—ResourcingtheEnergyTransition:MakingtheWorldGoRoundGeographicalandgeopoliticalconstraintstothesupplyofresourcescriticaltotheenergytransitioncallforacirculareconomysolution.March2021KPMGInternational—home.kpmg/IMPACT2©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.-FromOPECto‘OMEC’1:thenewglobalenergyecosystemAnenergytransitionisoccurringthatreliesuponnewsourcesofpowerandwilldrasticallyredrawtheglobalenergyandmineralsmarket–witheconomic,environmentalandgeopoliticalconsequences.Energyis,onceagain,atthecenteroftheneweconomyandgeopoliticallandscape.Withthepastfiveyearsthewarmestonrecord2,countriesarescramblingtomeettheambitioustargetsestablishedattheParisClimateAgreementin2015.Thewidelyacceptedtargetistolimittheincreaseinglobaltemperaturesto1.5degreesor2degreesatmost;nineofthetop10globaleconomiestodayhaveeitherannouncednetzeroplansorcommittedtodoingso.Globalfirmsandfinancialinstitutionsaresettingtheirownsimilarlyambitiousgoals-KPMGamongmanyothers,haspledgedtobecomeanet-zerocarbonorganizationwithinthenextdecade.Meetingthesetargetsmeansdecarbonizing3theenergysector–quickly.Thenecessaryreductioningreenhousegasemissions(GHGs)impliedbythesetargetscanonlybemetthroughthetransitionoftheglobaleconomyfromonebasedonfossilfuels,toonelargelypoweredbyrenewableandloworzero-carbonproductionandconsumptionofenergy.Netzeroagendasadoptedbyenergy-intensiveeconomieswillnecessarilyrequirelarge-scaleroll-outsofrenewableenergytechnologiestoeliminateemissionsfrompowergenerationanddecarbonizetheworld’smanufacturingandtransportsectorsthatcurrentlyrelyoncoal,oilandgas.Butthereisanunderappreciatedrisktotheenergytransition:thesupplyofcleanenergydependsonminednaturalresources,whicharesteepedingeological,geopoliticalandgovernancechallenges.Theworld’sattentionhasbeenfocusedonthecostsofrenewabletechnologiesthemselvesandcomparativelylittleattentionhasbeenpaidtothesupplychainthatmakethosetechnologiespossible.Theverybeginningofthatsupplychain–thesourcingofmetals,mineralsandabioticmaterials(‘resources’)–couldturnouttobetheweakestlink.Somewhatcounter-intuitively,thecoreissueisnotnecessarilyoneofquantityoftheminerals;globalknownreservesareinfactsufficienttomeetcurrentprojectionsofdemandformanyoftheseresources.Nearlythree-quartersoftotalglobalGHGs(73.2%)comefromtheenergysector(electricity,heatandtransport)4.Essential,butnotcritical?Demandforgraphite(usedtobuildanodesinautomotive,gridanddecentralizedbatteries)ispredictedbytheWorldBanktogrowthemostinpercentagetermsasaresultoftheenergytransition(bynearly500%5)–butdemandcouldtheoreticallybemetthroughexistingreserves(sittingat440%ofanticipateddemand).4.5milliontonsannuallyor68.8milliontonsincumulativedemandby205071.1million320million8tonsproducedReservesin202061Freshlymintedacronymfor‘OrganisationofMineralExportingCountries’–thisgroupingmaynotyetexist,butthepointremains:geopoliticalpowercouldshiftfromoil-dominatedcountriestocriticalmetal-dominatedcountries.2Climatechange:2020wasthejointhottestyearonrecord(2021)NewScientist.3Reductionofcarbonemissions.42016figuresbasedoncarbondioxideequivalents.Emissionsbysector(2020)OurWorldinData.5From2018productionlevels.6Graphitedatasheet–mineralcommoditiessummaries(2021)USGS.7Aconservativeestimatebasedonenergytechnologiesonly.MineralsforClimateAction:TheMineralIntensityoftheCleanEnergyTransition(2020)TheWorldBank(‘WorldBankReport2020’).8Anequallyconservativeestimatebasedonglobalmineproductionandreserves;inferredresourcesofrecoverablegraphiteexceed800milliontons.Graphitedatasheet–mineralcommoditiessummaries(2021)USGS.3©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.RefractoriesElectronicsDespitethis,futuresupplyfacestwokeyrisks:Extractionandproductionwillfaceincreasingscrutinyfromdownstreamindustries,investorsandthepublicoverenvironmental,socialandgovernance(ESG)issues;andEvenasthepoliticalagendaimpactsthe‘steepness’ofdemand(inpaceandvolume),accesstothese‘strategicresources’willbepoliticizedinthenameofnationalsecuritygiventhecentralityoftheirusetobroadereconomicdevelopmentandtechnologicalinnovation,aswellastheenergytransition.Giventhematerialintensityoflow-carbontechnologies,anypotentialdemand-supplygapsorconstraintscouldimpactthespeedandscaleatwhichcertaintechnologiesareabletobedeployed9.Assuch,abroadrangeofindustrieswillbeexposedtotheterrestrial,oceanicandeconomicrisksassociatedwiththeproductionanduseoftheseresources.Sectorsdependentongreentechnologiesandenergystoragesolutions,suchasinfrastructure,transportandautomotive,oronthealternateapplicationofcross-cuttingcriticalresources,suchasindustrialmanufacturingandlifesciences,willneedtomanageandassesstheseriskstoensuresupplychainresiliency.Inthefollowingpages,weexplorespecificgeographicandgeopoliticalfactorsthatcaninfluencecomparativedemand,availabilityandproductionoftheseresources–turningthemfrom‘essential’totheenergytransitionto‘critical’forbusinessoperations.Butunlikethe‘old’energysector,thereisacircularsolution;theredesignofproductsalongsidethereuse,recyclingandrepurposingoftheseresourcescanrelievethepressureoncommoditysuppliestomeetdemand–ensuringtherapidpaceoftheenergytransition,transformationofrelatedindustries,andreductionintemperaturerisesglobally.Geographicdominanceofsupply2020Production(%total)Estimateddemand(%total)LithiumCobaltGraphiteVanadiumIndiumBatteriesSteelOtherDRCongoJapanMozambiqueRussiaSouthAfricaSouthKoreaUnitedStatesOtherAustraliaBrazilChileChinaLithiumCobaltGraphiteVanadiumIndiumDemandbreakdownsareestimatesonlybasedonpubliclyavailableinformationandmaynotberepresentativeof2020figures.Sources:KPMG;USGS;NREL;GEMC;Roskill;CSAGlobal;DERA.“Thecirculareconomyandclimatechangemitigationareintrinsicallylinked.Whilegreatercircularitywillreduceemissions,it’salsocriticaltoensurethattherapidlyexpandingrenewableenergygridisdesigned,installedanddeployedusingregenerativeprinciples.Wemustavoidcreatinganenergyinfrastructurewastecrisisin20yearswhilesolvingtoday’sclimateemergency.”