Sustainable Mining of Critical Minerals an Opportunity for Mexico

Next month, the US government will be hosting the Global Clean Energy Action Forum (GCEAF), from Sept. 21 to 23 in the city of Pittsburgh, where both the 13th Clean Energy Ministerial (CEM) and the 7th Mission Innovation (MI) events will take place. These events will happen at a time when the world continues to watch the six-month horror created by Russia’s invasion of Ukraine, along with tensions between China and the US, from trade sanctions to human rights disputes, to opposing views on the war. All this is creating a clear and present danger to the global energy system. Yet, despite all these geopolitical challenges, there is great news for the energy transition. The US will be ready to “walk the talk” on climate action and share with its international counterparts its recently approved Inflation Reduction Act (IRA). The IRA includes US$369 billions of investment in energy security and climate change actions to reduce around 40 percent of its greenhouse gas emissions by 2030.

The GCEAF, with its focus on Rapid Innovation and Deployment and International Collaboration to Accelerate the Clean Energy Transition, would be an extraordinary platform to convene business and policymakers to partner and bring to market new technologies that will speed up the path toward a net-zero world, gathering momentum before the next United Nations Framework Convention on Climate Change Conference in Egypt (COP27). Yet not all members will be willing or able to present concrete action plans and explore new initiatives to scale up the energy transition.

There are a couple of topics that would benefit from having a dedicated campaign or initiative under the CEM/MI framework: critical minerals and batteries. The use of critical minerals is fundamental in the manufacturing of clean energy technologies and batteries. The International Energy Agency estimates that in a net-zero scenario, total mineral demand for clean energy technologies would have to be multiplied by six to match the expected growth in power generation (mostly solar and wind and other low carbon energy sources), electric vehicles and battery storage, and electricity networks.

Chile and China, together hold 36 percent of global copper production; while Australia, Chile, and China represent 87 percent of total lithium extraction; and China and the US have a 73 percent share of the world´s rare earths mining. Nevertheless, there are some other members that have large reserves of these minerals that could learn from the lessons and best practices applied in these jurisdictions, and together reduce bottlenecks created by increasing demand, scale up the supply and diversify the sources of these minerals, and minimize disruptions in the decarbonization pathways.

Canada, Germany, and Mexico hold the seventh-, eighth-, and ninth-largest lithium reserves, according to the US Geological Survey. An initiative on critical minerals would support energy transition efforts of these CEM/MI members and create synergies to continue expanding innovation and trade between partners. Moreover, Canada and Mexico are the top trading partners of the US, and together in North America, the region holds one-fifth of the share of world auto production.

Recently, Mexico started to focus on the opportunities related to lithium. The Mexican government on August 23, 2022 created Litio para México (LitioMx), a state-owned enterprise with the aim of taking advantage of the ample reserves in the country, and some investors (Canadian and Chinese) have plans to set foot in Sonora, the northern part of the country, where the largest deposits of this mineral are found. Mexico, along with a few other CEM/MI members, could propose the creation of an initiative on sustainable mining of critical minerals. On the one hand, the technology, the inputs, and the medium to extract the lithium varies depending upon the location and type of deposits (rock, salt, and clay). On the other, the extractive model has proven to be unsustainable. Therefore, for these reserves to be produced and support a net-zero world, there is a need to work together and innovate to develop more efficient technologies and less resource-intensive processes. In this context, Mexico could take advantage of its natural endowment, its network of commercial treaties, and this platform to bring forward an initiative that could help both domestically and internationally. Domestically, it could support the creation of a new industry, with the benefits associated in terms of job creation, capital formation, and regional development. Internationally, it could help Mexico in retaking a leadership role in the energy transition, by creating a coalition of partners with sufficient natural and economic resources to set up the basis of a sustainable extractive model and steer the critical minerals sector down a path where the mining standard is green and there is an opportunity for reskilling and retraining of the labor force and greening existing supply chains.