The International Energy Agency (IEA) reports a skyrocketing demand for critical minerals, such as lithium, which are essential for low and zero-emission technologies. The energy sector’s growing needs are a key driver behind this surge.

According to a recent report by the IEA, the demand for lithium tripled, cobalt demand jumped by 70%, and nickel demand rose by 40% between 2017 and 2022. Investment in the development of these critical minerals also increased by 30% in 2022, following a 20% rise in 2021. Companies specializing in lithium development recorded a 50% increase in spending, and firms in China nearly doubled their investment spending last year.

The IEA stated in December 2022 that renewables are set to overtake coal and become the largest source of electricity generation globally by mid-decade. Given the crucial role of critical minerals in technologies such as wind turbines and electric vehicles, the stakes are high.

If all planned projects in the critical minerals sector are realized, the supply might be sufficient to meet the climate commitments made by governments. However, the road ahead is not without challenges. The risk of project delays and “technology-specific shortfalls” leaves little room for complacency about the adequacy of supply.

The IEA stated that even more projects would be needed by the end of this decade to limit global warming to 1.5 degrees Celsius, a key goal of the Paris Agreement. The market for minerals essential to the energy transition reached $320 billion in 2022, doubling over the past five years. Start-ups in the critical minerals sector raised a record $1.6 billion last year.

China leads in the extraction of graphite and rare earths, as well as the processing of lithium. However, the world’s second-largest economy heavily relies on the Democratic Republic of the Congo for mined cobalt. The IEA’s report indicates that there has been limited progress in diversifying supply sources over the past few years, with the situation even worsening in some cases.

The sustainability credentials of the entire critical minerals industry also need improvement. The IEA reports that water withdrawals nearly doubled between 2018 and 2021, and greenhouse gas emissions remain high.

Fatih Birol, the IEA’s executive director, said, “At a pivotal moment for clean energy transitions worldwide, we are encouraged by the rapid growth in the market for critical minerals, which are crucial for the world to achieve its energy and climate goals.” However, he added, “Much more needs to be done to ensure supply chains for critical minerals are secure and sustainable.”