Friendshoring balances domestic mining

On Dec. 12, 2015, delegates from almost every country on the planet signed a landmark climate accord, the Paris Agreement, that united more than 190 parties in support of a legally binding treaty pledging to drive the overall planetary temperature down by slashing the use of fossil fuels and adopting solutions for a massive transition to renewable energy and green transportation.

This requires extensive economic and social transformation, measured in five-year cycles of climate actions and assessments. Under this accord and starting in 2024, countries will announce the next actions each will take and subsequently report on progress with a high level of transparency, identifying conditions and further steps needed with periodic reviews called “global stocktakes.”

The COVID pandemic, growing disruptions out of China, and the Russian invasion of Ukraine has exposed the fragility of global supply chains for the enormous quantities of materials needed to transition to lower carbon energy.

As a result, the U.S. has since experienced a big push toward “reshoring” previously imported commodities – especially various critical minerals such as lithium – back into domestic production for the sake of security as well as higher environmental and social standards. The shift also allows for transportation cost reduction, product quality and transparency, and gains tax incentives.

Reshoring has recently given way to “friendshoring” as a global trade practice where supply chain networks are focused on countries regarded as political and economic allies.

As opposed to “de-globalization,” the process of friendshoring improves diversification where China has almost completely cornered the market on electric vehicle (EV) batteries and for processing and refining most critical minerals relied on by that industry, the Democratic Republic of the Congo has struggled with human rights violations in its cobalt production, and regime changes in other countries put supply chains at risk.

Given existing reserves and resource discoveries yet untapped, it is possible for the U.S. and its democratic partners to diversify clean energy supply chains, relocating them to countries with shared values. However, approaching clean energy targets for 2030 still requires shifting the American mining industry on overdrive.

The solution might be to partly mitigate this with a second look at alternatives in transportation – the leading source of emissions for most countries – and put fewer vehicles on the roads.

Strengthening partnerships

The U.S. and partners including Canada, France, Germany, Italy, Japan, the United Kingdom, and European Union launched the Partnership for Global Infrastructure and Investment, and the Minerals Security Partnership to build clean energy supply chains as well as co-production and recycling critical minerals.

In January 2023, European Commission President Ursula von der Leyen announced that a key pillar of the EU’s new industrial strategy would be global partnerships to access inputs needed for industry, building on existing initiatives such as the European Battery Alliance and the Critical Raw Materials Act, both encouraging friendshoring.

“And I am very proud that this concept has found broad support from key partners. From Australia to Japan and the United States,” said von der Leyen in her 2023 State of the Union address. “And many other countries around the world want to work together. Many are overly dependent on a single supplier for critical minerals.”

These and a host of other initiatives support an emerging “joint industrial policy” phenomenon where strategies are coordinated at the international level, and collaborative supply chains are built in support of net-zero industries and infrastructure.

Will it work?

A recent study by the Net Zero Industrial Policy Lab (NZIPL) at Johns Hopkins University has begun to establish better datasets on how many critical minerals the U.S. and its partners could produce, and where to focus efforts to diversify and rebalance clean energy supply chains.

“The deployment of net-zero technologies such as hydrogen, batteries, and fuels will depend as much on their economic benefits, geopolitical importance, and resource availability as on their thermodynamic strengths and weaknesses,” said Net Zero Industrial Policy Lab Director Bentley Allan, an associate professor in the Krieger School of Arts and Sciences’ Department of Political Science. “We need action-oriented research that integrates detailed knowledge of how supply chains for net-zero industries are forming, an understanding of the industrial policy landscape, and a geopolitical perspective on how and why supply chains are forming the way that they are. That is where the NZIPL lab will come in.”

The NZIPL data estimated the quantities of various critical minerals needed for renewable energy and EV battery supply chains, then compared the results to mining reserves. The study outlines areas of focus, such as how international allies can best rebuild supply chains, allocate resources, and leverage economic opportunity while forging the political coalitions needed for a sustainable long-term transition.

