12 May 2022
The Role & Geopolitics of Critical Minerals in the Energy Transition
· David Kovatch, Director of Energy Transformation, National Security Council, The White House
· Jeff Morrison, Vice President, Global Purchasing and Supply Chain, GM
· Fiona Wild, Vice President, Sustainability and Climate Change, BHP
· MODERATOR: Allison Carlson, Managing Director, FP Analytics and Events
Watch the full session here:
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Allison Carlson: (33:25)
Okay, Andrew. Good morning. Thank you so much. And I'm also very excited to be leading this discussion on this important topic and to introduce our first panel conversation of today, where we'll look at the energy transition and how it will drive demand for extraction processing and trade of critical minerals and metals such as cobalt, copper, lithium nickel, and rare earths. So just to set the stage for a few minutes before we dive in, as we all know, there's growing demand for clean energy technologies. And in that the IEA is estimated the, that by 2040 in just two decades, the demand for critical minerals will increase sixfold. And there's this looming mismatch between our climate ambitions and the availability of critical minerals needed to achieve them. Not only that the geographic concentration of these minerals is also something that we all need to contend with and it's driving geostrategic and geo-economic competition. So to dive into these issues and discuss how we can meet this demand for these resources, both sustainably and reliably, I'm so thrilled to welcome our panel today. Joining us today, we have a David Kovatch director of energy transformation at the national security council in the white house. We also have Jeff Morrison, excuse me, vice president of global purchasing and supply chains at GM and Fiona wild, vice president sustainability and climate change at BHP. Thank you all for joining us.
Thank you. Thank
Allison Carlson: (35:04)
You. And welcome. So our time is short, so let's just dive in David. I'd like to start with you last year. At this time, the administration was embarking on a hundred day review of supply chains for critical minerals that were considered key to the economy. And last month, the administration announced a commitment to use the defense production act to bolster critical mineral supplies. So I'm just wondering if you can start us off today by highlighting the administration's key priorities and strategies for meeting this increasing demand.
David Kovatch: (35:40)
Thanks. Thanks, Allison. Absolutely. I'm really excited to be with you and join me, Jeff and, and Fiona here because critical minerals sit at the crux of the energy security and climate change challenges, which are two key priorities for the Biden administration. Combating climate change is central to our efforts domestically and international and the Biden administration's committed to the clean energy transition. So, so these are really important issues for us. I think it's important to emphasize promoting clean energy and energy security are not mutually exclusive. In fact, they go hand in hand. And so the president is underscored that the path to true energy security runs through clean energy. And it, as we work towards a clean energy future, it's essential that we do not trade reliance on one set of energy for dependence on another. So we recognize that a key component of this is ensuring that the energy transition has access, and we all have access to the critical minerals that clean energy technologies like batteries rely on a large capacity to batteries and, for, for vehicles and for, for grid storage applications, they're essential to meeting our climate goals and, and just those two sectors in the United States account for more than half of our carbon emission.
David Kovatch: (36:52)
And I think if Russia's warn Ukraine has taught us anything, if the importance of resilience secure supply chain. So, you know, that applies across the economy, but especially to inputs like critical energy minerals that are at the center of our clean energy climate and economic and job schools. And so that's why the white house has taken a number of steps. You mentioned the 100 day, report. You also mentioned the use of the defense production act. And so those are important steps to, of strengthen those supply chains across the sector's entire value chain. And I think, you know, what we're trying to do in some of those steps is a really holistic approach that includes mining and the production of materials, but it also includes processing and recycling. And that overlaid on top of all of those is a commitment to, to environmental sustainability, community engagement and social governance.
David Kovatch: (37:47)
I think those are really important elements that we prioritize. So, I mean, if you look at a couple of the examples of things that the administration has done, you have the bipartisan infrastructure law, for example. So President Biden's, bipartisan infrastructure law includes nearly 3 billion to boost production of advanced batteries. But it also is expected to go towards, not only battery materials, manufacturing, but refining and production plants, battery sell and pack manufacturing facilities, and recycling facilities. And those are going to create good paying, clean energy jobs. You mentioned the you, that also, will have an overlay of not only mining, but also processing modernization, which, to increase productivity and environmental sustainability and also safety. It also includes, secondary and unconventional sources such as mind waste coal Ash, geothermal brine, and so, and, and recycling, all of which are, are really important for increasing in meeting demand, but also reducing the need for, and in mining.
