Friday, March 18, 2022

The Dominance Of The U.S. Dollar Is Fading Right Before Our Eyes

 

Submitted by QTR's Fringe Finance via Zero Hedge  
18 March 2022

It was just a couple of weeks ago that I wrote an article arguing that the economic sanctions we have cast upon in Russia, due to its invasion of Ukraine, likely mark the beginning of a period where China and Russia would bifurcate the global monetary system, leading them to eventually challenge the U.S. dollar’s reserve status. 

Now, Saudi Arabia is joining the fray, further threatening to tip the balance of the global monetary scales that have kept the U.S. dollar afloat for decades.

The fact that predictions of a “new economy” and “new monetary system” only exist on fringe blogs like mine and haven’t gone mainstream given the current economic situation with Russia (even amidst our abuses of printing the dollar over the last several decades) is baffling to me.

As I noted to Andy Schectman in a recent podcast, our quality of life in the United States and our nation’s entire economy is an elephant balancing, on one leg, on the toothpick of the U.S. dollar’s reserve status.

Our quality of life relies solely in our unique ability to import the goods and services that we use and need on a daily basis, while exporting US dollars. We’ve been able to print trillions of U.S. dollars into existence over the last couple of years - monetary policy that is anything but sound, regardless of whether or not your currency has global reserve status – because of the luxuries afforded to us by the dollar’s global reserve status.

But this reserve status, and the $30 trillion in debt we have accrued and convinced ourselves we will never have to pay, quickly go from being long-term liabilities that we can theoretically ignore to current liabilities that we must address if the dollar is ever legitimately challenged.


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Challenging the dollar’s reserve status would be an obvious and immediate catalyst that would flip everything we think we know about economics in our country on its head. Our monetary policy blind spots, that we have been willfully ignoring for decades, would instantly become leverage for the rest of the world.

The stage appears to remain set for this to happen. Globally, if you are an enemy of the United States, the situation hasn’t looked better to challenge the U.S. dollar, maybe ever, than it does now:

  • We have run up a mountain of debt and grossly expanded our money supply in an extremely short period of time

  • We are the most reliant we have ever been on other countries to import goods and services

  • We have a presidential administration that (1) doesn’t understand basic economics and (2) is limiting our nation’s ability to produce commodities, which act as a foundation for a country’s inherent wealth

  • We are about to enter into a economic recession

  • Inflation is setting records and is already bankrupting the middle and lower class of our nation, before even considering a potential challenge to the dollar

And while a week or two ago I was only worried about China and Russia, now that the world has been forced to pick economic sides, other nations are throwing their respective hats in the ring, too.

Saudi Arabia, which is a nation of major consequence economically due to its significant oil and gas reserves, has reportedly embraced the idea of accepting Yuan instead of dollars for Chinese oil sales.

Not unlike Russia and China’s plans to de-dollarize, that date back nearly a decade, the Saudis have been considering this idea for six years already. And not unlike Russia and China’s new economic tie-up, the catalyst for speeding up the process has been U.S. foreign policy:

Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.

The talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year as the Saudis have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom, the people said.

The consideration by Saudi Arabia is consequential.

It shows that other nations, when forced to choose sides between the U.S. and its foes, don’t feel obligated to commit to the U.S. dollar, further undermining the world’s perception about the dollar’s strength.

Not unlike Russia, Saudi Arabia is a country that, regardless of how much its currency may “devalue” versus a fiat basket of currencies, is still backed by finite resources.

This gives the country and its currency intrinsic strength. Russia seems to understand this. In fact, just this morning, Russian Foreign Minister Sergei Lavrov, likely alluding to this fact, said that economic sanctions against Russia make the country “stronger”.

Saudi Arabia is now another serious name on the list of contenders who have the currency bite to back up the economic rhetoric bark of challenging the dollar.

