Lithium, nickel, cobalt, manganese and synthetic/high-grade natural carbon will be the predominant materials needed in the EV sphere. In a recent report, the IEA noted that the world would need 50 more lithium, 60 more nickel and 17 times more cobalt by 2030 if countries around the world were to deploy sufficient green technologies to meet their pledged emissions scenarios. ¹⁷

The growth of green hydrogen is expected to lead to a significant rise in demand for nickel and zirconium. The growth in wind power will lead to a manifold increase in need for materials such as copper and rare-earth elements (REEs) such as neodymium, dysprosium and terbium. These REEs are essential to manufacture the high-strength magnets contained in offshore wind generators and high-performance motors for EVs. ¹⁸ Platinum group metals (such as platinum and palladium) are used in vast quantities in catalytic convertor emission abatement systems. Materials such as rhenium and tantalum will be essential for aerospace applications and the future electrification of air transport. Materials such as arsenic, gallium, indium, tellurium and germanium are needed for solar energy devices. Further, assessments around critical materials demand for low-carbon technologies often miss the need for digital and grid technology deployment. The low-carbon energy transition needs ‘smart grids’ to make the new system work effectively. Again, materials demand is often missed when the focus is only on the specific generator or PV panel.

The primary resources from which many TCMs are derived are not uniformly distributed around the globe. The challenge for many countries in the West is the dominance of China in supply chains for many of the key materials. Moreover, the processing capacity needed to transform these raw materials into refined products for industrial use is also not uniformly distributed. Furthermore, disruptions to global supply chains resulting from the Coronavirus pandemic ¹⁹ have posed a challenge to what has been a prevailing narrative of globalisation in the latter half of the twentieth century. The pandemic has highlighted the fragility of global supply chains, ²⁰ and many manufacturers are considering the advantages of ‘reshoring’ ²¹ operations. After a period of growth of global value chains, momentum appears to have stalled ²² and structural shifts appear to point to a new emerging narrative where manufacturers are considering the resilience that can be offered through more domestic capacity. ²³ There are other factors that are also influencing this trend. For example, a growing middle class in countries where labour was hitherto cheap now command higher wages, which diminishes the relative advantages of offshoring operations.

Development of new renewable technologies required for environmental objectives, coupled with supply issues, have resulted in more prominent discussion of material requirements of the energy transition amongst policymakers and energy experts. ²⁴ Critical materials supply for the clean energy transition has been identified as one of the key policy challenges in the 2020s ²⁵ and measures to tackle this are essential to climate change goals. ²⁶ The IEA recently published a dedicated report on the topic. ²⁷ A number of recent reviews focus on the resilience of the material supply chains and identify the energy transition as one of the most important factors driving rapidly growing demand. ²⁸ Time is scarce and the relatively late realisation of the importance of materials supply and demand means that the scope for incremental changes may have passed.

Legal and policy context in the UK

The UK was the first country to set out legal targets to reduce greenhouse gas (GHG) emissions. With the entry into force of the Climate Change Act in 2008, ²⁹ the UK Government was charged with legally binding targets to reduce GHG emissions by at least 80%, compared to a 1990 baseline, by the year 2050. This was followed by many subsequent strategies across different policy areas that contribute to emissions of GHGs. ³⁰ Although this was an ambitious target at the time, the UK Government soon decided to extend its target further; partly to meet global pledges but also to position the UK as a global actor in climate action. In its 2019 Net Zero report, the Climate Change Committee recommended that rather than setting ‘a 97% target that leaves a small residual amount of emissions’, it would be more appropriate to set a net zero target. ³¹ Accordingly, section 1 of the Climate Change Act was subsequently amended in 2019 so that the target was now to achieve net zero GHG emissions by 2050.

In the same vein, the UK Government launched a Ten Point Plan for a Green Industrial Revolution in 2020. ³² This Plan aims not just to address climate change, but also to enable the UK to ‘transform its economy, deliver jobs and growth across the country’. ³³ This will be underpinned by the UK's ability to capitalise on low-carbon technologies, in the expectation that investing in clean technologies will help position the UK as a global leader in green technologies. ³⁴ This discourse clearly maintains that technology is the primary driver not only for environmental change, but also for economic growth. ³⁵ Out of 10 points, seven points directly rely on the use of particular technologies to drive the change.

