Although the world is moving closer to an international agreement on climate policy, any deal will likely run into the same problems previous iterations have: enforcing binding legislation. Although the signatories have not set their final emissions goals yet, many countries, especially those that are relatively underdeveloped and those that are coping with major economic slowdowns, will eventually fall short of whatever targets they decide on.
But the effort to curb emissions and address concerns over climate change will continue. Instead of fixating on another upcoming summit with limited potential for success, the important areas to watch for long-term impacts are the instances in which adopting different technologies to reduce emissions will have geopolitical consequences. Increased use of lower emission technologies will cause a shift in supply chains because they require different raw materials. These include rare earth elements and other less common metals and minerals. Securing these raw material imports poses a new set of challenges, and in the future, many researchers will focus on using cheaper, more readily available inputs when developing new and alternative technologies.
The U.N. Climate Change Conference will take place in Paris at the end of the year — a forum for continued negotiations on international emissions policy. Several nations have already submitted their preliminary goals in the form of documents called “intended nationally determined contributions,” which include goals for emissions reductions by 2025 or 2030.
These outlines are designed to aid the Paris negotiations, but they also illustrate some of the hurdles that will slow the international community’s efforts. The debate over which countries should shoulder the responsibility of reducing emissions has historically been a major sticking point, and key carbon dioxide producers China and India have yet to submit their intended nationally determined contributions. (Notably, Beijing announced some of its climate goals in a joint announcement with the United States last November.) Although submissions from Russia and Switzerland emphasize the importance of holding all nations accountable, countries with developing economies feel that the requirement to utilize low-emission technologies could restrict their growth.
These fundamental differences mean the Paris negotiations are unlikely to result in outcomes with much geopolitical impact. In fact, even if the participants reach a binding international agreement, enforcing it and holding its signatories accountable on a global scale will remain extremely difficult — if not impossible.
However, governments will attempt, in some fashion, to reduce carbon emissions. Timelines will inevitably differ from country to country, but states will have to pursue alternate energy sources as a result of good-faith efforts to meet emission reduction goals. Though the deadlines for these targets are still more than a decade away, governments could begin taking action over the next five years. Many countries will implement or keep policies that reduce carbon emissions by encouraging the use of technologies that reduce emissions or are more efficient with energy use. For example, Germany will probably rely more on wind and solar energy sources — in addition to corresponding energy storage technology — as it decommissions its nuclear plants over the next decade. Similarly, Japan is unlikely to completely restore its nuclear power plants, so it will need to rely on additional sources of renewable power production in the future, too. Though China will continue to rely on coal for a significant portion of its power production, the country has become a world leader in carbon capture and storage technology for its coal power plants, a much cleaner variation on thermal power plants, and has collaborated with the United States on efforts to improve the technology.
Yet, cleaner power production is only one way to reduce emissions. Some, including the European Union, the United States and China, are implementing measures to decrease emissions from the transportation sector. These measures include financial incentives, fuel economy standards and lower emissions targets. As technologies continue to improve and costs decrease, more drivers will likely embrace battery-powered vehicles. With improvements, fuel cell-powered vehicles could become competitive in the transportation sector.
Raw Material Inputs
The technological adaptations and shifts in response to the policies outlined and implemented to reach climate goals will have concrete implications for supply chains. Obtaining energy resources and securing supply lines are geopolitical imperatives that no country can ignore. Indeed, Japan’s decision to attack Pearl Harbor as Tokyo’s own supply lines came under threat and the U.S. Navy’s mandate to ensure transit through the energy-critical Strait of Hormuz are just two examples of how the need to secure delivery of fuel supplies can drive state behavior. Oil, natural gas and coal may be the most obvious commodities to track right now, but as the world shifts to cleaner energy sources and other related technologies to meet new emissions standards, different inputs will be needed in growing quantities.
Wind power, for example, requires heavy rare earth elements such as dysprosium and praseodymium, while solar power relies on gallium and tellurium. Energy-efficient lighting that uses light emitting diodes, or LEDs, could increase the demand for germanium. Current fuel cell technologies rely heavily on expensive platinum catalysts, while lithium and graphite are crucial to battery-powered vehicles. These less talked about metals will become increasingly essential. In fact, dozens of metals are vital inputs for technologies that could become fixtures of daily life over the course of the coming decades.
Just as the Middle East is crucial to the global supply of oil, other regions are similarly critical to the supply chains of some of the metals mentioned above. Many know that China controls the majority of the world’s supply of rare earth elements, but it is less well known that China is also the world’s largest producer of natural graphite. Also, Beijing’s drive to increase high-end manufacturing has resulted in Chinese factories’ producing a significant portion of the technologies that require rare earth elements. China’s grip on the rare earth market, however, is loosening. Beijing removed export quotas earlier this year after the World Trade Organization ruled the country had failed to show justification for them.
Nonetheless, rare earth elements are not the only necessary inputs of future technologies. The demand for many different metals and minerals will increase, and the physical security of their supply centers will become a key concern for some. The Democratic Republic of the Congo is the largest producer of cobalt, a vital input for battery technology. Kinshasa’s weak and unstable government has tenuous control over its territory. The increased demand for the mineral resources produced there has the potential to aggravate centuries-old hostilities among the local population. Given the problems facing much of the developing world, the potential for corruption, smuggling and conflict dramatically increases the risk to global supply centers.
China and the Democratic Republic of the Congo are just two examples. As the world becomes more dependent on advanced technologies, security environments and the political behavior of a new set of producers will become more important to the global economy.
Research into Alternatives
Risks to the supply of inputs and the high cost of some metals will influence the focus and direction of future research. Platinum currently plays a vital role as a catalyst in fuel cell technology, but it is an expensive metal with roughly three quarters of its production occurring in South Africa. This lack of diversity in supply, combined with the instability in South Africa’s mining sector, puts it at higher risk for disruption and increases its cost. Because of this, some researchers have opted to use a catalyst made of a nickel and titanium alloy, both of which are available in much higher volumes — production rates in 2014 total 161 metric tons of platinum compared to 2.4 million metric tons for nickel — and from more sources. While other consumers of nickel, primarily stainless steel producers, will compete for inventory, reserves are sufficiently high, and the prices for both these materials are expected to remain comparatively low. The recently developed nickel and titanium catalyst is not at the point of commercialization yet, but it represents the direction of future research.
Regardless of whether the Paris talks result in a binding agreement, much of the developed world will increase its use of energy efficient technologies to reduce carbon emissions. Supply chains for oil, natural gas and coal will remain vital, but as a large number of comparatively minor materials become increasingly important, pressure on their suppliers will become greater as a result. Geopolitical factors in countries that were previously considered marginal or unimportant, such as the Democratic Republic of the Congo, Chile, Peru and South Africa, will become increasingly important to the global energy supply. Likewise, the importance of countries such as China will change, but for different reasons. Over the long term, researchers will likely focus on using cheaper, more abundant materials in developing new technologies, a move that will cause a second, structural, shift in energy supply chains.
“How Carbon Emissions Reductions Will Alter Supply Chains is republished with permission of Stratfor.”