As The Wall Street Journal notes, the Saudis have “traded oil exclusively in dollars since 1974, in a deal with the Nixon administration that included security guarantees for the kingdom.”

The U.S. dollar’s ties to oil have been crucial in helping prop up the currency’s demand globally. These ties have also helped drum up the psychological buy-in necessary for the world to collectively accept that “the next guy” is going to want their U.S. dollars.

But given the alliance between Russia and China – and the newfound alliance between Saudi Arabia and China - it looks as though that confidence game might be coming to an end right before our very eyes.

In other words, the dollar could be fading from the global picture like Marty McFly’s brother from that family photo in Back to the Future.

We may not notice it right away…

…but eventually it’ll be clear.

Far be it for me too be a harbinger of too many uncomfortable predictions at once, but, as I wrote last year, I also strongly believe that China will eventually back its forthcoming digital currency with gold to further strengthen its economic and monetary posture globally.

The contrast between a forthcoming divided global economy would be stark: nations like China and Russia seem genuinely interested in the idea of sound money backed by commodities, while the United States seems preoccupied with jargon filled academic circle jerks trying to convince ourselves that debt is money that “we owe to ourselves”, to quote Paul Krugman, and that money literally grows on trees.

If given the choice between the two ideologies, where do you think the world is going to wind up?

I’m not sure we’re ready to embrace the answer here in the United States, but we better get ready to.

--

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Boris and Biden Can't Blame Ukraine War For Energy Crisis


Protestors in Berlin have been holding up placards suggesting they’d sooner shower in cold water than use Russian gas, others however are more concerned about how they will keep warm and cook their food while still others are wondering how they will for to fill their cars with fuel for the commute to work, or buy food with the prices of both fuel and food rocketing.

Meanwhile in Britain Boris Johnson has called on the public to make sacrifices, solemnly telling us that we need to drop cheap Russian energy and ‘accept that such a move will be painful’.

Telling voters that the spiralling inflation we are now experiencing, and the effect on living standards might sound like a politiian trying to be honest for once . Or might it be the case that Boris Johnson, never a man known for plain speaking, is preparing us to be told that Russia’s war against Ukraine, rather than the follies of 'net zero' policies and transitioning from fossil fuels to intermittent 'sustainable' energy sources are to blame for price rises that coming down the lione long before the first Russian boot stepped over ~Ukraine's border?

Managing without Russia’s energy supplies will hit the Germany economy hard. German industry and domestic energy supplies have relied heavily on imported Russian natural gas since Germany's influential but idiotic Green lobby pressured Angela Merkel into abandoning coal and nuclear in favour of wind and solar electricity generators. Germany imported 32 per cent of its gas from Russia in December and wants to reduce that by two-thirds over the next year but has no viable alternative and even Germany's brilliant engineers cannot conjure current from wind turbines when the wind does not blow or from solar panels when the sun does not shine.

Energy prices throughout Europe were skyrocketing before any economic sanctions were impised on Russia. The energy crunch caused by the failure of green energy policies, and exacerbated by economies restarting after lockdowns, saw UK energy regulator Ofgem raise the energy price cap by 54 per cent, but oil and gas price increases throughout 2021 had already driven dozens of companies out of business by February, 2022.

Higher prices would normally be hard to explain for a governing party committed to the traditional Conservative principle of keeping living costs in check. ‘But the war has changed the narrative in a number of ways,’ says one Conservative lawmaker, ‘the cost of living crunch can also now be blamed on something out of our control.’

Debt servicing payments are increasing by billions of pounds month by month, as nations, already half buried under the mountain of debt they incurred in order to fund the insanity of their pandemic responses now have to flood their economies with even more fiat money to stave of the effects of global price inflation. That, for Johnson and Biden, has meant trying to blame their economic woes on Russia. It might work, but rising prices aren’t a recent phenomenon: they were being shaped by government decision-making long before sanctions hit.

