Securing Critical Minerals Supply Chains for the Clean Energy Transition

The International Energy Agency estimates that to hit net-zero globally by 2050, six times more critical minerals will be required in 2040 than today.1 The rapid increase in demand for critical minerals is likely to increase price volatility. This could aggravate energy security concerns, and thereby delay the necessary clean energy transition. These vulnerabilities are amplified in emerging economies because they lack access to capital to secure critical minerals. It is essential for G20 countries to collaborate to lower the cost of capital across the critical minerals value chain- production, processing, and recycling- as well as to develop and adopt sustainability criteria to ensure that clean energy supply chains are both resilient and sustainable. This policy brief provides an overview of frameworks for investment in critical minerals production and explores ways to deepen access to supply chains by lowering the cost of capital. Banks and investors are deterred by the risks associated with upstream mining, so additional types of capital provision are needed. It will assess several modes of blended finance, in which development finance is used to unlock commercial finance, with the fundamental objective of derisking mining investment and improving access to critical minerals for emerging economies. The brief builds on the Global Blended Finance Alliance launched at the previous G20 summit in Indonesia to assess different types of capital provision,withafocusonenvironmental, social, and governance frameworks. It examines how G20 cooperation, with the support of international financial institutions, might be able to maximise capital availability for critical mineral supply. The authors urge the G20 to consider creating a critical minerals supply chains working group, consider G20 enabled financing, coordinate the formation of standards and investment facilitation, and coordinate emerging economy participation in critical mineral alliances.