The lab was created by the Whiting School of Engineering’s Ralph O’Connor Sustainable Energy Institute and the SNF Agora Institute’s Center for Economy and Society to integrate technical analysis of net-zero supply chains with the study of industrial policies on carbon reduction in order to offer insights and solutions for successful strategic collaborations between governments and industry.

Allan considers the opportunity to cooperate with fellow researchers around the world as crucial to achieving the lab’s long-term success.

“Having some of the world’s best engineering expertise is essential; we won’t be able to do this without understanding the technical details in these supply chains and the technologies involved,” he said.

This includes an understanding that shortages emerge when removing countries considered “fragile democracies” such as Argentina, Brazil, Bolivia, Indonesia, Mexico, Poland, and South Africa, which all have large reserves of graphite, silver, and tin. Alternately, relying solely on U.S. free trade partners favored by the U.S. Inflation Reduction Act, would likely result in more shortages for cobalt, chromium, and selenium.

“Reserves” include only measured and indicated deposits that have been deemed economically viable to mine. Many countries including the U.S. have large untapped mineral resources of various kinds that may become economically viable in the future, with new discoveries as a regular occurrence over the last decade.

Thus, global reserve levels of various minerals may grow and stabilize further with continued exploration and the development of more efficient mining technologies.

Being practical

The anticipated surge in EVs has faltered some, and previous boom numbers may not accurately reflect the demand in coming years – the electric mobility sector can be predicted to plateau or grow exponentially, depending on the datasets used.

With 2024 around the corner, national reports come due and climate actions will again be revised.

Excluding China also isn’t possible in the short term. Even with substantial growth in the mining sector, democratic countries are left drastically short on critical minerals supply, and behind the proposed timeline.

The NZIPL study also provides alternatives for the coordination of potential technology choices; nickel demand can be reduced by incentivizing more hydrogen transportation applications and investing in public transit infrastructure, decreasing demand for EVs. Silicon could potentially substitute for graphite, while targets and technology research and development could be adjusted accordingly.

We may not be able to have our cake and eat it too, instead stepping back from the shorthand solution of building more EVs and forestalling any resulting production deficits with smarter use of transportation technologies and an overhaul of public transit infrastructure.

The imperfect short term may be longer than expected, initial promises reevaluated for their practicality on the timeline.

Every tool in the box

Reaching net-zero will come from adopting the nationally invested ethos that won the space race – the U.S. and its partners must promote these goals and push for solutions and support publicly, cooperate intimately and work faster than ever, with extremely focused and highly coordinated joint industrial policy.

The cautiously optimistic conclusion is that the U.S. and its democratic partners could achieve critical minerals independence in most areas based on friendshoring with clear and coherent strategies focusing and aligning joint industrial policies, the likelihood of expanding reserves and a concerted effort increasing mining and production.

It would still require exponential growth across the mining industry to achieve 2030 targets, with new mines ever the subject of protests and legal challenges, this could serve to halt or slow development.

A PR overhaul for the mining industry, especially in the U.S. is also necessary to gain community buy-in and keep wheels turning.

Relying heavily on this happening on time is the weakest link in the U.S. net-zero plans.

This and similar studies funded by the Department of Energy and other government programs have been used to set focused targets for U.S. diplomatic and economic efforts. Countries partnered with the U.S. on overcoming similar challenges will need to see value gained for themselves in being part of a sustainable supply-chain partnership.

“I think this first study exemplifies the kind of issues that NZIPL will tackle and the technical data-rich analysis we will provide. Given this policy conversation around friendshoring, it’s essential to look at what it would mean to implement it and how feasible it is,” said Allan, noting that this first study was to satisfy lack of applicable knowledge on the topic.

“For this friendshoring study, I went to D.C. for meetings with policymakers to figure out what people wanted information and advice on. I believe academia has a big role to play in supporting policymakers because we can operate independently and without bias,” he added. “With good information about what the policy problems are, we can go to work on finding solutions, regardless of what the government is hoping the results will be.”