Of particular importance for this discussion are the three points of the Ten Point Plan which outline UK ambitions to promote technologies which are fundamentally reliant on a steady supply of technology metals. Firstly, the UK Government is committed to advancing offshore wind, its ambition is to ‘quadruple our offshore wind capacity so as to generate more power’. ³⁶ By 2030, the UK aims to produce ‘40GW of offshore wind, including 1GW of innovative floating offshore wind in the windiest parts of UK seas’. ³⁷ In 2018, nearly all of the offshore wind turbines deployed in Europe used permanent magnet motors ³⁸ containing rare-earth materials. Wind turbines require around 0.5kilotons of magnets per GW. ³⁹ As wind turbines scale up and become larger, they make more efficient use of materials. In order to fulfil this ambition, the UK would need to secure around 20 kt of rare-earth magnet material if this demand was to be fulfilled using permanent magnet machines. Secondly, the shift to EVs is another important objective and the UK aims to accelerate the shift to electric mobility by adopting more stringent phase-out deadlines: the sale of new diesel and petrol cars will now end by 2030, while achieving 100% zero emission from 2035. ⁴⁰ As with offshore wind technology, electric cars are heavily dependent on CMs. The fact that other countries are also announcing similar plans and policy measures to move to electric transport means that global competition for EV battery materials is likely to intensify further. Global demand for lithium, for example, is predicted to grow by over 20% a year in the next decade. ⁴¹ Finally, the growth of low-carbon hydrogen relies on platinum group metals; thus, the access to these metals will be necessary for the UK to achieve its ambition to develop ‘5GW of low-carbon hydrogen production capacity by 2030’. ⁴²

The 2021 Net Zero Strategy sets out a clearer strategy surrounding critical minerals and recognises these as key to the growth of clean energy technologies. ⁴³ Due to different risks that may hamper their supply, the Strategy recognises that it is critical to maintain flow within supply chains and improve the UK's future economic resilience. ⁴⁴ Equally, the Net Zero Strategy acknowledges the importance of the mining sector, vouching to support engagement in new and existing markets as well as to facilitate investment and collaboration in extraction and processing opportunities. ⁴⁵ However, some stakeholders have reservations over the use of the term ‘minerals’ in the Strategy as it appears to focus on increasing metals mining or primary supply, and this alone will not be sufficient to address the anticipated short-term demands. Nor would an emphasis on increasing supply solely through increased mining align with environmental and circular economy goals. An environmentally sound strategy, we contend, should also equally emphasise sustainable options to address supply risks. As discussed further in the section Challenges and opportunities surrounding technology metals, primary mining must be supplemented by efforts to increase secondary supply (e.g. through recycling), as well as demand reduction (e.g. through optimisation of materials use and extending product life).

On 04 July 2022, the UK launched the Critical Minerals Intelligence Centre (UKCMIC), ⁴⁶ its first-ever centre to analyse stocks and flows of critical minerals to support and inform the delivery of the 2022 UK Critical Minerals Strategy. ⁴⁷ The Centre, based in Nottingham, will be run by the British Geological Survey and governed by the Department for Business, Energy and Industrial Strategy (BEIS). Funding is available for the CMIC over 3 years, to provide criticality assessments and aid evidence-based policymaking in relation to CMs. The first list of materials considered a high criticality risk for the UK include antimony, bismuth, cobalt, gallium, graphite*, indium, lithium*, magnesium, niobium, palladium, platinum, REEs, silicon, tantalum, tellurium, tin*, tungsten* ⁴⁸ and vanadium. ⁴⁹ The UK has several critical minerals resources. ⁵⁰ Whilst this presents an opportunity, there are also a number of ongoing challenges that will be discussed in the next section.

Challenges and opportunities surrounding technology metals

Concluding remarks on the way forward

As the UK Government moves from its initial Critical Minerals Strategy and begins to translate this into action, wider consideration of product-relevant policies that contain those critical materials is needed to maximise recovery of CMs at the end of product life. This may prove to be an onerous task, as the UK is faced with rapid economic challenges and a shifting geopolitical landscape. Moreover, most other nations around the world are competing for access to the same resources. The geopolitical picture is complicated by conflicts, as some resources and their processing capacity are owned by nations under sanctions, aiming to provide leverage in ongoing geopolitical events. However, in turn these sanctions provide further challenges for the countries imposing them in terms of their own materials security. In developing the delivery plan for the new strategy on critical materials, the UK Government needs to forge new international trade alliances and consider approaches taken by other countries, including environmental and labour safeguards in trading partner countries. Such an approach would build on the lead taken in COP26 and could set a benchmark internationally. The Strategy already considers the actions necessary to achieve international collaboration on critical minerals and considers Environmental & Social Governance (ESG) of materials as one of the key pillars of future critical minerals policy. ⁷⁴

UK policy on critical materials has needed to adapt following leaving the European Union. There are multiple implications for UK Critical Materials Strategy which need careful and informed evaluation. UK critical materials policy as well as product standards that contain those materials were previously developed as a part of EU policy. Although the UK is now free to independently formulate its own policy by creating a new governance regime that may diverge from the EU regime, this may not be an optimal approach. The UK market is highly integrated into the EU market which has consistency of standards and practices. Therefore, any greater regulatory divergence would create market barriers and increase trade friction, neither of which would help the UK economically. In turn this could hamper the UK's efforts to develop sustainable critical materials policies.