–FedericoMerlo,ManagingDirector,WorldBusinessCouncilforSustainableDevelopment9WorldBankReport(2020).4©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.From‘essential’totheenergytransition…Lowcarbontechnologies,includingthoseenablingrenewablepowergenerationnetworks,requiregreatermineralsuppliescomparedtotraditionalfossil-fueldrivensystems10.Thereareanumberofcomponentstorenewablesystemsthatrequirearangeofmineralinputs,including,forexample:Energycaptureandoutputofrenewableenergysourcesisdependentoncertainresourcesusedtobuildtheirstructures,orascomponentsinthegenerationofelectricity,suchastheuseofindiumasatransparentelectrodeinsolarpanels.Energystorageiscurrentlyreliantongraphite,cobaltandlithium(lithium-ionbatteries),orvanadium(vanadiumredoxflowbatteries[VRFBs]).‘Rechargeable’solutionsarecriticalforvariableandintermittentformsofrenewableenergysupply(suchassolarorwind)and‘cleaner’technologieslikeelectricvehicles(EVs).Energyefficiency,withconversion,transmissionanddistributionincreasinglyfulfilledbyelectroniccomponentsdrivinglowerenergyuseacrossarangeofelectronicequipment,includingdatacenters,smartgrids,industrialapplicationsandintelligentbuildings.TherecentWorldBankreportestimatesthatoverthreebilliontonsofmineralsintotalarerequiredtomatchtheenergyproductionandstoragedemandsofatwo-degreefuture(2DS)by205011.Significanteveninabsoluteterms,thisrepresentsanincreaseindemandofuptonearly500%forcertainmineralsfromcurrentlevels,suchaslithium,graphiteandcobaltwhichareutilizedinenergystoragetechnologies.Otherestimatesplacedemandforspecificresources,likeindium,atover12timescurrentproductionlevelsby205012.Notably,theseestimatesoftenexcludeotherindustrialapplicationsthatplacefurtherupwardspressureondemand–liketheend-useoftungstenindrillingandcuttingwithinmanufacturing,integrationofgallium,silicon,indiumandgermaniuminotherdigitaltechnologies,relianceoncobaltandvanadiumin3Dprinting,andtheuseofcobaltinsteelproduction13.Despitethepervasivemyth14,eventhissignificantuptickindemandforessentialresourcescouldbemetbyminingresourcedepositsinmanycases15.Formostresources,knownreserves(andas-yetunexploreddeposits)wouldofferadequatesupplytomeetglobalproductionrequirements,particularlyinthemediumterm–and,likeoilandgas,offersasignificantopportunityforresource-richcountriesandterritories.Asextraction,refinementandmanufacturingtechnologiesalsoimprove,fewermineralsarelikelytoberequiredtoachievethesameendoutput–conservingthesesupplies.EstimatedcumulativedemandagainstknownreservesThousandmetrictons200000180000160000140000120000100000800006000040000200000IronGraphiteZincNickelLeadCopperAluminiumCobaltManganeseLithiumChromiumVanadiumMolybdenumTitaniumSilverIndium232%22%12%31%18%2%14%113%1%27%1%11%2%22%11%228%Cumulativedemandasapercentageofknownreservesin2020Cumulativedemandthrough2050(forenergyapplications)Knownreserves(2020)Sources:WorldBankReport;USGS;EuropeanCommissionJointResearchCentre(Indiumreservesonly);KPMG16.Ofcourse,whengeopoliticsisatplay,thingsareneverthatsimple.10WorldBankReport(2020).11Ibid.Thisisindependentoftheassociatedinfrastructurerequiredtodeployorutilizethesetechnologies(suchastransmissionlinesorchassisofEVs)andincludes17in-scopeminerals.12MetalDemandforRenewableElectricityGenerationintheNetherlands(2018)UniversiteitLeiden.13TheWorldBankReport(2020);CriticalRawMaterialsforStrategicTechnologiesandSectorsintheEU(2020)EuropeanCommission(‘CriticalRawMaterialsReport’).14Mineralresources:Exhaustionisjustamyth,sayscientists(2017)UniversityofGeneva.15Albeitnotall,suchasiron,indiumandcobalt,whereestimateddemandforenergyapplicationsexceedsknownreserves.16NeodymiumistheonlyresourceidentifiedintheWorldBankreportthathasnotbeenincludedhere;unliketheothers,reservesofneodymiumarenotreportedbytheUSGSorEUJRC.5©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.…to‘critical’forbusinessSimilartotheoilandgasindustry,anumberofpoliticalandgeographicfactorscouldinfluencethecomparativedemandandsupplyoftheseresources,creatingsupplyrisksforbusinessandultimatelychallengingthepaceandscaleoftheenergytransition.Thesetrendshavethepotentialtoturn‘essential’materialsintoa‘critical’componentforbusinesses,notjustwithincleantechnologybutacrossmultiplesectors,includingindustrialmanufacturing,lifesciencesandautomotive.Demand:youcan’tpredictwinnersAlthoughdepositsareanticipatedtobeabletomeetglobaldemandinmanycases,unanticipatedupwardsswingsindemand(andresultantlagsinsupply)havethepotentialtoresultinshorter-termpricevolatilityandshortagesintheproductionofseveralcriticalmetals.#1PoliticsandpolicyGeopoliticsfeaturesinbothsidesofthedemand-supplyequation.Here,domesticpoliticsandappetitefora‘green’agendawilllikelyinfluencethe‘steepness’(involumeandpace)indemandforcertainresources.Specifically,politicalagendaswillchange:1.‘Who’youcompetewith:settingthedomesticambitiononclimatechange.Resourcedemandisanticipatedtosignificantlyincrease(andquickly)undera2DSscenario,comparedtoa‘businessasusual’fourdegrees.Althoughglobalcollaborationwillbeneededtoachievethesetargets,thepaceandappetitetosupportthedisruptivetransformationwillvarybetweencountries,impactingpolicysupport(fromsubsidiestocarbonborderadjustmentmechanisms)anddemandforgreentechnologiesandassociatedresources.2.‘What’youcompetefor:influencingthemixofrenewabletechnologiesadopted.Forexample,theroleofnuclearpowerintheenergytransitionremainsuncertainforpoliticalandsocialreasons-despiteprovidingmorethan10%ofglobalelectricityatoneofthelowestlevelsofGHGemissionsinthecombinedlifecycleofpower-generatingtechnologies17.Unanticipatedlimitsorrestrictionstothistechnologymaycausedemandforsolar,windandhydroelectricpower(andtheirassociatedresourcedependencies)torise.