David Kovatch: (38:56)
There's another issue I'd like to mention and that's, XMS make more in America. So this was announced just a couple weeks ago, and this is actually a, a recommendation that came out of the 100 day review of supply chain. And so just a couple weeks ago, XM announced unanimous port approval for it to make more initiative America initiative, which will expand, help, expand production capacity by providing access to capital for, for American manufacturers. So this could pertain to anything across the economy, but an important compliment to it'll be an important compliment to our efforts to address climate change. Because we're going to price prioritize environmentally beneficial project projects. That'll include things like battery manufacturing and, and applications that we use critical minerals. So that's a lot of what we're doing on the domestic side internationally. You know, I think we understand that no matter how much we do domestically, the United States alone is not going to provide the world's entire world supply of critical minerals for clean energy applications.
David Kovatch: (40:02)
And so we're working with our partners and allies on diversifying the supply to increase energy security just like with traditional energy sources, you know, the best, security is diversity. And so we're working with ally and partners on doing just that, last month secretary Ramono hosted her Australian government counterparts along with us and Australian companies to, discuss, how we can cooperate to, to do just that. And while Australia's a natural counterpart giving it mining experience and, and resources and our close partnership, we're also interested in working with other partners and allies, on other work streams that could include things like information sharing and, and strengthening cooperation on critical mineral investments to support public and private sector financing. We’re looking at the potential of, jointly promoting on mining sector governance, and here's the highest environmental social and government stand governance standards.
David Kovatch: (41:03)
And on that last point, that's something that's been a priority of ours for a long time now through the state departments energy resource government initiative, UGI, it promotes sound mining, sector governance, resiliency in those supply chain. So those are things that we've right done with resource rich partners for a long time. So I just want to leave you all with the idea that this is a priority for us for clean energy goals, for energy security goals as well. And it's something that we're taking a holistic approach on that looks at not just mining, but also processing and recycling and, and governance issues as well.
Allison Carlson: (41:38)
Wonderful. Thank you, David. I really appreciate you laying that out. And clearly there is so much activity happening on the part of the administration and broader government on this issue. I'd like to tease on some of those points that you made throughout the conversation, but like to turn to Fiona now pick up on the issue of growing demand. And often we're hearing in the media and elsewhere, certainly about growing demand for lithium and cobalt essential inputs for batteries, but demand is also growing for copper class one nickel and graphite. And I'm wondering from your perspective and from an industry, how is BHP responding and how are you approaching scaling to meet the challenge and how are you doing so very importantly, with the lowest operational emissions in mind?
Fiona Wild: (42:26)
It's a really great, great question, Alison, thanks for that. And I, I just might pick up on something that David said, which is he said the best security is diversity, and that's a, it's a really interesting, consideration for us. So BHP is the world's largest diversified mining company. And as you mentioned, we produce a whole range of commodities from and met coal, the steel making, also copper for electrification and nickel for batteries. And we use tools like scenario analysis to help us think through the impacts of responses to climate change and how that might impact our portfolio and our strategy. And what we found is that the, the greater, the global efforts to decarbonize, the more demand increases for our commodity. So the better we are likely to perform as a business. And that's really because of this, by that we hold.
Fiona Wild: (43:17)
So as you've outlined, the energy transition has a really material impact on demand for copper and nickel, as well as for a more steel for building things like wind farms for comp and other sorts of decarbonization infrastructure. In particular, in our scenario, we found that if we want to keep pace with the development of renewables, we'd expect copper demand to double over the next 30 years, and that we'd expect nickel production to have to increase fourfold, to try and keep up with the next generation of battery technology. So as we've outlined, the industry needs to grow if the world is to decarbonize, but what's really important is that it needs to grow in the right way. So it needs to think about, we, we need to think about the way that we produce these, these products for our customers and the downstream supply chains that we produce.