In Britain, inflation has been outpacing official forecasts for months – and was expected to hit 7 per cent even before Ukraine was invaded. One Secretary of State expects the headline rate to hit double digits before the end of the year. In Joe Biden's America runaway inflation is running even faster with the year on year increase in consumer prices having already topped 8 per cent.

Blaming their economic woes on Russia's conflict in Ukraine probably seems an easy way out for political shtsters like Johnson and Biden. It would have worked too (to borrow a phrase from Scooby Doo villains,) but for that pesky virus interfereing. No doubt Russia’s war is a serious, and increasing, problem, prticularly when we consider the likely effect of the ban on Ammonium Nitrate (fertiliser) exports to the west. But two years of relentless scaremongering propaganda used to prop up the pandemic narrative have almost destroyed public trust in politics and the madia. Rising prices aren’t a recent phenomenon: they were being shaped by government decision-making, the economic damages caused by unnecessary and ineffective lockdowns and the suspension of commercial activity as entire nations were placed under house arrest, long before sanctions started to contribute to the latest spike in energy prices.

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Green Energy's Reverse Robin Hood Effect

 

For more than 20 years a near-unanimous consensus has driven the formulation of energy policies in the western democracies: the big lie that has been repeated so often it became the truth in the minds of the unthinking masses is that renewable energy and only renewable energy can save the planet from catastrophic climate change.  It's bollocks of course but every major political party in every economically developed democratic nations seems to have climbed on the bandwagon and joined the competition to demonstrate a greater degree of moral rectitude regarding the green agenda than any of their fellow bandwagon riders can accomplish. It is not just politicians either, public information media, the academic communities and even the celebrity circus have joined in - none of them will engage in serious debate and none will tolerate even the slightest degree of dissent. The Science is settled and if you question it you are a racist, sexist, homophobic fascist, baby murderer.

It is agreed then, because those who disagree are pariahs who cannot be given any sort of public platform to present the scientific and empirical evidence that demolishes the doom laden scaremongering on the mathematical modellers, that fossil fuels are to blame for everything.  

That kind of thinking stifles discussion and so idiotic and economically ruinous policies like 'net zero', the unrealistic ambition to reduce or mitigate carbon dioxide emissions so that on balance no CO2 is added to the atmosphere by human activity has never been debated, let alone voted on by the public. The bigger question of concern to ordinary punters who are just trying to keep their heads above water financially and live decent loves is what I have called the reverse Robin Hood effect,  just how much should everyday families be expected to fork out to bankroll the commercially unsustainable operations of green energy grifters. 

 Figures from the website of Ofgem, the UK regulatory body for the gas and electricity markets, reveals more than 25 per cent of a standard electricity bill goes on what are called “environmental and social obligation costs”. And, as a further kick in the teeth, just under 5 per cent of the bill’s total is added for Value Added Tax, a tax ultimately paid by consumers on the mark up added to a product or service by a business process.

So what are these “environmental obligations”? 

Every year, in order that politicians, the Academic communities, information media and the celebrity circuses can wallow in self - righteousness, billions of pounds in taxpayers money is being channeled in the form of  'green' subsidies to the owners and operators of intermittent, unreliable energy generation operations such as wind farms and solar panel fields. The owners and operators of sustainable generation plant range from large multinational corporations and rich landowners to smallholders who have given up trying to make a living from farming to house owners with a large enough garden to plonk a windmill in or enough roof area to accommodate a few solar panels. Many of the wealthiest people in Britain who own huge estates have been paid for years simply to have wind turbines on their land regardless of whether these generate relevant amounts of electricity or not. This is the reverse Robin Hood effect that steals from the poor who were never given the chance to opt out of the green levies and gives to the rich for no better reason than that they are rich enough to own significant amounts of land.