#2TechnologyandinnovationEfficiencyimprovementsandtechnologicialadvancements,includingtheapplicationtonewindustries,couldplaceupwardspressureonthedemandforindividualresources,dependingonthesubtechnologies(greenorotherwise)thatarethemostwidelydeployedinthelonger-term.Forexample,growthinoff-shorewindfarmsmayspurdemandforneodymiumanddysprosium(usedinthemagnetsofturbines).Theroleofhydrogenasamediumforenergyportability(i.e.storageofexcessrenewableenergyandtransportationtoregionswithlessrenewableresources)increasedemandforiridiumandplatinum(inelectrolysers).Theuseofrheniumasacatalystincarboncaptureandstoragesolutionsforharder-to-decarbonizeindustriescouldcauseshortagesfortheaerospaceindustry(asacomponentofturbinebladesinengines).HeliumwasrecentlyremovedfromtheEU’scriticalrawmaterialslistgivenadeclineineconomicimportance,butmaybere-addedgivenitsrelevancetoarangeofemergingdigitalapplications18.AsidentifiedbytheWorldBankReport,concentratedmaterialsthatareonlyneededforoneortwotechnologiesmaybemorepronetodemandfluctuationsstemmingfromtechnologicaldisruptioninthelonger-term;however,itistherecognizedversatilityofcross-cuttingmaterialsthatmayalsoexposethemto(unanticipated)demandfromnewinnovationsandcompetitionfromdifferentindustries.“Technologyandsubtechnologychoice,materialsubstitution,andtechnologicalimprovementswillshiftthedemandforindividualmineralsunderdifferentlow-carbonscenarios...Thetechnologypathwaythatwillemergetodecarbonizeelectricityproductionwillshapethemineralsthatwillexperiencethelargestincreasesindemand.Itispossiblethatnewtechnologiessuchasfloatingoffshorewind,greenhydrogen,orsolid-statebatteriesmaychangetheshapeofthefutureenergysystem.Thesetechnologiesrequiredifferentmineralsandcarrydifferentmineraldemandimplications.”–WorldBankReport(2020)17Nuclearpowerhasabigroletoplayintheenergytransition.Here’swhy.(2020)WorldEconomicForum.18CriticalRawMaterials(2020)EuropeanCommission.6©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.‘Critical’energystorageMassadoptionofEVsacrosstheUS,EuropeandChinaisbeingacceleratedbypoliciestoincreaseEVuptake,includingnewregulationsbanningthesaleofnewInternalCombustionEnginesandsubsidiesforEVmanufacturers.AnumberofvehiclemanufacturershaverecentlybeenforcedtotemporarilyhaltproductionofEVsduetobatterysupplybottlenecks–specifically,theunavailabilityofthekeyresources19.Lithium,graphite,andcobaltarecurrentlyprimarilyusedinenergystorage,includingbatteriesforEVs,andhavethehighestdemandfiguresrelativeto2018productionlevels20.Buttheseresourcesalsohavethehighestlevelofdemandrisk:thereareanumberofenergystoragesubtechnologiescurrentlyunderresearchanddevelopment(R&D).Likesodium-ionbatteries,foruseinEVs,smartphonesandlaptops;unlikelithium,sodiumisalreadywidelyandcheaplyavailable21.OrVRFBs–longer-lifebatterytechnologywithalmostunlimitedenergycapacityandwell-suitedtoindustrialapplications.Uptakehasbeencurrentlyconstrainedbythehighcostsofitsbasemineral,vanadium.Supply:youcan’tdiversifyawaySimilartotheoilandgasindustry,supplychainsofthesematerialsarecomplexandlargelylinearinnature.Diversificationislimitedineveryaspect:theseresourcesoriginatefromasmallsetofcountries,refiningisconcentratedinevenfewercountries,andoftenthereareveryfewresourcesthatcanactasasubstitute22.#3GeopoliticsClimatechangeisa2021entranttothelistofdriversofa‘G-Zero’world,definedbynocountryorgroupofcountrieshavingthepoliticalandeconomicleveragetodriveaninternationalagenda.Majoremittersandmarketmoverswilllikelypressaheadwithclimateaction,butweakgeopoliticalconnectivetissuehavethepotentialtoturntheseintosourcesofconflict.Meaning,unlikeotherresourcesinshortsupply,oneofthemostlikelyconstraintson‘critical’resourcesareinherentlygeopoliticalinnature:strategiccompetitionovertheseresourceshasthepotentialtoupsetexistingregionalpowerbalancesandsignificantlydisruptsupply.Ofparticularimportanceisthespeedatwhichthesegeopoliticalconstraintscouldhit.Inrecognitionofthepotentialforresource-richorganizationsandcountriestotakecontrolofmineralsupplychains,theUS,UK,EU,JapanandAustraliahaveallpublishedGeopoliticalpowercouldshiftfromoil-dominatedcountriestocriticalmetal-dominatedcountries.ThesourcingofcriticalmineralsanddiversificationawayfromhostiletradingpartnershasrepositionedanumberofcountriesinastrategicpositiontoengagewiththeUSandlike-mindedcountries.listsof‘critical’rawmaterialsthatareconsidered“vitalto…securityandeconomicprosperity”23.Aspartofabroaderstrategytoreducerelianceandminimizesupplychainrisks,theselistsconsiderthecentralityoftheseresourcestocontinuedeconomicdevelopment,technologicalinnovationandtheenergytransition,balancedagainstpotentialreservesandrelianceonimports.Withglobalmomentumaroundtheenergytransitionaccelerating,competitionforsecuresourceswillcatalyzeaninternationalefforttominethesemineralsathome(wherepossible)andtosourcethemsustainably.“Chinaprovides98%oftheEU’ssupplyofrareearthelements(REE),Turkeyprovides98%oftheEU’ssupplyofborate,andSouthAfricaprovides71%oftheEU’sneedsforplatinumandanevenhighershareoftheplatinumgroupmetalsiridium,rhodium,andruthenium.TheEUreliesonsingleEUcompaniesforitssupplyofhafniumandstrontium.”–EuropeanCommission98%19ManufacturersAreStrugglingToSupplyElectricVehiclesWithBatteries(2020)Forbes.20WorldBankReport(2020).21Thebatteriesofthefuture(2020)DW.22Notably,twoofthethreepillarsofR&DinvestmentsbeingcoordinatedbytheUSDepartmentofEnergytoaddresssupplychainriskfocusonthediversificationofsupplyanddevelopmentofsubstitutes.Thethirdisdrivingrecycling,reuse,andmoreefficientuseofcriticalmaterials.CriticalMaterialsRareEarthsSupplyChain:ASituationalWhitePaper(2020)USDepartmentofEnergy.23FinalListofCriticalMinerals(2018)USDepartmentoftheInterior.7©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.