Fiona Wild: (44:10)
So it's really about making sure that we can set those commitments and targets for our operational emissions. For example, also thinking through, social value that can be generated in the governance around these issues, as well as looking at the decarbonization in the value chains. I think the thing that perhaps separates, the mining sector from others is the particularly in BH P's case, we have to think in terms of decades. So we have to think and plan for decades. And this long term perspective means that social value, which is a positive contribution, if you like that we can make to society is hard, wide into every decision that we make. So when we're investing in a region to work in partnership with those communities for the long term, to get those long term social environmental and economic outcomes.
Allison Carlson: (44:59)
Great, thank you. And really want to focus on sustainability as well throughout this conversation. So thank you for attention to that and the importance of diversification of energy supplies for greater security. Jeff, I'd like to bring you in now as well. So when we're thinking about growing demand, certainly the pandemic over the last few years, and now Russia's invasion of Ukraine has really rocked supply chains around the world. And we've been watching this unfold and there's been quite a bit of attention on shortages of semiconductors, but this also pertains to critical minerals and metals. So I'm wondering in your role, how are you looking at supply chain security and what are you focused on in terms of securing the resources that you need?
Jeff Morrison: (45:45)
Hey, Allison. So first of all, just thank you for inviting me to join the panel today. I think forums like this are really important to get our message out and, and really help with the energy transition. And as you mentioned, part of that, that we're experiencing even today on, on our products is how fragile our global supply chain can be at times. And I would say we've experienced over the last couple of years with COVID, is unprecedented in terms of how we've had to manage supply and is really made us refocus and rethink what, what we mean in terms of supply chain resiliency. And so a lot of the work that we are doing is looking strategically at all of our commodity, all of our commodities, our partners, our footprints, as well as our different finished goods that we're buying for the vehicles and you know, working with our partners to come up with a more resilient, sustainable way forward.
Jeff Morrison: (46:52)
And some connection is a great example where we continue to we continue to struggle with, with supply on a daily basis, even though it's gotten better. And, really we've started engaging directly, not only with the semiconductor suppliers, but also the HADS and foundries, in looking at what the capacity footprint, needs to be in the future. And, you know, we've announced, we've, we've announced some partnerships. We have others that are in flight, looking at bringing a lot of that capacity here to north America and, making sure that we've got, supply protection, more so, and then I think as you, as you, as you then think forward about, EVs, this is top of mind for us. You know we're committed to this vision of zero emission, zero congestion.
Jeff Morrison: (47:51)
You know, as part of that, we, we want to make sure that we're controlling our own destiny and that we've got, the ability to ensure that we've got adequate supply sustainable supply of EV RO materials. And, you know, so some of the announcements that you've seen from GM recently, uh, we've announced a manufacturing joint venture with our main battery cell partner, LG energy solutions, we've announced, partnerships throughout the value chain for making battery cells. So that includes our CA active material, with poco we've announced deals with, CTR who's a assault C based geothermal Brian lithium producer. We’ve announced, I think this week rare earth supply and magnet Allo flakes to make EV magnets out of fourth ward, Texas. And, you know, I picking up on some of the comments that David made. It's a lot of this is, is in strong partnership with, with the administration and policy to make sure that they understand what we think our needs are, and that we've got the right level of support between ourselves to make that happen.
Allison Carlson: (49:15)
Great. And you pointed out a number of really important projects that are rolling out or being started, and immediately what comes to mind is investment and the investment that will be required to really increase production and secure your supply chains. And so I'd like to turn it back to Fiona, and then David here from you on this as well, but from Ann’s perspective, how are investors thinking about challenges of supply and demand for criticals in a decarbonizing world, and what are some of the financing mechanisms that are absolutely key here?
