Shortages of key metals will prevent countries from meeting net-zero emissions goals by 2050 as not enough focus is being paid to the current financing in the resource sector, according to Bank of America.
The net-zero emissions goals set to be achieved by no later than 2050 are in jeopardy because of the dearth of key ‘metals important for future technologies’ (MIFTs). And it all comes down to financing the mining projects for the energy transition.
“The world is only slowly waking up to this threat. And China being the biggest producer of many critical resources exacerbates supply risk for the Western world. The market focus often is mainstream copper and nickel, but we identify 27 MIFTs used in electric vehicles (EVs), renewables and energy storage,” said Bank of America commodity strategists Michael Widmer and Francisco Blanch.
The 27 MIFTs identified by the BofA included lithium, cobalt, nickel, manganese, aluminum, iridium, molybdenum, copper, and more. Use cases listed were everything from powering electric vehicles, wind applications, and energy storage.
One solution to this is more investment. And that means at least doubling mining’s capital expenditures.
“Based on the current resource endowment and market balances, we don’t expect the 1.5°C global warming target to be achieved by 2050: 1.7-1.8°C looks likely. One solution to resolving shortages and constraints, as ever, lies in investment,” Widmer and Blanch said. “To prevent metal shortages and achieve Net Zero, mining CAPEX needs to nearly double.”
The mining industry needs to spend $81 billion annually to 2030, and that is just to avoid shortages to achieve net zero. “It is worth noting that this CAPEX requirement does not even include any demand growth from traditional consumers,” the report said. “Operators are underspending massively, suggesting that CAPEX may need to almost double to $160 billion pa for the world to hit Net Zero by 2050.”
Another solution is new technologies and recycling. Technologies that can help include, lithium iron phosphate batteries for EVs, nuclear power’s contributions, and new production technologies.
Energy transition will not be cheap, but returns on mining investment also look very solid, with the BofA estimating an impressive +94-317%.
“The UN estimates the adaption costs at $140-300BN pa by 2030 in developing countries alone. Based on the mining CAPEX required to achieve Net Zero, although this may simplify it a bit, the return on that investment could be somewhere between +94-317%,” the authors of the report said.
As things stand now, only 38% of carbon dioxide emission reductions could be achieved by 2030. “Looking at this from a different angle, and working various scenarios on the availability of the most constrained metals, i.e. copper, platinum, nickel and lithium, into our calculations, the world would have nearly 28Gt of residual CO2e unabated in 2050 in the most pessimistic scenario. Even in the most optimistic scenario, the emission trajectory would still be far off target, with a residual CO2e balance of 15Gt,” the report stated.
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