—#4ExplorationAbsoluteproductionnumbersandrelativeincreasesindemandforeachmineralwillplayaroleintheirabilitytomeetsupply,particularlyifadditionalexplorationisnecessary.Notalltheoreticalreservesaretechnicallyoreconomicallyextractable.Criticalmetalproductionscalesslowly:historywouldsuggestthatitwouldtakearound10yearsfromdiscoverytomining(althoughpendingonsize,thiscouldfluctuatebetweensevento13years).Italsorequireslargecapitalinvestments.Inanageofadisjointedglobalpublicpolicylandscaperelatedtotheenergytransition,mixedmarketsignalsandvaryingdegreesofnaturalresourcedepositsandindustrialdemandbuildouthaveforestalledafeverpitchofmineralsourcing–untilnow.Onthesupplysideof#1PoliticsandPolicy,arapidincreaseinglobaldemandwillthereforebehardtomeetwitharapidincreaseinglobalsupply.Asnotedpreviously,useofmineralresourceswillvarydependinguponclimatepoliciesadoptedacrosstheworld.Ultimately,resultantpricehikesfromdemand,orsubsidiesfromgovernment,couldopenupreservesthatwerenotpreviouslycommercialoraccessiblevianewtechnologies.However,companiesindifferentpartsoftherelevantvaluechainsathand,aswellasinvestorsortradeandcommodityfinanciers,requireaglobal,long-terminvestmentassurancetobeabletofundthesupplyside–atthepacenecessarytomeetclimateambitions.#5AccessExtractionofdepositsalsocomewitharangeofclimateandenvironmentalimplications.Thesematerialsmaynotberare,buttheyareprecious,requiringhugeamountsofenergy,labourandefforttoextract,refineandconsume.“Thescaleofassociatedgreenhousegasemissionsisafractionofthatoffossilfueltechnologies.However,thecarbonandmaterialfootprintscannotbeoverlooked.”—WorldBankReport(2020)Outsideofcostconsiderations,accessibilitytoreservescanberestrictedbyfactorsthatopencompaniestoESG-relatedregulatory,ethicalandreputationalexposure,suchas:Physicaldamage:theenvironmentalimpactsofminingcanoccuratlocal,regional,andglobalscalesthroughdirectandindirectminingpractices.Miningcanresultinsinkholes,erosionorthecontaminationofsoil,groundwater,andsurface(includingdrinking)watertonameafew.Humancost:insomeregionssuchastheDemocraticRepublicoftheCongo(DRC),thehumancostofextractingrareearthscanbesevere,withthequalityoflifeoftheminersdetrimentallyimpacted.Supplychainsareatriskofconflictissuesandhumanrightsabuses,unsafeworkingconditions,andchildlabour,aswellassocialimpactsfromeco-toxicity24.Extractionalsoconsumesalargeamountofresourceswhichincidentallydivertsawayormakesitharderforlocalstoaccessthesameresources.Biodiversitycost:majorrisksincludehabitatlossandfragmentation,disturbanceofmigratoryspecies,introductionofinvasivespeciesandinsomecasesregion-widedeclinesinrareandthreatenedspeciesandecosystems(suchastheinfluenceofcoltanminingonGrauer’sgorillasintheDRC)25.Deepseaminingisoftencitedtohavingthepotentialtoaddressterrestrialsupplyconstraints,howeversimilarchallengesexist.Scientistsarewarningthatdeep-seaminingcanwipeoutentirespecies–manyyettobediscovered26.Thescrapingoftheoceanfloorbymachinescanalterordestroydeep-seahabitats,leadingtothelossofspeciesandfragmentationorlossofecosystemstructureandfunction.Manyspecieslivinginthedeepseaareendemic–meaningtheydonotoccuranywhereelseontheplanet–andphysicaldisturbancesinjustoneminingsitecanpossiblywipeoutanentirespecies(forexample,85%ofthewildlifelivingaroundhydrothermalventsarefoundnowhereelseintheoceans).Sedimentplumesandpollution(noise,lightandvibrations)canalsohavesignificantimpactuponwildlifepopulations27.Importantly,noneofthesefactorsoperateinisolation–forexample,politicalconcernsaroundaccesstocobaltsuppliescouldleadtoindustrialpolicieschampioningtheprimacyofVRFBtechnologies,changingthedemandmixfor(andcontinuedinvestmentin)certainminerals.24Thehighhumancostofcobaltmining(2019)MiningReviewAfrica.25Agriculture,mining,huntingpushcriticallyendangeredgorillastothebrink(2019)Mongabay;Miningandbiodiversity:keyissuesandresearchneedsinconservationscience(2018)TheRoyalSocietyPublishing.26DeepSeaMining(2018)IUCN.27Ibid.©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.-’ThefiveresourcestorulethemallToillustrate,wehavefocusedonfivemetalsandmaterialsthatareconsideredintegraltothesmoothoperationoffutureglobalenergysupplychainsandrelatedmanufacturing.Thesearecertainlynottheonlyresourcesthatfacetheseissues;forexample,copper,aluminumandnickelfacesimilarchallengesaroundincreasesindemandandcriticalityacrosssectors.However,lithium,cobalt,vanadium,indiumandgraphitehavebeenchosenastheyareexpectedtoexperiencethegreatestgrowthindemand(inpercentageterms)fromenergytechnologiesby205028-andgeographicalandgeopoliticalconstraintshavethepotentialtobottlenecksupplychains.Lithium:what’syourcompetitiondoing?5.6mtons(27%ofknownreserves)Cumulativedemandby2050Alightsilvermetalthatishighlyreactiveandflammable,itisoneofthemaincross-cuttingresourcesintermsofitsapplications.Itisacriticalcomponentforenergystorage(EVbatteries,consumerelectronicsandgridscaleenergystorage),butalsoarangeofotherproductsincluding:aircraft;glassceramics;aluminumalloys;andpharmaceuticals.Themaindriverofdemand(lithium-ionbattery)facessignificantdemandpressurefromnewenergystoragetechnologies;however,itisanticipatedtoremaintheprimarysub-technologyusedinautomotive,decentralizedandgrid-scaleenergystorageby205030.Productionhasalreadyskyrocketedtomeetdemandinrecentyears,nearlydoublingbetween2017and201831andcausingashort-termdropinlithiumprices.However,therearetwolonger-termpotentialcriticalconstraintsonextractionandaccesstolithiumdeposits.Cobalt:howreliantareyou?8mtons(113%ofknownreserves)Cumulativedemandby20507.1mtonsReservesin2020Cobalthasvariousapplicationsinindustrialprocesses(asanalloy),animalfeed,biotechnologyprocessesandpharmaceuticals,aswellasbatteries,laptopsandsmartphones.Despiteaforementionedsupplyconcerns,itisanabundantmetalelement;identifiedterrestrialresourcesofcobaltstandaround25milliontonnes,withafurther120milliontonnesexistinginmanganesenodulesandcrustsontheflooroftheAtlantic,IndianandPacificOceans35.Itispredominantlyextractedasaco-andby-productofcopperandnickel,soisalsodependentonthedemandconditionsfortheseothermetals.However,itisperhapsthemostoften-citedmineralexampleforsupplychainriskstemmingfromgeopoliticalchokepointsandresponsiblesourcingissues;thishasledtosignificantR&D21mtonsReservesin202050%29IndicativerecyclingratesThoughminedacrosssixcontinents,thetopfourglobalproducersareAustralia,China,ArgentinaandChile.Boliviaholdsnearlyaquarterofallidentifiedlithiumresourcesglobally(21mtonnesof86mestimatedtotal)32,howeverstatecontrolandlimitedmininginfrastructuremeanthatproductionislargelyuntapped.Growthinsupplywillthusbeheavilylinkedtogeopoliticalconditionsandaccessibilitytothesereservesinalandlockedcountry.EurasiaGrouppredictsthattheUSmayexperienceparticulargeopoliticalheadachesrelatingtosupply–ofthecountrieswiththetopfivelargestreserves,onlyAustraliacanbeconsideredaparticularlyfriendlynation.TherearealsoESGconcernsassociatedwithextraction.InChile,lithiumusesapproximately500,000gallonsofwaterpertonneextracted,whichdivertsaway65%ofavailablewaterinsomeregions,causingadverseimpactsonlocalfarmersgrowingproduceandrearinglivestock33.68%34Indicativerecyclingrateseffortstominimizetheamountofcobaltrequiredinenergystorage.Specifically,thereiscurrentlyahighconcentrationofcobaltsupplyinonecountry–theDRC,whereapproximately70%oftotalproductionissourced36.Economicandpoliticalinstability,alongsidelaborandcorruptionconcerns,meanscobaltsupplyishighlyunpredictable.Responsibleinvestmentprinciplesincludingtransparencyandaccountabilityguidelineshavethepotentialtocurtailcapitalawayfromtheseoperations,howeveralackofalternativeslimitsthisasameaningfulsolution.Geographicdominanceoftheupstreamsupplychain,withtwothirdsofrefinementcapabilitylocatedinChina37,alsocreatespotentialsupplychainchokepoints-whichassumeparticularimportanceduringtimesofincreasedgeopoliticaltension.28WorldBankReport(2020).29Innovationboostslithium(2019)PVMagazine.30WorldBankReport(2020).31Ibid.32Lithiumdatasheet-mineralcommoditiessummaries(2021)USGS.33Thespirallingeconomiccostofourlithiumbatteryaddiction(2018)Wired.342011figure;RecyclingperspectivesforcobaltintheHague(2018)UniversiteitLeiden.3525mtonnesterrestrialreservesincludeidentifieddepositsthathavenotbeenleasedtotheminingsector(acrosstheDRC,Zambia,Australia,Cuba,Canada,RussiaandtheUS).SomeoftheoceanicreservesarelocatedinExclusiveEconomicZonesandsovereignterritories,othersininternationalwaters.Cobaltdatasheet-mineralcommoditiessummaries(2021)USGS.36Ibid.37Cobaltcrunch?Dealingwiththebatteryindustry'sloomingsupplychallengesforcobalt(2018)Apricum.©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.88©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.-----’Indium:what’sthealternative?34,000tons(228%ofknownreserves)Cumulativedemandby205015,000tonsReservesin20200-1%38IndicativerecyclingratesIndiumtinoxide(ITO)remainsthebestmaterialtofillthegrowingneedforLCDs(liquidcrystaldisplays)intouchscreens,flatscreenTVsandsolarpanels.Innature,indiumisquiterareandnearlyalwaysfoundasatraceelementinotherminerals—particularlyinzincandlead—fromwhichitistypicallyobtainedasaby-product.Lowlevelsofextractionfromindiumresultsinloweravailabilityandresourceinefficiency;overallextractionefficiencyfromminetoproductisbetween23%and28%,althoughmuchofthatindiumdoesnotenterthemarket.Chinaisthemajorproducerofindium,representing56%ofglobalrefineryproductionin202039.Inlate2020,ChinaproposedanewExportControlLawthatenablesthecountrytolimitexportsofdual-useitemsrelatedtonationalsecurityandinterests,includingrareearthelements.Thecurrentgeographicconcentrationofsupply,combinedwiththecriticalityofthismineraltotechnologiesbeyondtheenergytransition,offersasizableopportunityfor‘Western‘alliedcountriestodeveloprawandurbanmining.TakeCanada:ofthe35criticalmetalsidentifiedbytheUS,itisasizablesupplierof13ofsuchminerals,includingindium.EurasiaGroupsuggeststhatthisadvantagehasopeneduptheopportunityforabroaderbilateralpartnershiponindustrialcooperation,defensepriorities,andcollaborationontheinternationalstage.Thistrendislikelytocontinue:securingareliablestreamofresourceswhiledrivingaclubofallynationsthatexploiteachcountry’snetworkofgeopoliticalties.Vanadium:where’syournextsupplier?2.4mtons(11%ofknownreserves)Cumulativedemandby205022mtonsReservesin202030%40IndicativerecyclingratesVanadiumisasilvermetallicelementthatthathasavarietyofavarietyoflarge-scaleandhigh-techuses,suchasspacevehicles,nuclearreactorsandsuperconductingmagnets.ItisalsothekeymaterialinVRFBs,analternativetolithium-basedbatteriesinsomeapplicationsthatcanbechargedthousandsoftimeswithoutdegrading41.Substitutingvanadiumisnotcurrentlyeconomicalortechnicallyeasy.AlongsidetheUSandCanada,theEuropeanCommissionidentifiedandformallyregisteredthismetalonthe2017listofCriticalRawMaterials;thelistseekstoincreaseawarenessofpotentialsupplyrisks,informtradeagreements,andstimulatetheproductionofidentifiedresourcesbysteeringnewminingandrecyclingactivitieswithintheEU.Aspreviouslymentioned,productionhasbeenlimitedbyhighcosts;extractionofadditionalmineralsfromvanadium-richindustrialwasteproducts,suchasnickelandtitanium,hasbeensubsidizingvanadiumextraction42.ProductionislargelyconcentratedinfourcountrieswithChinaowningthemajoritymarketshareat62%in2020,followedbyRussia,SouthAfricaandBrazil.However,manyminingcompaniesinNorthAmericahaverevealedplanstoinvestinexplorationorreopenclosedvanadiumminesintheUS,CanadaandAustralia43.Graphite:whowantsitthemost?68.8mtons(22%ofknownreserves)Cumulativedemandby2050320mtonsReservesin2020<1%44IndicativerecyclingratesThemainapplicationforgraphiteisasarefractorymaterialsuchasinsteelmaking,butitisalsoessentialintheproductionoflithium-ionbatteriesusedinEVs.EurasiaGrouphighlightsgraphiteasanotableexampleoftheriskofcountry-dominatedsupplychains:Chinaisthesourceofmorethan60%oftheglobalsupplyofamorphousgraphite,andabouttwothirdsofthisisflakegraphite(100%ofglobalprocessingofwhichoccursinChina)45.Thegovernmenthasintroducedpolicycontrolstorestrictnewentrants,regionallyintegrateoperations,andgrowthepercentageofthemarkettouchedbystateownershiporinvestment.Thedominanceofonecountryacrossthischainhasthepotentialtojeopardizeothercountries’accesstothemineralandtheeconomicactivityassociatedwithitsproductionanduse.However,thismaychangeinthecomingyears,asanincreasedglobaldemandforgraphiteuseinbatterieshassparkedexplorationeffortsacrosstheglobe;Mozambique,FinlandandSwedenallhaveexplorationprojectsunderway.38Thepromiseandlimitsofurbanmining(2020)FraunhoferISI.39Methodstoincreaseindiumsuppliesforthemanufactureofthin-filmsolarcells(2015)EuropeanCommission;Indiumdatasheet–mineralcommoditiessummaries(2021)USGS.40Mineralprocessingandmetallurgicaltreatmentofleadvanadateores(2020)MDPI.41Vanadium:themetalthatmaysoonbepoweringyourneighbourhood(2014)BBC.42CanVanadiumFlowBatteriesbeatLi-ionforutility-scalestorage?(2019)EnergyPostEU.43VanadiumOutlook2021:StrongChineseDemandExpected,butUncertaintyRemains(2020)InvestingNewsNetwork.44Thesuccessstoryofgraphiteasalithium-ionanodematerial(2020)SustainableEnergy&Fuels.45Li-IonBatteries:AReviewofaKeyTechnologyforTransportDecarbonization(2020)Energies.©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.9910©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.Renewableenergyrequires‘renewable’inputsThepaceandscaleoftheenergytransitionnecessarytomeeta2DSscenariorequiresthewidespreaddeploymentofcirculareconomysolutions46-andnotjustintheenergysector.Sohowdoyoumanagesupplychainriskswheregeographicdiversificationofsourcesislimitedandinputsmaynotbeabletobesubstituted?Thecirculareconomy.Asmorecleantechnologiesarerequiredtomeetlowertemperaturetargets,greaterquantitiesofthesemineralswillbeneeded.Reducingtheneedtoextractfromterrestrialandoceansites,andstillgrowavailablematerialsinthemarket,willrequireexistingmaterialtobeutilizedinnew,circularways.Whatisthecirculareconomy47?Acirculareconomyisa‘regenerative’modelthatlookstoretainthevalueof‘circulating’resources,products,partsandmaterials.Itseekstodesignoutwasteandpollution,keepproductsandmaterialsinuse,increaseproductivityandregeneratenaturalsystems.ExplorationDesignProductionDisposalWasteMiningWasteProcessingWasteRawMaterialWasteWasteWasteUseWasteWasteReprocessRecycleReproduceRe-useSubstitutionofrawmaterialPrimaryresources-fromlineartocircularInrecentyears,thecirculareconomyhasgainedincreasingmomentumasaconceptamongbusiness,policymakersandconsumers,astheurgencytoactagainstclimatechangeintensifies.However,politicalpressuretoeliminatetheuseoffossilfuelsandincreasetheshareofrenewableenergyhasfocusedR&Dpredominantlyonmorecost-effectivegenerationandtransportationofrenewableenergy,withlessfocusontheneedforcircularitywithintheenergysector.Redesign,recycling,reusingandrepurposingacrosstheresourcelifecyclewillplayakeyroleaddressinggeopoliticalandgeographicconstraints-mitigatingpotentialpricevolatilityandsupplyshortages,particularlyforresourcesunabletobesubstituted(likevanadium),andreducingtheneedfortheextractionandemissions.Suretyofsupplyhasalreadybeenimprovedbyexistingcirculareconomystrategies;forexample,JapanandSouthKoreahavemadesignificantinvestmentsintotherecyclingofindium48.Butexistingrecyclingeffortswillnotbeenough.Ironically,themoreambitiousourclimateambitions,thegreaterthepotentialrelianceon‘non-renewable’minedmaterials,possiblynegatingthepositiveenvironmentalimpactofmanufacturingthesegreentechnologiesinthefirstplace.46CircularEconomy:AKeyLeverinBridgingtheEmissionsGaptoa1.5°CPathway(2016)CircleEconomy.47‘CircularTransitionIndicators’Framework(2021)WBCSD,poweredbyKPMG.48Indiumdatasheet(2020)USGS.11©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.CircularinflowCircularoutflowCOMPANYBOUNDARYLinearinflownon-renewablevirginresourceLinearoutflowNon-recoverableproductandwastestreamsLandfillIncinerationLandfillIncinerationPotentialforcircularitycanbeassessedagainstthreepillars:%%%circularrecoveryactualinflowpotentialrecoveryInflow,ormovementtowardssecondaryresourcesandsubstitutionof‘critical’resourceswithnon-criticalalternatives;thiscouldbeconstrainedbytheavailabilityofsecondaryfeedstockandsuitablesubstitutesforvirgincriticalresources.Recoverypotential:improveddesigntofocusonmodularity,disassemblyandrecyclability(suchastheuseofmono-materials),whichwillrelyonnewformsoftechnologicalinnovation.Actualrecovery:addressingcurrentcollectionconstraintsthroughnewbusinessmodels(incentivizingrecoverythroughproduct-as-a-serviceandbuy-backschemes),morematurereturnlogistics(toenhancecollection),andinnovationinnewrecyclingtechnologies(toimproverecyclingyield,whichmaybeconstrainedduetothelimitedamountsofresourcesabletobeharvested).Source:WBCSD;KPMG.Super-chargingcirculareconomysolutionswillbeessentialtoaddressingthegeographic,geopoliticalandeconomicconstraintsofthefuture,ensuringasmoothershort-termsupply-demandequilibriumandthelonger-termviabilityoftheenergytransition.Thiscanonlybeachievedifglobalandnationalclimateandenergytransitionpolicygoeshand-in-handwithcirculareconomystrategiestoreducecriticalmetalrisksanddependence49.Acoupleofcaveats:somelevelofnewresourceextractionwillbeagiven,asexistinglevelsofsomeoftheseresourcesalreadyincirculationcannotmeetfuturedemandontheirown.Challengestotheexpansionofthesecirculareconomystrategiesalsoremain,includingcosts,designandtechnicalissues50.Theselimitations(suchasthethermodynamicmanufacturingprocessoftheseproducts,thedesignforrecyclabilityconstraintsandalignmentacrossstakeholdersinthevaluechain)willneedtobeaddressed.Governments,investors