Fiona Wild: (49:51)
Yeah, it's a great question. It's, it's really interesting having conversations with investors now about this topic versus five years ago, where it didn't really tend to come up in conversations. So now kind of ESG discussions are core to all of our investor engagements and climate is the sort of defining ESG issue for, for BHP is particularly focused in commitments. We are making and performance against those targets and goals that are being set both in terms of our operational for so what we can control, but also in terms of how we're engaging with our suppliers, the shippers of our products and our customers. So all the way throughout that value chain. So the focus doesn't stop it for us at the, the factory gate. It looks at the entire supply chain and the role that we're playing in Decarbonization across that, I think what's really interesting in working with investors is building, understanding sharing lessons learned about what's working, what's not working, but also finding ways to collaborate.
Fiona Wild: (50:55)
So, you know, working with investors on novel types of mechanisms that might encourage more investment in new types of technologies on new ways of thinking about decarbonization underpinning this a, I think there is still a bit of a lack of recognition of the critical role of mining and nets to support the transition. So you won't see electrification without copper. You know, you won't see a builder of decarbonization infrastructure without steel, and you won't see a scalable electric vehicle batteries without nickel. So that I think an understanding of how supply chain are of how the goods and services that you want are generated is incredibly important. I'll give a, an example. I remember talking to someone about how we define what green revenue is. And someone said, well, I think green revenue is revenue. For example, that might be generated by a wind turbine producer.
Fiona Wild: (51:47)
And I said, well, do you know what wind turbines are made of? And they said, well, they're made of metal. I said, but they're made of steel. Do you know what steel is made from? And they said, not really. I said, it's made from iron or met cold. So we need to think through all of the different component parts of these value change when we're thinking about where capital needs to be invested, to make sure that we are actual providing the mechanisms to bring these goods and services to the market that can support infrastructure that can support decarbonization, but also make sure that we're doing it in the right way, as I mentioned earlier on, I think the other thing for investors as well is to think through decarbonization challenges. So investors like to kind of allocate missions to different sectors and think through how each sector should be planning its pathway to decarbonize, which makes perfect sense, but we also need to recognize that different sectors will decarbonize in different ways, and there are different pathways to get to net zero. So for example, you might expect the power sector to be decarbonizing ahead of the steel sector, which is a much hard to abate process in terms of substitute ability. So I think it's important for there to be information coming out from groups like the I P C and the IA to help inform a really credible understanding of the pathways to get to net zero, but also really importantly, to hold companies to account for delivery.
Allison Carlson: (53:09)
Absolutely. And we have a panel upcoming in a few minutes about the power grid as well, and how to address some of those issues there. So for all of those tuning in now, please stay tuned for that conversation. I'd like to turn it back to you, David, from your perspective and thinking through government and government's role in terms of investment, what are some of the key priorities there?
David Kovatch: (53:33)
Sure, sure. Thanks, Alison, it's a great question. And it's one that we've spent a lot of time on. I think first of all, government has to have a little bit of humility and foster, some really close relationships with industry to understand what those challenges are and what the needs are of industry. You know, we can't just come up with these solutions on our own, in a bubble. We have to understand, the businesses and so fostering relationships and, and really having close communication with the sector that's doing the work is important and that's something we prioritize doing. I'd also say that having long term policy signals and clear goals is really important. And so that's something, I think the Biden administration's made really clear, right? We are absolutely committed to the clean energy transformation. That's something that we're, we're going to be driving towards. And I, I don't think that there's any doubt in, in anybody's mind, that's where we're headed.
David Kovatch: (54:29)
Then you know, we have, things that we can do different tools us government has that we're looking into, you know, our United States trade and development agency has the ability to finance, feed studies for, for major projects overseas. Our development finance corporation can, can provide certain amounts of financing for some of these kinds of projects. That's something they're looking into and I've already spoken about the XMS abilities as well. So I think we have a suite of tools. We're, we're very interested in, in seeing how we can deploy them creatively. And we're really trying to just foster those, important advisory, you know, relationships with industry to make sure that we're doing so in an efficient way that is actually sending the, the right kind of signals needed to make that.
