Autor: Nermin Sefić
The shift from fossil fuels toward renewable energy sources and electric vehicles is often presented as a path toward liberation from the geopolitical dependencies that have defined global energy…
The shift from fossil fuels toward renewable energy sources and electric vehicles is often presented as a path toward liberation from the geopolitical dependencies that have defined global energy policy for decades — particularly dependence on oil and gas reserves concentrated in a relatively small number of countries. Reality proves considerably more complicated. Rather than liberation from geopolitical dependency, the energy transition creates a new, in some respects even more concentrated dependency — this time on critical minerals like lithium, cobalt, nickel, copper, and rare earth elements essential for batteries, wind turbines, solar panels, and electric motors.
Unlike oil, whose reserves, though unevenly distributed, are nonetheless present across multiple continents and under the control of dozens of different countries, production and processing of critical minerals shows considerably greater concentration in the hands of a small number of actors. The Democratic Republic of Congo produces most of the world's cobalt. China, despite modest domestic reserves of many key minerals, dominates global processing — controlling most of the world's capacity for processing lithium, cobalt, and rare earth elements, regardless of where the raw materials were mined.
This concentration in the processing stage, not just extraction, represents a particularly significant structural risk that often remains insufficiently recognized in broader discussions of supply security. A country may have significant domestic reserves of lithium or nickel, but if it lacks domestic processing capacity to convert those raw materials into a form suitable for battery production, it remains dependent on external, often Chinese, processing facilities — creating a dependency that exists even when the raw material itself is domestic.
This concentration creates obvious geopolitical vulnerabilities for countries and regions trying to accelerate their own energy transition but lacking domestic capacity for either extraction or processing of key minerals. The European Union and the United States, despite ambitious goals for electrifying transportation and energy systems, remain significantly dependent on imports, mostly from China, for many components critical to that transition.
This dependency became particularly visible during periods of heightened geopolitical tension between China and Western countries, when occasional Chinese export restrictions on certain critical minerals — such as gallium and germanium, key to the semiconductor industry — served as a clear reminder of structural vulnerability. Although these restrictions weren't directly aimed at the energy transition, they served as a signal to all countries dependent on Chinese mineral processing to consider supply chain diversification as a matter of national security, not just economic efficiency.
The response of Western countries to this vulnerability includes a combination of strategies — encouraging domestic production and processing through subsidies and regulatory facilitation, diversifying raw material sources toward politically close countries like Australia and Canada, and investing in research on alternative battery technologies that would reduce dependence on the most critical minerals like cobalt.
Each of these strategies carries significant limitations that slow actual diversification. Building new mining and processing capacity requires not only enormous capital investment but also a time period of ten or more years from discovery to full production, accounting for regulatory processes, environmental assessments, and infrastructure construction. This timeframe means that even successful diversification efforts currently underway won't significantly change the global supply structure for at least another decade, during which dependence on existing, concentrated sources remains.
Diversification toward politically close countries, while useful for reducing immediate geopolitical risk, doesn't solve the processing concentration problem — Australia, for instance, mines significant quantities of lithium, but much of that raw material is still shipped to China for processing before returning in a form suitable for battery production, simply because Chinese processing capacity remains significantly larger and more competitive than any alternative currently being built elsewhere.
Alongside the geopolitical dimension, extracting critical minerals carries significant environmental and social costs that often remain insufficiently visible in broader discussions of the "clean" energy transition. Lithium extraction from salt flats in South America requires enormous quantities of water in regions often already facing water stress, creating a direct conflict between local communities dependent on that water for agriculture and global demand for lithium needed for a battery on the other side of the world.
Cobalt mining in the Democratic Republic of Congo is associated with documented cases of child labor and hazardous working conditions in smaller, informal mining operations that constitute a significant share of that country's total cobalt production. This issue creates a complex ethical dilemma for companies trying to secure supply chains free of these practices, given how difficult it is to trace mineral origins through complex, multi-layered supply chains that often involve mixing materials from formal and informal sources before reaching battery manufacturers.
Recycling batteries and other components containing critical minerals is often presented as a potential solution that could over time significantly reduce dependence on new raw material extraction. Long-term, this logic makes sense — once a sufficiently large existing stock of batteries and devices containing these minerals is built up, recycling can become a significant supply source that reduces the need for new extraction.
Short-term, however, this solution remains limited by simple market-growth mathematics — current production of new batteries for electric vehicles and energy storage is so much larger than the existing stock of batteries available for recycling that even a theoretically perfect recycling rate couldn't meet most current demand. This limitation will become less significant as the market matures and as the first generations of electric vehicles from the past decade reach the end of their lifespan, but for the next decade or so, new raw material extraction remains unavoidable.