Equally important are the timescales needed to develop any new strategy, which can take decades to develop and embed, as seen in the cases of the EU and USA. Given the pressing nature of the climate challenge, it is essential to put in place approaches to mitigate against materials criticality that can be more rapidly implemented and prioritise regulatory intervention accordingly.

At a time when a clear and workable plan is needed to secure global supplies of the TCMs needed by British industry, the UK's plan has been further beset by challenges from unprecedented global events and domestic distractions. ⁷⁵ For some TCMs such as lithium and tungsten, there is the potential to develop indigenous primary sources, for many others there are not. Whilst the mineral wealth under UK soil is defined, the UK can make careful, informed choices to improve supply chain resilience. There is potential to build domestic processing capacity for a range of materials, and the UK should explore the synergies between primary (mined) and secondary (recycled) material inputs into these supply chains. ⁷⁶ In many cases, the same processing technologies exist for both, and if set up correctly, both should be leveraged to support the downstream supply chain. ⁷⁷

However, there is a risk that the UK will fall behind in the race to secure critical materials, as it competes against other larger, more powerful, nations and economic blocks with mature and established policy and governance structures in this area. The UK has released its Critical Minerals Strategy in 2022 and is in the process of establishing the attendant infrastructures to support the delivery of this strategy. States and regional bodies in many other parts of the world have already created institutions and governance bodies to conduct concerted research and development for building the socio-technical infrastructures to address challenges of materials criticality. The table below contains some examples of measures taken across a range of jurisdictions in recent years (however, this is by no means an exhaustive list) Table 1.

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Table 1.

Some key policy actions used by other nations / trade blocs highlighting key organisational units.

European Union	EU adopted a Raw Materials Initiative (RMI) as early as 2008 78 Setting up European Institute for Innovation & Technology (EIT) on Raw Materials 79 Setting up of European Raw Materials Alliance (ERMA), 2021 80 . Many individual EU member states have national critical materials policies complementing EU policy.
United States	Setting up of Critical Materials Institute 81 Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals 82 (2017) Executive Order 13953 (E.O. 13953), Addressing the Threat to the Domestic Supply Chain from Reliance on Critical Minerals from Foreign Adversaries and Supporting the Domestic Mining and Processing Industries (Sep 30, 2020) 83
Japan	Trade agreements with resource rich countries through Japan Oil, Gas and Metals National Corporation (JOGMEC) Investment in R&D capability through, for example, New Energy and Industrial Technology Development Organization (NEDO) 84 and the Japan Science and Technology Agency (JST) 85
United Kingdom	Formation of All Party Parliamentary Group for Critical Minerals 86 Launch of first UK Critical Minerals Intelligence Centre (CMIC) 87 (04 July 2022) Publication of first UK Critical Minerals Strategy 88 (22 July 2022) Joint Statement of Intent between Canada and UK on Collaboration on Critical Minerals 89
China	Dominance in mineral supply and processing across a range of critical materials, by securing access to global resources and building processing capability 90 Has unofficially used dominant position with rare earths as leverage in diplomatic disputes 91
Canada	Setting up of Canadian Critical Materials & Minerals Alliance to support development of the sector 92 Canada / US Joint Action Plan on Critical Materials Collaboration 93
South Korea	South Korea to build up a strategic stockpile of key critical materials 94 Partnership between Australia and South Korea on Critical Materials 95
UN	Following COP26, the UN has convened meetings on ensuring the supply of critical materials for clean technologies to enable climate goals 96 UN Policy Brief (May 2021): ‘Transforming extractive industries for sustainable development’ 97

Finally, social interventions and circular business models are crucial to reduce our demand for critical materials. A proportion of our technology metals demand will be needed for the energy transition, but some demand could be mitigated through better-informed user interventions. This will in the first instance require raising public awareness about critical materials and how they are key to achieving net zero targets. More importantly, consumer habits will need to change through more functional use of products containing critical materials and more accessible recycling schemes for consumers. This will require putting in place a range of regulatory approaches through various product and quality standards and softer approaches through information policies and voluntary schemes that should inform consumers when making their purchase choice and encourage eco-management scheme attractive for large polluters. Currently this demand management is absent from the UK Strategy.