The green obsession, driven by the fantasy science of mathematical modellers has now reached such heights of hysteria that governments are seriously considering banning domestic gas boilers and requiring every home to install a hideously expensive and comically inefficient gadget known as a heat pump to provided domestic heating and hot water. Not only are these expensive to buy and install even in homes where they can be installed, but they are expensive to run and will increase by threefold at least the domestic energy bill for homes that have them. That is the difference between the science of mathematical modelling and true scientific analysis. 

An assessment carried out by Xavier Connolly, our resident engineer, of what replacing the gas heating [including hot water] with electric heat pump and diesel with electric car would do to my annual electricity consumption, less than 1500 units for the last ten years. It would rise to over 7000 units a year. This for a modest house/one car. Nationally, at that proportion of increase, where generating ant for a national increase of 4.5 times in domestic electricity consumption is coming from I do not know - it is not just the wind generation, but the back-up for when wind does not blow. Solar is useless at night or in the winter, even with the current subsidy the payback time is not worthwhile - you only get a few pence per generated unit, an indication of its real value, Boris calling on homeowners to fit it is just propaganda or "greenwashing" .  

  Naturally the poorest who take the least out of all the green incentives will be hardest hit by price increases. Examples would be the tax breaks on Tesla cars, or the ground source heat pump installation grants. These things are beyond the means of most people even though they are subsidised. 

  The one positive to come out of the Ukraine conflict for people in the west is that our eyes have been opened to the fact that most of that most of the energy consumed by the the people of western nations comes from countries run by chest thumping tyrants or head amputating Islamic theocrats who have neither like or respect our values and liberal attitudes and who are quite prepared to cut off our energy supplies as the whim takes them. This being unarguably the case it would make sense for western democracies to admit the folly of green thinking, abandon virtue signalling idiocies like 'net zero' and try and produce as much of our own energy as we possibly can. 

It should be noted that due to green hysteria our decisions on energy policy, the abandonment of fracking, for instance, have worked in the interests of Russia and the middle eastern oil states, on whose wish lists keeping Europe hooked on Russian energy wouild have figured close to the top. In 2014, there were reports that Anders Fogh Rasmussen, then the secretary general of Nato, had grown concerned that Putin's government was supporting propaganda campaigns to discredit fracking. Given the fanaticism of the green lobby it would not have taken much propaganda to convince people like the fanatical crusties of Exstinktion Rebellion that fracking would release a hoard of Enochian demons on the world.

Forget global warming and trying to save the planet from overheating. If we are to minimise our dependence on authoritarian dictatorships for our energy, we need to be able to make our own energy right now and that means firing up our mothballed coal and gas here and if in the long term it is shown that we need clean energy, that means hydrogen, nuclear, perhaps in the form of Small Modular Reactors or even nuclear fusion if it can be made to work economically and Thorium Molten Salt Reactors.

The point most people seem to be missing completely on the "green issues" is that the problem is not the use of cars, electricity, gas, oil, or coal. It is simply the sheer extent to which the human population on every continent has ballooned over the past century or thereabout since we developed antibiotics and mass vaccinations. Medical science has simply sidestepped almost all of nature's population control mechanisms, without the slightest attempts by anyone but China (where the one - child policy has created a hideously unbalanced society,) to do anything about the consequences of that.From the noise such people make if somebody tries to initiate a discussion on creationism or Intelligent Design one would expect them to show a little more understanding of how evolution works on a global rather than individual scale.

If the population keeps on going this way it will not matter one iota what source of energy we prefer, or whether we're all driving electric vehicles or shivering under cold showers as heat pumps fail to warm the water in the cold norther winters. The simple truth is we are taking too much from the planet because there are far, far too many of us on it now. Sure we can feed a lot more people but only by giving more land over to the intensive cultivation methods of industrialised agriculture which is actually putting more and nastier pollutants into the environment than energy production in all its forms.