,mineralproducers,corporatesandenduserseachhaveaparttoplayaspartofaholisticresponsetotheshiftinenergymixandresourceavailability:#1ConsumersEndusersandcivilsocietyhavesofarproventobeoneofthestrongestagentsofchangeforsustainableandresponsiblesourcingofcriticalminerals.Thepublic’simaginationhasbeencapturedbytheideaoftheirostensibly‘green’productslikeEVscausinghiddenanduntoldharmtotheenvironmentandtocommunities.Thisgivessuchpublicinterestgroupstheopportunitytocontinuetoapplypressureandexertscrutinyonminingpracticestoensurefairandequitableoutcomes.However,italsocomeswitharesponsibilitytoacceptandworkwithintheconstraintsposedbytechnologyandpolicyfactorswhichlimitthe‘artofthepossible’fortheproducersandprocessorsoftheseminerals.LithiumpricesinChinaareexperiencingsignificantvolatilityasaresultofdemandforenergystoragesolutions.Comingcloseto$25,000atonnein2018andinsteadydeclinesince,themidpointpriceforbatterygradelithiumcarbonatehasnowincreasedbyover40%comparedtoJanuary202051.Despitebeingalmostfullyrecyclable,only5%oflithiumbatteriesarerecycled52.Why?Batterydesign–challengesaroundtheseparationofthemetalcomponentpartscurrentlylimitsrecyclingopportunities.49LinearRisks(2018)WBCSDinpartnershipwithKPMG.50WorldBankReport(2020).51LithiumpriceinChinasurges40%to18-monthhigh(2021)Mining.com52Thebatteryparadox:howtheelectricvehicleboomisdrainingcommunitiesandtheplanet(2020)SOMO.12©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.#2GovernmentsBeing‘openforbusiness’isafarcryfromtheproactiveriskassessmentandmitigationrequiredtodevelopresourcesupplychainsinahighlycompetitiveglobalenvironment.Governmentshaveamultifacetedobligationtoaddresseachoftheissueshighlightedpreviously,andpromotetheseresourcesasapermanentmaterialtomaximizetheiruseinafuturecirculareconomy.Firstandforemost,greaterclarityonclimateambitionandenergymixexpectationswillberequiredtodrivemarketsignals–forexample,‘ina2DSdecarbonizationpathway,globaldemandforrelevantmineralsinelectricstoragebatteriesisexpectedtoincreasebyover1,000percent’.Detailedpathwaysontheembeddedcostsincleantechwillallowgovernmentstobolstertheirpolicyframeworkstodriveinvestment,secureagainstsupplyrisks,andachievetheirpolicyambitionswithcriticalmineralsattheheartofindustrial,trade,environment,naturalresource,andsecuritypolicy.Governmentsmayalsoconsiderincentivizingurbanminingfromusedproducts(suchase-waste),particularlyinEurope.Europeisalmostcompletelydependentonsupplyofcriticalmetalsfromoutsideofitsborders,althoughthecontinenthassomereserves.MininginEuropewillbeconfrontedwithhurdles,buthigh-techsolutionsandcircularfocusedincentivescanhelpovercomethese.#3InvestorsDivestmentwillremaintheeasywayoutforinvestorslookingtosafeguardagainstESG-relatedrisks.However,toensurethestableaccessofglobalmarketstocriticalmineralinputsandtoenabletheindustrialtransformationrequiredforasmoothenergytransition,aholisticapproachtoportfoliomanagement,withabetterunderstandingtherisksandopportunitiesofmining,sourcing,using,andrecyclingthesematerials,willberequired.Centraltothiseffortisfocusingonwhatcertainvaluechainplayerscandotoimprovemetaluseefficiency(forexample,productdesignersandproducerswithrespecttoeaseofmetalseparation),aswellasthegeopoliticalpinchpointscoveredhere,whentheyareexpectedtomanifest,andthedegreetowhichgovernmentpolicyhedgesmaysolveforthem.Whataboutfinancing?Thereareseveralfundingchallengesspecifictoinvestmentincriticalresourceprojects,including:01Technology&process:theneworcommerciallyunproventechnologyandprocessesrequiredtoproducemineralsincreasetheriskofcostoverrunsorproductionbeingbelowexpectations.02Markets&pricing:itcanbemoredifficulttoassessmarketsupplyanddemandandpricingisnotastransparentasothermoreestablishedcommodities.03Customers&offtake:itcanbechallengingtoidentifyandengagewithendusercustomersandthenprogresstoofftakeagreementswithtermsrequiredtoobtaindebtfinancing.04Equity&sponsors:equityrequirementstofundconstructioncanbesignificantforsmallerdevelopmentcompaniesanddifficulttoattracttheinvestortypepreferredbydebtfinanciers.05Infrastructure&supplychain:remotelocationsandlimitedsuppliers/processingmeansacrediblestrategytoensurelongtermaccesstoinfrastructureandsupplychainsisneeded.Thesechallengesmakeitmoredifficulttoattractdebtfundingatrequiredvolumeandonappropriateterms.Governmentsaroundtheworldhaverespondedtothesechallengeswithvariousgrantsandloanprogramsinorderto“crowdin”othercommercialsourcesoffinance.However,morecouldbedonetofillmarketgapsandencouragecommercialsourcesofcapitaltofundtheinvestmentneeded.#4ResourceproducersThevaluechainofcriticalmetalsisextremelycomplex53.Inlightofaforementionedchallenges,producersofcriticalmineralswillbefacingscarcityandthereforeincreasingpriceandpricevolatility,atthesametimeasconsumersarelookingformorecircularandsustainablepractices.Asafirststep,miningisoftenassociatedwithsignificantenvironmentalandsocialnegativeimpacts;gettingagriponthecompany’s‘ESGfootprint’andlevelofthe‘circulartransition’isnecessarytomapabaseline.Limitingthecarbonfootprintofmineralsneededforthecleanenergytransitionmayoffer53CriticalRawMaterials(2014)KPMG.—13doublewins,helpingtoboosteconomicgrowthandreduceenvironmentalrisksinresource-richdevelopingcountries.Itwillalsoenablethetransitiontoa2DSinlinewiththeParisAgreement,SustainableDevelopmentGoal(SDG)7“accesstoaffordable,reliable,sustainableandmodernenergyforall”,andSDG13,taking“urgentactiontocombatclimatechangeanditsimpacts”.Thesupplychainwillonlybecomemorecomplexwhenfactoringinrecoveredmetalsandtheirreintegrationintothevaluechain;thiswilllikelyneedtobeintegratedintopricingandinvestmentdecisionsforproducers.Thereareanumberofnewandexpandedbusinessmodelsthatcanbeexplored,includingretentionofownershiptoenableurbanmining.