The Argentina-Bolivia-Chile triangle, known as the "lithium triangle," contains an estimated more than half of the world's known lithium reserves locked in Andean salt flats. The method of extracting lithium from these salt flats — evaporating brine in large ponds over months to a year, before chemically processing the remaining concentrate — differs significantly from the hard-rock lithium mining dominant in Australia, with its own set of environmental and economic trade-offs.
Bolivia, despite holding the largest estimated reserves within the triangle, remains significantly behind Argentina and Chile in actual production, partly due to historically more restrictive policy toward foreign investment that slowed development of needed infrastructure, and partly due to technical challenges specific to the chemical composition of Bolivian salt flats requiring different processing methods than those established in neighboring countries. This example illustrates the broader point that possessing raw-material reserves alone doesn't guarantee market position without accompanying investment in infrastructure, processing technology, and a regulatory environment that attracts needed capital.
Chile, on the other hand, has developed a considerably more mature lithium sector through a combination of a more stable regulatory framework and earlier foreign investment, but faces increasingly loud demands from local communities and environmental movements for stricter control of water consumption associated with lithium extraction, given that the Atacama region, where much of Chilean production occurs, ranks among the driest regions on the planet.
China's dominance in critical mineral processing isn't an accidental outcome but the result of deliberate, long-term industrial policy dating back decades, when China recognized the strategic value of controlling this segment of the supply chain at a time when Western countries didn't place great importance on mineral processing, focusing instead on raw-material extraction and finished-product manufacturing. Chinese state companies systematically invested in processing capacity, often with lower environmental standards and labor costs than would be acceptable in Western countries, enabling competitive prices that gradually displaced alternative processing capacity elsewhere in the world.
This historical dynamic creates a significant challenge for Western diversification attempts — it's not enough to simply build new processing capacity, but to also compete against decades of accumulated Chinese experience, economies of scale, and, in some cases, lower environmental and labor standards that make Chinese processing structurally cheaper than alternatives that must satisfy stricter Western regulation.
Alongside geographic source diversification, researching alternative battery chemistries represents a second significant strategy for reducing structural dependence on the most critical minerals, particularly cobalt, whose production concentration in one country and documented labor-condition problems make it a particularly problematic link in the battery supply chain. Lithium-iron-phosphate batteries, which entirely avoid using cobalt and nickel, have seen significant market-share growth over prior years, despite somewhat lower energy density compared to traditional chemistries using nickel and cobalt.
This trade-off between energy density and supply-chain security illustrates a broader dynamic in which vehicle manufacturers must balance product performance against long-term supply security, with the decision of which chemical formulation is optimal increasingly depending not just on technical specifications but on geopolitical risk assessment associated with specific minerals needed for each alternative. Sodium batteries, which use considerably more abundant and geographically distributed sodium instead of lithium, represent an additional technology in early commercialization that, if it matures, could further reduce dependence on geographically concentrated lithium reserves, though currently lagging behind lithium-ion batteries in energy density needed for applications like longer-range vehicles.
While critical-mineral discussions often focus on lithium and cobalt due to their direct battery connection, copper deserves equal, if not greater, attention given how ubiquitous it is in nearly every energy-transition component — from power lines carrying energy from wind turbines and solar plants, through electric motors in electric vehicles, to the charging infrastructure itself that must be built at massive scale. Estimates suggest an electrified vehicle requires several times more copper than a conventional internal-combustion vehicle, and wind turbines and solar installations require significantly more copper per unit of energy produced than traditional fossil-fuel plants.
This increased copper demand meets its own set of structural supply constraints. Unlike lithium, where significant new reserves were discovered over the prior decade, large existing copper mines worldwide are gradually recording declining ore quality, requiring processing ever-larger quantities of rock for the same amount of extracted copper, increasing production costs and extraction's environmental footprint.
As the significance of critical minerals for the energy transition and national security has become increasingly clear, diplomacy aimed specifically at securing access to these resources has become an increasingly significant element of major economies' foreign policy. The United States, European Union, and Japan actively negotiate partnerships with countries rich in critical minerals, often offering a combination of direct infrastructure investment, technology transfer, and preferential market access in exchange for more secure, longer-term access to those countries' mineral resources.
Indonesia represents an instructive example of this shifting dynamic — as the world's largest nickel producer, the Indonesian government imposed a ban on raw nickel-ore exports, forcing foreign companies to build processing capacity within Indonesia itself instead of simply exporting raw material for processing elsewhere, significantly increasing domestic value-added and jobs associated with the nickel sector.
Rare earth elements, despite their name suggesting extreme scarcity, aren't geologically that rare so much as their economically viable concentration at extraction-suitable locations is rare, as is the existence of processing facilities capable of separating individual elements from the complex ores in which they naturally occur together. These elements are key not only for the civilian energy transition, through use in magnets for wind turbines and electric motors, but also for the defense industry, where they're used in missile guidance systems, radar technology, and other advanced military systems.