Just pause a moment to think about that. Population forecasts suggest by the end of the century if current trends continue the human population will increase by 50%. Does anybody think that The Science will be able to make our environment cleaner and more pleasant when we have 4 billion more people than we have now, all of whom will need food, homes, jeans, tee-shirts, shoes, cars, mobile phones, blu-tooth earphones, televisions, skateboards, fast food, drugs, holidays etc etc etc... You get the idea. It makes zero difference to go for net zero if we cannot do something about our failure to be in balance with the rest of the world.

And yet the doyens of science in their infinite stupidity can only focus on extending the human life span still further. Pop - scientists are incapable of looking ahead to see the less fortunate consequences of their claimed successes.

The green energy rip-off is of monumental proportions and it is time there was open debate so that the many serious and well qualified scientists, environmentalists, weather watchers and economists can be given equal opportunity to put their views before a mass audience alongside the propaganda pumped out by BBC, ITN and Sky News and the print media. 

When people’s energy bills for the second quarter of 2022 land on their doormats, they're going to experience a profound shock. The increase in gas prices has already been heavily trailed, and they may be able to pay for that with a bit of belt-tightening, but electricity bills are going to hurt too, but nothing like as much as they will when we all have to support a small power station to keep our heat pumps running.


 

Renewables: The Wind & Solar ‘Transition’ Is Ruining the Planet

 https://stopthesethings.com/2021/06/15/rapacious-renewables-how-the-wind-solar-transition-is-devouring-the-planet/

Crony capitalists aren’t just promoting subsidised wind and solar, they see subsidised Electric Vehicles as yet another means of lining their pockets with taxpayers’ money.

The marketing pitch is that this is all for the good of the Planet. Whirling wonders lovingly caressing breezes to capture ‘free energy’; energy-rich sunbeams falling gently onto sheets of shimmering glass-covered fields of silicon – what could be cleaner or greener than that.

Plug an EV into a notionally wind and solar power grid and the Planet must surely avoid our rapacious appetite for destruction, and last for eons to come.

Well, that’s the marketing myth, anyway.

At the heart of every EV, solar panel and wind turbine there is a bevy of rare minerals which, are fast becoming rarer thanks to our ‘inevitable transition’ to an all wind and sun powered future and the much heralded (and overhyped) shift to all EV motoring.

As Michael Klare explains below, there is no such thing as a free lunch. In short, ‘rare earths’ are so named for a reason; they happen to be mined in the more politically unstable and socially challenged parts of the world; and the Chinese Communist Party has taken a strategic interest in both mining and processing rare earths, to its significant economic advantage.

Lithium, Cobalt, and Rare Earths
Tom Dispatch
Michael Klare
20 May 2021

Thanks to its very name — renewable energy — we can picture a time in the not-too-distant future when our need for non-renewable fuels like oil, natural gas, and coal will vanish. Indeed, the Biden administration has announced a breakthrough target of 2035 for fully eliminating U.S. reliance on those non-renewable fuels for the generation of electricity. That would be accomplished by “deploying carbon-pollution-free electricity-generating resources,” primarily the everlasting power of the wind and sun.

With other nations moving in a similar direction, it’s tempting to conclude that the days when competition over finite supplies of energy was a recurring source of conflict will soon draw to a close. Unfortunately, think again: while the sun and wind are indeed infinitely renewable, the materials needed to convert those resources into electricity — minerals like cobalt, copper, lithium, nickel, and the rare-earth elements, or REEs — are anything but. Some of them, in fact, are far scarcer than petroleum, suggesting that global strife over vital resources may not, in fact, disappear in the Age of Renewables.

To appreciate this unexpected paradox, it’s necessary to explore how wind and solar power are converted into usable forms of electricity and propulsion. Solar power is largely collected by photovoltaic cells, often deployed in vast arrays, while the wind is harvested by giant turbines, typically deployed in extensive wind farms. To use electricity in transportation, cars and trucks must be equipped with advanced batteries capable of holding a charge over long distances. Each one of these devices uses substantial amounts of copper for electrical transmission, as well as a variety of other non-renewable minerals. Those wind turbines, for instance, require manganese, molybdenum, nickel, zinc, and rare-earth elements for their electrical generators, while electric vehicles (EVs) need cobalt, graphite, lithium, manganese, and rare earths for their engines and batteries.