“Everyminingcompanyunderstandstheuniquecomplexityandchallengestoconsistentlyfind,mineanddeliverproducttomarket.Asocietykeentoacceleratetheenergytransitionmustnowprioritizeworkingwiththesectortohelpitdeliver.”—TrevorHart,GlobalHeadofMiningCorporates#5Acrossthethreepillarsofcircularity,businessesacrossexposedindustries,inparticularindustrialmanufacturing,willhavearangeofoptionstohelpenableacirculartransition.Forexample:1.Inflow:companiesacrossarangeofsectorscouldlooktoreducecriticalmetalusebyincreasingalternativeeffortstoproducecleanenergyorotherproductswithasmallerneedforcriticalmetals.Substitutionaloneisnotenoughandmightshiftthisburdentoothermetals.TherecyclingpotentialofITOscrapisaprovenwayofreturningasignificantamountofindiumtotheglobalmarket,withefficienttechnologyandafastprocesstime;theworld’ssecondaryrefinedindiumproductionresultedalmostexclusivelyfromtherecyclingofmanufacturingscrapratherthanrecoveryfromend-of-life.However,thisonlyrepresentsaverysmallamountoftotalindiumcurrentlyused,duetolackofrecyclinginfrastructuresandvolatilepricesofthemetal.2.Recoverypotential:theautomotiveandenergysectorcouldlooktoincreasecircularproductdesignandclosedloopeffortsbyincludingcirculardesignprinciplesintheproductionofenergyassetssuchaswindturbinesandPVpanels,butalsoEVstoenablefuturereuseofcomponentsandmaterialsafterthetechnicalusecycle.Forexample,thefirstsolarpanelsarenearingtheendoftheirlifespan(approximately25years)and,withinvestmentintonecessaryinfrastructure,couldtheoreticallybecomeasourceofmanyvaluablematerials,includingsilicone,silver,glassandaluminum.3.Actualrecovery:thoseintheindustrialmanufacturingvaluechaincanfinanciallyincentivizemetalreusethroughleasingandrefurbishmentcontracts,effectivelytaggingafinancialbenefittokeepmetalsinuseandallowing,forexample,forthecollectionandrecyclingofpreciousmetalsfromdiscardedbatteriesandelectronics.Byanalyzingtherisksandopportunitiesofnewbusinessmodelsandbettercircularmetricsassociatedwiththelifecycleofresources,businesseswillnotonlybeabletoavoidpotentialsupplychokepointsandrealizecostsavings,butalsocapturenewopportunities,asconsumers,employeesandprivateandpublicfinancialstakeholdersgravitatetowardsindustryleadersinthisspace.InimplementingtheParisAgreement,globaleffortsbygovernmentandtheprivatesectorareneededtomovetowardsarenewableenergysystem.Closingtheloopwillnotbeeasy-developmentofthesecirculareconomystrategiesmayencounterlegal,financial,organizationalandoperationalbarriers,thatrequirecollaborationbetweendifferentstakeholders,andpotentiallynewskills(technological,environmentalandeconomic)toovercome.However,astechnologyadvances,opportunitiestoembracecirculareconomyprincipleswillonlyincrease,andtheirapplicationtotheresourcesrequiredforthisenergysystemandothertechnologicalinnovationsshouldbehigherontheagendaofbusinessesacrossabroadspectrumofsectors.Movingtoarenewableenergysystemandthetransitiontowardsamorecirculareconomyarepartofthesameagenda.©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.AbouttheKPMGandEurasiaGroupAllianceKPMGInternationalhasformedanalliancewithEurasiaGroup,oneoftheworld’sleadingglobalpoliticalriskresearchandconsultingfirms,todevelopsolutionsthathelpbusinessesdealwithgeopoliticalchallenges.Throughouralliance,KPMGprofessionalscanbringthepoliticalinsightsofEurasiaGroup’sanalystsacross100+countriesandterritoriestogetherwithKPMGfirms’nutsandboltsunderstandingofyourbusinesscoveringthemacrotothemostgranularofanalysis.AboutKPMGIMPACTKPMGfirmsareworkingwithclientsacrosstheworldtosupportthemindecarbonizingtheirbusinessesandsupplychains,andembeddingESGineverythingtheydo.KPMGIMPACTbringstogetherKPMGfirms’expertiseinsupportingclientstoaddressthebiggestchallengesfacingourplanet,withtheaimofdeliveringgrowthwithpurposeandachievingprogressagainsttheUnitedNationsSustainableDevelopmentGoals(SDGs).AuthorsSophieHeadingGlobalGeopoliticsLeadKPMGE:sophie.heading@kpmg.co.ukRohiteshDhawanMacroStrategistandHeadofPartnershipsEurasiaGroupE:dhawan@eurasiagroup.netArnoudWalrechtCircularEconomyLeadKPMGintheNetherlandsE:Walrecht.Arnoud@kpmg.nlJoshHasdellESGStrategyKPMGintheUKE:josh.hasdell@kpmg.co.ukContactsTrevorHartGlobalHeadofMining,KPMGE:thart@kpmg.com.auUgoPlataniaGlobalHeadofSteelandMetals,KPMGE:Ugo.PLATANIA@kpmg.luMikeHayesGlobalHeadofClimateChange&Decarbonization,KPMGE:michael.hayes@kpmg.ieWiththanksto:AbdulHassan(KPMGintheUK);ColemanSabbithi(KPMGinIndia);CraigJones(KPMGinAustralia);DanGinger(KPMGinAustralia);GeorgeMowles-VanDerGaag(KPMGintheUK);RiyaAneja(KPMGinIndia);RohitSabharwal(KPMGinIndia);SuzanneKuiper(KPMGintheNetherlands).ConnectwithaKPMGIMPACTleadernearyou–kpmg.com/impactcontactshome.kpmghome.kpmg/socialmediaTheinformationcontainedhereinisofageneralnatureandisnotintendedtoaddressthecircumstancesofanyparticularindividualorentity.Althoughweendeavortoprovideaccurateandtimelyinformation,therecanbenoguaranteethatsuchinformationisaccurateasofthedateitisreceivedorthatitwillcontinuetobeaccurateinthefuture.Nooneshouldactonsuchinformationwithoutappropriateprofessionaladviceafterathoroughexaminationoftheparticularsituation.Throughoutthisdocument,“we”,“KPMG”,“us”and“our”referstotheglobalorganizationortooneormoreofthememberfirmsofKPMGInternationalLimited(“KPMGInternational”),eachofwhichisaseparatelegalentity.TheKPMGnameandlogoaretrademarksusedunderlicensebytheindependentmemberfirmsoftheKPMGglobalorganization.KPMGreferstotheglobalorganizationortooneormoreofthememberfirmsofKPMGInternationalLimited(“KPMGInternational”),eachofwhichisaseparatelegalentity.KPMGInternationalLimitedisaprivateEnglishcompanylimitedbyguaranteeanddoesnotprovideservicestoclients.Formoredetailaboutourstructurepleasevisithome.kpmg/governance.©2021CopyrightownedbyoneormoreoftheKPMGInternationalentities.KPMGInternationalentitiesprovidenoservicestoclients.Allrightsreserved.
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