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

Xin Sun, Han Hao (), Clara Galeazzi, Tomer Fishman, Dengye Xun, Magnus Ericsson, Gang Liu, I-Yun L. Hsieh, Zongwei Liu and Fuquan Zhao
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Xin Sun: Tsinghua University
Han Hao: Tsinghua University
Clara Galeazzi: Harvard University
Tomer Fishman: Leiden University
Dengye Xun: Tsinghua University
Magnus Ericsson: Luleå University of Technology
Gang Liu: Peking University
I-Yun L. Hsieh: National Taiwan University
Zongwei Liu: Tsinghua University
Fuquan Zhao: Tsinghua University

Nature Sustainability, 2024, vol. 7, issue 5, 672-681

Abstract: 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.

Date: 2024
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DOI: 10.1038/s41893-024-01329-3

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