At present, with wind and solar power accounting for only about 7% of global electricity generation and electric vehicles making up less than 1% of the cars on the road, the production of those minerals is roughly adequate to meet global demand. If, however, the U.S. and other countries really do move toward a green-energy future of the kind envisioned by President Biden, the demand for them will skyrocket and global output will fall far short of anticipated needs.

According to a recent study by the International Energy Agency (IEA), “The Role of Critical Minerals in Clean Energy Transitions,” the demand for lithium in 2040 could be 50 times greater than today and for cobalt and graphite 30 times greater if the world moves swiftly to replace oil-driven vehicles with EVs. Such rising demand will, of course, incentivize industry to develop new supplies of such minerals, but potential sources of them are limited and the process of bringing them online will be costly and complicated. In other words, the world could face significant shortages of critical materials. (“As clean energy transitions accelerate globally,” the IEA report noted ominously, “and solar panels, wind turbines, and electric cars are deployed on a growing scale, these rapidly growing markets for key minerals could be subject to price volatility, geopolitical influence, and even disruptions to supply.”)

And here’s a further complication: for a number of the most critical materials, including lithium, cobalt, and those rare-earth elements, production is highly concentrated in just a few countries, a reality that could lead to the sort of geopolitical struggles that accompanied the world’s dependence on a few major sources of oil. According to the IEA, just one country, the Democratic Republic of the Congo (DRC), currently supplies more than 80% of the world’s cobalt, and another — China — 70% of its rare-earth elements. Similarly, lithium production is largely in two countries, Argentina and Chile, which jointly account for nearly 80% of world supply, while four countries — Argentina, Chile, the DRC, and Peru — provide most of our copper. In other words, such future supplies are far more concentrated in far fewer lands than petroleum and natural gas, leading IEA analysts to worry about future struggles over the world’s access to them.

From Oil to Lithium: the Geopolitical Implications of the Electric-Car Revolution
The role of petroleum in shaping global geopolitics is well understood. Ever since oil became essential to world transportation — and so to the effective functioning of the world’s economy — it has been viewed for obvious reasons as a “strategic” resource. Because the largest concentrations of petroleum were located in the Middle East, an area historically far removed from the principal centers of industrial activity in Europe and North America and regularly subject to political convulsions, the major importing nations long sought to exercise some control over that region’s oil production and export. This, of course, led to resource imperialism of a high order, beginning after World War I when Britain and the other European powers contended for colonial control of the oil-producing parts of the Persian Gulf region. It continued after World War II, when the United States entered that competition in a big way.

For the United States, ensuring access to Middle Eastern oil became a strategic priority after the “oil shocks” of 1973 and 1979 — the first caused by an Arab oil embargo that was a reprisal for Washington’s support of Israel in that year’s October War; the second by a disruption of supplies caused by the Islamic Revolution in Iran. In response to endless lines at American gas stations and the subsequent recessions, successive presidents pledged to protect oil imports by “any means necessary,” including the use of armed force. And that very stance led President George H.W. Bush to wage the first Gulf War against Saddam Hussein’s Iraq in 1991 and his son to invade that same country in 2003.

In 2021, the United States is no longer as dependent on Middle Eastern oil, given how extensively domestic deposits of petroleum-laden shale and other sedimentary rocks are being exploited by fracking technology. Still, the connection between oil use and geopolitical conflict has hardly disappeared. Most analysts believe that petroleum will continue to supply a major share of global energy for decades to come, and that’s certain to generate political and military struggles over the remaining supplies. Already, for instance, conflict has broken out over disputed offshore supplies in the South and East China Seas, and some analysts predict a struggle for the control of untapped oil and mineral deposits in the Arctic region as well.

