Critical minerals needed for India’s green transition

Rajesh Chadha
Senior Fellow
Centre for Social and Economic Progress
New Delhi, India

rchadha@csep.org

Ganesh Sivamani
Research Associate
Centre for Social and Economic Progress
New Delhi, India

gsivamani@csep.org

Minerals are all around us. They are the raw materials needed to manufacture all everyday objects, including buildings, cars, and mobile phones. They are also used for developing green technologies the world requires for transitioning away from fossil fuel-based energy and transport to meet the goal of mitigating climate change. India, which emits just under 7% of the world’s greenhouse gas emissions, has made sizeable pledges in its Nationally Determined Contributions. These include achieving 50% cumulative electric power capacity from non-fossil fuel-based sources by 2030, compared to the 41.6% it has today and reducing the emissions intensity of its gross domestic product (GDP) by 45% by 2030 from 2005 levels. To meet these goals, India, as is the case with the rest of the world, will require a substantial scale-up in manufacturing and deploying clean energy technologies and electric vehicles. Consequently, the demand for minerals needed for producing these green technologies shall grow rapidly.

Mineral resources, either in their primary or processed form, which are essential for the production process of an economy, and whose supplies are likely to be disrupted on account of non-availability or risks of unaffordable price spikes, are referred to as “critical minerals.” Additionally, they lack substitutes and effective recycling processes. The geographic concentration of extracting and processing these minerals may also adversely affect their supply risks. Most critical minerals are mined in a handful of countries – Australia, China, DR Congo, and some parts of South America – while much of the processing is done in China. For example, three-fifths of rare earth minerals, essential for manufacturing clean energy technologies, electronics, and defence technologies, are mined in China, while more than four-fifths are processed there.

Supply chains of critical minerals may also be affected by unexpected events with global consequences, such as the COVID-19 pandemic and the Russo-Ukraine war. A country’s trade policies also affect these mineral supply chains, such as when Indonesia, with the largest nickel reserves in the world, banned the exports of the mineral in favour of developing a domestic processing industry. Countries must be ready to deal with these challenges in meeting their critical minerals needs. The USA, Japan, China, and the EU have periodic assessments of mineral criticality and strategies to minimise risks to the supplies and their economies. India, however, lacks in this front, with just two such evaluations. The Centre for Social and Economic Progress (CSEP) recently updated India’s critical minerals assessment.

In a CSEP study titled, “Critical Minerals for India: Assessing their Criticality and Projecting their Needs for Green Technologies,” the authors computed criticality levels of 23 minerals used in India’s manufacturing sector. This paper summarises the results of this study. The assessments were made considering two axes of criticality – economic importance and supply risks – with several indicators under each. The economic importance was estimated using the share of the mineral’s consumption in the gross value added (GVA) in the manufacturing sectors, the substitutability of the mineral, and the mineral’s GVA multiplier coefficient. The supply risks were estimated using the Herfindahl-Hirschman concentration index; the quality of governance of mineral supplying countries; end-of-life recycling rate; import reliance of the mineral; substitutability in mining; and India’s mineral self-sufficiency.

By combing the various indicators under each axis, the criticality of each mineral was computed. Niobium, lithium, and strontium were the most important for India economically, while heavy rare earth minerals, niobium, and indium had the highest supply risks. The study also projected large quantities of some of the critical minerals would be required for manufacturing solar panels, wind turbines and electric vehicles. While India is well-endowed with minerals, there is slack in exploring deep-seated and critical minerals, and starting new mining activities takes time. For minerals with no known resources within India, the country must look toward creating trade agreements and acquiring foreign mineral assets to meet its mineral needs.

Securing the critical minerals required for manufacturing green technologies must become an urgent priority, or else India – and the rest of the world – risks falling short of its climate change mitigation targets.

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