This dual civilian and military application makes Chinese dominance in rare-earth processing a particularly sensitive national-security issue for Western governments, given that a significant supply disruption could simultaneously threaten both the civilian energy transition and the ability to manufacture key defense equipment.
Alongside new extraction and source diversification, recycling existing products containing critical minerals represents a third pillar of dependency-reduction strategy, with a particularly interesting dimension in the context of electronic waste. Old phones, computers, and other electronic equipment contain measurable quantities of rare earth elements, gold, silver, and other valuable materials, yet the actual recycling rate of this electronic waste remains surprisingly low in most developed countries, despite technically mature extraction technology existing.
This gap between technical possibility and actual recycling practice partly reflects a lack of economic incentive — the cost of collecting, sorting, and processing electronic waste often exceeds the market value of recoverable materials, especially compared to the cost of extracting the same materials from natural sources in countries with lower labor costs and less strict environmental regulation.
Lithium prices went through a dramatic cycle over the past few years illustrating just how volatile the critical minerals market can be. Lithium carbonate prices peaked at a record $81,360 per tonne in November 2022, before falling to just $20,782 per tonne by February 2024 — a 67% decline within just 15 months, according to Addionics analysis. This price collapse continued further, with prices falling below $15,000 per tonne during 2024, bottoming at around $8,100 per tonne in June 2025, before a partial recovery to $24,000-$26,000 per tonne in early 2026.
This volatility directly reflects in battery prices. According to BloombergNEF's annual lithium-ion battery price survey, the average battery pack price fell from $139 per kilowatt-hour in 2023 to $115 in 2024 (a 20% decline, the largest since 2017), then to a record $108 per kilowatt-hour in 2025 — a total decline of 93% compared to 2010, when the average price was around $1,474 per kilowatt-hour. For consumer context, the cost of battery cells in a base-model Tesla Model 3 fell from 15% of the vehicle's total price in January 2023 to just 7.5% by August 2024.
This price decline partly stems from structural oversupply, particularly from China, and the increasing dominance of cheaper lithium-iron-phosphate (LFP) batteries that entirely avoid more expensive nickel and cobalt — in China, average LFP battery prices fell to just $70 per kilowatt-hour, with forecasts of a further drop to $36 as early as next year.
The Democratic Republic of Congo produces over 70% of the world's cobalt, and 15-30% of that production comes from artisanal and small-scale mining (ASM) — a sector where documented human rights problems remain particularly severe. According to the Wilson Center, of 255,000 Congolese working in cobalt mines, an estimated 40,000 are children, some as young as six. The US Department of Labor and Department of State formally list DRC cobalt as a product associated with forced and child labor in their official 2024 and 2025 reports.
The economic context explaining this problem's persistence is extreme — according to a 2024 World Bank estimate, 73.5% of DRC's population lives on less than $2.15 daily, making ASM mining, despite all its risks, one of the few available income sources for families struggling to survive. This reality makes simply banning child labor without addressing underlying poverty practically unenforceable — organizations like Save the Children therefore advocate investing in communities that would enable parents to support children without needing their labor, rather than a purely punitive approach.
There are also concrete, measurable improvement efforts. The African Development Bank's PABEA-Cobalt project, launched in 2019, had extracted over 9,016 children from artisanal cobalt mines and reintegrated them into schools or vocational training by December 2024. A consortium of major technology and automotive companies — including BMW, BASF, Samsung SDI, Samsung Electronics, and Volkswagen — launched the "Cobalt for Development" initiative in 2019, which has so far benefited over 1,800 community members in DRC regions through improved education access. Despite these efforts, the problem's scale remains enormous relative to interventions' impact so far — illustrating how difficult it is to solve human rights problems deeply embedded in the supply chain of a critical mineral without which the global energy transition simply cannot advance in its current form.
The energy transition toward renewable sources and transportation electrification remains necessary given climate goals, but the narrative of that transition as a simple path toward energy independence and geopolitical security is oversimplified. Instead of replacing one dependency (oil) with complete independence, the transition creates a new, in some respects structurally more concentrated dependency on critical minerals and, more importantly, on the capacity to process them.
For organizations and countries planning their own energy strategy, the practical conclusion is that diversifying critical mineral supply chains deserves the same strategic attention that diversifying oil sources deserved over previous decades — with the understanding that this diversification will require years, if not decades, of patient investment in domestic capacity, international partnerships, and recycling technologies before it delivers a significant reduction in the structural vulnerability that exists today.
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Autor i urednička odgovornost: Nermin Sefić. Izdavač: GNK ASG d.o.o..
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