Allison Carlson: (55:26)
Absolutely. And those partnerships are key. I'd like to pick up on two things that were mentioned Fiona by you. and by David is you as well. And then bring Jeff in, you know, thinking about investors and investment and need to account for efforts to decarbonize and reduce emissions throughout the value chain and supply chains. It brings to mind accounting tracking and tracing emissions. And so Jeff, from your perspective, how do you think about that, about tracking and accounting for the environmental and social impact throughout supply chains and what, what types of technologies and partnerships are you thinking through as you're working into secure supply chains?
Jeff Morrison: (56:11)
Hmm. So Allison actually on, on Monday, we, we made an announcement, really focused on an ESG pledge that they were making with our suppliers. And so we've, we've partnered with a company Ecova and you know, Ecova is helping us to survey not only sustainability and pledges to get scope one and two emissions to meet goals by, by 2035 to 2038, depending on the industry that you're in is as well as doing certification on labor and human rights. And so as we, as we look at our supply base today already through the work that we've done prior to this announcement, we've got over half of our suppliers spend with suppliers who have signed up to this pledge and have made that commitment. And, you know, the goal is to, to use systems like, you know, like Ebos has to help us with being able to measure and to track supplier performance in these areas.
Jeff Morrison: (57:15)
And you know, as, as we go forward, we're, we're getting deeper into value chains. And as we think about, you know, know EV raw materials, the, the actual mind assets are important, and we want to make sure that we secure that where we're seeing the bigger opportunity is actually to, to optimize the processing steps from that mineral to where we actually make a battery and, you know, looking at looking at more sustainable ways to do that trying to eliminate processing steps. And again, I would see those over time you know, folding into this, this sustainability pledge that we've made as well.
Allison Carlson: (57:59)
Great. Thank you. And digging a little bit more into the sustainability pledges. I'd like to bring in an audience it's question right now and turn it back to you, Fiona. This is from Thomas Pickford, who is joining us from London today, and he's at Kings college in London. He asks, how do we make sure that the green transition doesn't mean sacrificing specific people and places, places like Chile in salt flats or the copper belt in the DRC are likely to see a huge increase in extraction to fuel this transition. And so his question is how can we make sure that European or north American decisions or others don't harm communities and people in these areas?
Fiona Wild: (58:44)
Yeah, it's a great question. Thanks to on for sending that one through. I think the important thing here is to think through how decisions get made and the broad range of stakeholders who are involved in those decision making processes. So when we make decisions about investments, we don't make decisions in isolation. So we have a really, really strong focus on engaging with a range of different stakeholders who could be impacted in those decisions, including for example, communities and a very strong commitment to, for example, free prior and informed consent before we will access any of those resources for development. That enables us to make sure that we can actually secure what we call social value. So this long term commitment in this long term generation of value for communities, because when we know, we know when we go into to locations, whether we’re entering locations or exiting locations, we have long term relationships with the communities where we're operating, and we need to understand what the benefits are that can be delivered to those communities and, and have that participatory process in understanding how these activities will be structured. So for us, it's really about understanding, not just a financial value that can be generated, but a really, really strong focus on social value because that's what underpins success for us in the long term.
Allison Carlson: (01:00:05)
Thank you. Thank you for diving into that. And focusing on a, just transition is obviously so important and a part of many of our discussions over the next two days. Another thing I'd like to, to dig into, which was brought up earlier, David, by you, and I'd like to dig into it a little bit more is we've been talking a lot about production and increasing extraction, but we'd really like to focus a bit now, before we have to transition out of this panel on advanced recycling and materials recovery, what can we do with what we have and how can those systems be invested in and expanded and scaled? So there's greater materials, recovery as well to mitigate the amount of, of extraction that needs to happen to meet this demand. David, I'd like to go to you and briefly to Jeff before we transition into our next panel.