Here, then, is the question of the hour: Will an explosion in electric-car ownership change all this? EV market share is already growing rapidly and projected to reach 15% of worldwide sales by 2030. The major automakers are investing heavily in such vehicles, anticipating a surge in demand. There were around 370 EV models available for sale worldwide in 2020 — a 40% increase from 2019 — and major automakers have revealed plans to make an additional 450 models available by 2022. In addition, General Motors has announced its intention to completely phase out conventional gasoline and diesel vehicles by 2035, while Volvo’s CEO has indicated that the company would only sell EVs by 2030.

It’s reasonable to assume that this shift will only gain momentum, with profound consequences for the global trade in resources. According to the IEA, a typical electric car requires six times the mineral inputs of a conventional oil-powered vehicle. These include the copper for electrical wiring plus the cobalt, graphite, lithium, and nickel needed to ensure battery performance, longevity, and energy density (the energy output per unit of weight). In addition, rare-earth elements will be essential for the permanent magnets installed in EV motors.

Lithium, a primary component of lithium-ion batteries used in most EVs, is the lightest known metal. Although present both in clay deposits and ore composites, it’s rarely found in easily mineable concentrations, though it can also be extracted from brine in areas like Bolivia’s Salar de Uyuni, the world’s largest salt flat. At present, approximately 58% of the world’s lithium comes from Australia, another 20% from Chile, 11% from China, 6% from Argentina, and smaller percentages from elsewhere. A U.S. firm, Lithium Americas, is about to undertake the extraction of significant amounts of lithium from a clay deposit in northern Nevada, but is meeting resistance from local ranchers and Native Americans, who fear the contamination of their water supplies.

Cobalt is another key component of lithium-ion batteries. It’s rarely found in unique deposits and most often acquired as a byproduct of copper and nickel mining. Today, it’s almost entirely produced thanks to copper mining in the violent, chaotic Democratic Republic of the Congo, mostly in what’s known as the copper belt of Katanga Province, a region which once sought to break away from the rest of the country and still harbors secessionist impulses.

Rare-earth elements encompass a group of 17 metallic substances scattered across the Earth’s surface but rarely found in mineable concentrations. Among them, several are essential for future green-energy solutions, including dysprosium, lanthanum, neodymium, and terbium. When used as alloys with other minerals, they help perpetuate the magnetization of electrical motors under high-temperature conditions, a key requirement for electric vehicles and wind turbines. At present, approximately 70% of REEs come from China, perhaps 12% from Australia, and 8% from the U.S.

A mere glance at the location of such concentrations suggests that the green-energy transition envisioned by President Biden and other world leaders may encounter severe geopolitical problems, not unlike those generated in the past by reliance on oil. As a start, the most militarily powerful nation on the planet, the United States, can supply itself with only tiny percentages of REEs, as well as other critical minerals like nickel and zinc needed for advanced green technologies. While Australia, a close ally, will undoubtedly be an important supplier of some of them, China, already increasingly viewed as an adversary, is crucial when it comes to REEs, and the Congo, one of the most conflict-plagued nations on the planet, is the leading producer of cobalt. So don’t for a second imagine that the transition to a renewable-energy future will either be easy or conflict-free.

The Crunch to Come
Faced with the prospect of inadequate or hard-to-access supplies of such critical materials, energy strategists are already calling for major efforts to develop new sources in as many locations as possible. “Today’s supply and investment plans for many critical minerals fall well short of what is needed to support an accelerated deployment of solar panels, wind turbines and electric vehicles,” said Fatih Birol, executive director of the International Energy Agency. “These hazards are real, but they are surmountable. The response from policymakers and companies will determine whether critical minerals remain a vital enabler for clean energy transitions or become a bottleneck in the process.”

