Supply chains remain vulnerable to geopolitical risks
Source: Asia Insurance Review | Oct 2023
While energy transition requires a dramatic increase in the supply of critical materials, their supply chains remain vulnerable to a range of geopolitical risks according to a new report by the International Renewable Energy Agency (IRENA).
The IRENA report said there is no scarcity of reserves for energy transition minerals but the global capabilities for mining and refining them are limited. Supply disruptions could impact the speed of the energy transition in the short to medium term.
The new report Geopolitics of the Energy Transition: Critical Materials examines the geopolitical risks and opportunities linked to a growing demand for materials in the coming years and calls for a holistic approach to diversify supply chains.
While the dependency and supply dynamics fundamentally differ from fossil fuels, mining and processing of critical materials is geographically concentrated, with a few countries and few major companies playing a dominant role. External shocks, resource nationalism, export restrictions, mineral cartels, instability, and market manipulation could therefore increase the risks of supply shortages.
IRENA director general Francesco La Camera said, “The energy transition will become a main driver of demand for critical minerals. The risk of supply chain disruptions is less about energy security and more about the potential slowdown of the transition, which must be avoided.
He said it is imperative to urgently strengthen collaboration on critical materials to minimise the geopolitical risks of concentrated supply chains and accelerate the deployment of renewables to limit rising temperatures to 1.5°C. A