David Kovatch: (01:01:00)
Sure, sure. Thanks Allison. Great question. I think that's something that we've prioritize, frankly, if you look at the decisions that we've made in terms of funding through the bipartisan infrastructure law and that a good deal of that funding is going to go to jump starting the recycling of battery metals. It's something that's been included in the defense production act. That's gone towards critical minerals. It's something thing that could be applied potentially to the XM make, make it make more in America. So that's something that, that we think is hugely important because you know, as long as we are growing the need for, for these materials, there's absolutely going to be a long term need for, for reminding the question is what can we do to make the most out of the materials that we've already mine to, to make sure that these are these clean energy technologies of the future, have the lowest possible footprint, and carbon embedded emission. So we think that's hugely important. It's something that we've prioritized through all our decision and it's, and, and, and so, yeah, I think you've seen that through the legislation and, and where we've put our resources.
Allison Carlson: (01:02:14)
Absolutely. And Jeff, if I could ask for your input here as well, how are you thinking about that in the expansion of recycling and materials recovery for securing supply chains?
Jeff Morrison: (01:02:26)
So a hundred percent of our TM batteries are recyclable. So, you know, that's, that's an important part of the value chain and, and, you know, so we're thinking about, you know, partners that can recycle and in, in the most efficient, sustainable way so that we have maximum recovery of the precious metals that we want to get back. You know, today we probably have a very low car park of, of EVs and, and batteries that are coming back for recycling. One of the things that we see is, EV batteries have a really long life and the life likely goes beyond even the initial vehicle life. And so, you know, we've started looking at life cycle management to have secondary use applications where we can take a battery maybe at the end of the automotive life that still has 60 to 70% of its useful life. And I use that in other applications, but then ultimately when it, when it is ready to be recycled and reclaiming the metals to be able to do that not only in a most efficient way with the right partners, but even from a location standpoint, to have that located in such a way that we can efficiently feed the metals back into our battery making process.
Allison Carlson: (01:03:41)
Great. Thank you. And one quick, last question from the audience before we're transitioning into the next panel and Fiona, this one is for you. This is coming from PI Mahe. I hope I pronounced your name correctly out of the UK and the climate adapt patient and resilience. I, the UK government and he asks the set of issues, demonstrates the link between the need to mitigate climate change through the clean energy transition and the need to adapt and build resilience to climate risk. So what does a private sector need from governments as well as finance to support the resilience of supply chains and support infrastructure to climate related shock from extreme weather? That's a big question I know, and we're running out of time, but you know, would like you to respond quickly if you could.
Fiona Wild: (01:04:29)
Okay. I think it is a complicated question to answer in a short period of time. What I would say is the private sector in general, I think is focused primarily on managing transition risk associated with, so how do we manage the response to climate as opposed to sort of prioritizing the, the physical impacts of climate change, but we're starting to see that changing one of the first things we need to be able to do that really well is an understanding of what the climate impacts are likely to be. So really good access to data to enable us to understand not just at the macro scale, but at the local scale, what decline, what does climate change mean across a range of different scenarios for individual towns, individual communities. So access to that data is incredibly important. And then a collaborative approach to thinking through the risks that climate poses and a range of measures that can be put in place to manage those, whether it's changing management practices, whether it's looking at natural climate solutions to build resilience or whether it's engineering solutions that we might need. So I think it's really having great access to data, but also making sure that we can bring in a whole range of different state holders as we think through risk assessment processes. But also as we think through solutions, this isn't just about engineering, our way out of solutions. There's a whole lot of things we can do, particularly in terms of natural climate solutions that can give us community benefits, watershed benefits and bad diversity benefits, which are increasingly important as climate takes hold.
Allison Carlson: (01:05:58)
Wonderful and very well put, thank you so much. And thank you all for joining us, Fiona, a wild Jeff Morrison and David Kovatch really appreciate you joining us today and sharing your insights.
Fiona Wild: (01:06:10)
Jeff Morrison: (01:06:11)
David Kovatch: (01:06:12)
Allison Carlson: (01:06:13)
With that. We're fortunately out of time for that panel, but would like to into our next, We'd like to welcome Maggie lake veteran journalist and founder of Maggie lake media to help explore house cities around the world. Our leading on climate action. Hi, Maggie. Welcome.