As Birol and his associates at the IEA have made all too clear, however, surmounting the obstacles to increased mineral production will be anything but easy. To begin with, launching new mining ventures can be extraordinarily expensive and entail numerous risks. Mining firms may be willing to invest billions of dollars in a country like Australia, where the legal framework is welcoming and where they can expect protection against future expropriation or war, but many promising ore sources lie in countries like the DRC, Myanmar, Peru, and Russia where such conditions hardly apply. For example, the current turmoil in Myanmar, a major producer of certain rare-earth elements, has already led to worries about their future availability and sparked a rise in prices.

Declining ore quality is also a concern. When it comes to mineral sites, this planet has been thoroughly scavenged for them, sometimes since the early Bronze Age, and many of the best deposits have long since been discovered and exploited. “In recent years, ore quality has continued to fall across a range of commodities,” the IEA noted in its report on critical minerals and green technology. “For example, the average copper ore grade in Chile declined by 30% over the past 15 years. Extracting metal content from lower-grade ores requires more energy, exerting upward pressure on production costs, greenhouse gas emissions, and waste volumes.”

In addition, extracting minerals from underground rock formations often entails the use of acids and other toxic substances and typically requires vast amounts of water, which are contaminated after use. This has become ever more of a problem since the enactment of environmental-protection legislation and the mobilization of local communities. In many parts of the world, as in Nevada when it comes to lithium, new mining and ore-processing efforts are going to encounter increasingly fierce local opposition. When, for example, the Lynas Corporation, an Australian firm, sought to evade Australia’s environmental laws by shipping ores from its Mount Weld rare-earths mine to Malaysia for processing, local activists there mounted a protracted campaign to prevent it from doing so.

For Washington, perhaps no problem is more challenging, when it comes to the availability of critical materials for a green revolution, than this country’s deteriorating relationship with Beijing. After all, China currently provides 70% of the world’s rare-earth supplies and harbors significant deposits of other key minerals as well. No less significant, that country is responsible for the refining and processing of many key materials mined elsewhere. In fact, when it comes to mineral processing, the figures are astonishing. China may not produce significant amounts of cobalt or nickel, but it does account for approximately 65% of the world’s processed cobalt and 35% of its processed nickel. And while China produces 11% of the world’s lithium, it’s responsible for nearly 60% of processed lithium. When it comes to rare-earth elements, however, China is dominant in a staggering way. Not only does it provide 60% of the world’s raw materials, but nearly 90% of processed REEs.

To put the matter simply, there is no way the United States or other countries can undertake a massive transition from fossil fuels to a renewables-based economy without engaging economically with China. Undoubtedly, efforts will be made to reduce the degree of that reliance, but there’s no realistic prospect of eliminating dependence on China for rare earths, lithium, and other key materials in the foreseeable future. If, in other words, the U.S. were to move from a modestly Cold-War-like stance toward Beijing to an even more hostile one, and if it were to engage in further Trumpian-style attempts to “decouple” its economy from that of the People’s Republic, as advocated by many “China hawks” in Congress, there’s no question about it: the Biden administration would have to abandon its plans for a green-energy future.

It’s possible, of course, to imagine a future in which nations begin fighting over the world’s supplies of critical minerals, just as they once fought over oil. At the same time, it’s perfectly possible to conceive of a world in which countries like ours simply abandoned their plans for a green-energy future for lack of adequate raw materials and reverted to the oil wars of the past. On an already overheating planet, however, that would lead to a civilizational fate worse than death.

In truth, there’s little choice but for Washington and Beijing to collaborate with each other and so many other countries in accelerating the green energy transition by establishing new mines and processing facilities for critical minerals, developing substitutes for materials in short supply, improving mining techniques to reduce environmental hazards, and dramatically increasing the recycling of vital minerals from discarded batteries and other products. Any alternative is guaranteed to prove a disaster of the first order — or beyond.
Tom Dispatch

 

 


‘Clean’ energy pipe dream turns toxic.