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Reducing supply risk of critical materials for clean energy via foreign direct investment

Nature Sustainability (2024)Cite this article

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Abstract

Existing research on the security of the supply of critical materials for clean energy generally aggregates information at the country level, a practice that obscures the extensive role of foreign direct investment (FDI) in the production of critical materials. FDI refers to an ownership stake in a company or project by an overseas investor. Here we establish a database for global mining of lithium, cobalt, nickel and platinum at company level, covering 240 countries and regions. We show that 47% of lithium, 71% of cobalt, 41% of nickel and 34% of platinum mined in 2019 were under FDI. We then explore how FDI may affect supply risks by proposing a supply risk index that allocates production of the critical materials to the country of origin of investors instead of the country where production is located. We present upper and lower bounds of the supply risk index that reflect scenarios where either all investors or only state investors prioritize the home-country demand, respectively. This study presents an approach for assessing the national supply risks of critical materials, considering the geographical allocation of FDI.

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Fig. 1: Locations, operators and shareholders of global FDI-related mines in 2019.
Fig. 2: Material production from a geographical perspective (left) and a company ownership perspective (right).
Fig. 3: Geographical and adjusted trade network of the four clean energy materials in 2019.
Fig. 4: Top 10 supply risk indices.

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Data availability

The information on country affiliation of companies is from the ORBIS database of Bureau van Dijk58. The ownership hierarchy of mine owners and stakeholders was collected from annual reports, public statements and news reports of relevant companies, consulting groups and information services platforms. Geographical production and international trade of four materials are from the United Nations Comtrade database54, United States Geological Survey Reports14 and our previous studies8,19,36,37,66. Source data are available in Supplementary Information.

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Acknowledgements

This study was sponsored by the National Natural Science Foundation of China (72122010 to H.H., 72334001 to G.L., 71774100 to H.H., 71991484 to G.L.) and the National Key R&D Program of China (2019YFC1908501 to H.H.).

Author information

Authors and Affiliations

  1. State Key Laboratory of Intelligent Green Vehicle and Mobility, Tsinghua University, Beijing, China

    Xin Sun, Han Hao, Dengye Xun, Zongwei Liu & Fuquan Zhao

  2. Tsinghua-Rio Tinto Joint Research Center for Resources Energy and Sustainable Development, Tsinghua University, Beijing, China

    Xin Sun, Han Hao & Dengye Xun

  3. Tsinghua Automotive Strategy Research Institute, Tsinghua University, Beijing, China

    Han Hao, Zongwei Liu & Fuquan Zhao

  4. Belfer Center for Science and International Affairs, Harvard University, Cambridge, MA, USA

    Clara Galeazzi

  5. Cambridge Centre for Environment, Energy and Natural Resource Governance (C-EENRG), University of Cambridge, Cambridge, UK

    Clara Galeazzi

  6. Institute of Environmental Sciences (CML), Leiden University, Leiden, the Netherlands

    Tomer Fishman

  7. Luleå University of Technology, Luleå, Sweden

    Magnus Ericsson

  8. College of Urban and Environmental Sciences, Peking University, Beijing, China

    Gang Liu

  9. Institute of Carbon Neutrality, Peking University, Beijing, China

    Gang Liu

  10. Department of Civil Engineering, National Taiwan University, Taipei, Taiwan

    I-Yun L. Hsieh

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Contributions

X.S. and H.H. conceived the idea, conducted the analysis and wrote the paper. C.G., T.F. and G.L. wrote sections of the paper and provided guidance on the paper. D.X. and M.E. provided data for the analysis. I-Y.L.H., Z.L. and F.Z. reviewed and edited the paper. H.H. and G.L. supervised the work and secured funding for the project.

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Correspondence to Han Hao.

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Nature Sustainability thanks Roderick Eggert, Maria Amélia Enriquez and Yosuke Shigetomi for their contribution to the peer review of this work.

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Supplementary Figs. 1–14, Discussion and Tables 1–11.

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Sun, X., Hao, H., Galeazzi, C. et al. Reducing supply risk of critical materials for clean energy via foreign direct investment. Nat Sustain (2024). https://doi.org/10.1038/s41893-024-01329-3

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