Critical Minerals: An Opportunity in the Sustainable Asset Markets

At a Glance

• Lists of critical minerals often include nickel, copper, lithium, cobalt, graphite and rare earth elements. These materials are integral components of solar panels, wind turbines, electric vehicles, batteries and electricity networks, as well as other goods such as computers and household appliances.
• While critical minerals are commonly mined, new technologies are emerging that will allow them to be produced from coal byproducts and other materials.
• To understand the opportunities in the sustainable asset markets, it is important to understand the legal and regulatory landscape applicable to the potential opportunities in the metals, critical minerals, and sustainable assets markets.

As nations and businesses around the world continue to transition to more sustainable sources for their energy and transportation needs, a renewed focus on critical minerals has spurred ingenuity and investment in the space. Thus far in 2024, the Biden-Harris administration in February announced investments of $17 million, and in April announced investments of $16 million in projects aimed at extracting, producing and refining critical minerals within the United States. Additionally, the International Energy Agency held its first-ever Critical Minerals and Clean Energy Summit in September 2023, with global leaders and businesspeople meeting to discuss how best to advance a secure and sustainable global supply of critical minerals. 

The reason for this renewed focus on critical minerals is simple — critical minerals are key components to many of the technologies that will help the energy and transportation sectors transition away from fossil fuels. Defined by the American Geosciences Institute as “resources that are essential to the economy and whose supply may be disrupted,” lists of critical minerals often include nickel, copper, lithium, cobalt, graphite and rare earth elements. These materials are integral components of solar panels, wind turbines, electric vehicles, batteries and electricity networks, as well as other goods such as computers and household appliances. As the transition to clean energy technologies has accelerated, demand for these resources has increased, paving the way for possible additional opportunities to generate and monetize sustainable assets or charge premiums for such minerals that may have been generated using a process that reduces or removes greenhouse gas emissions. 

According to the International Energy Agency, from 2017 to 2022, the overall demand for lithium tripled, the demand for cobalt rose 70% and the demand for nickel rose 40%. Moreover, an analysis done by the International Energy Agency found that reaching a global net-zero emissions goal by 2050 would require six times more minerals in 2040 than those required to meet today’s demand for clean energy technology. Simply meeting the goals stated in the Paris Agreement would require four times more minerals in 2040 than required to meet today’s demand for clean energy technologies. 

Fortunately, while critical minerals are commonly mined, new technologies are emerging that will allow them to be produced from coal byproducts and other materials. For example, the above-mentioned $17 million in funds from the Biden-Harris administration is dedicated to three projects that will produce critical minerals from coal-based resources. Similarly innovative projects are being developed to extract critical minerals from other waste products and end-of-life lithium batteries. Such innovation not only can help to alleviate some of the pressures related to the supply of critical minerals, but may also generate an additional sustainable asset to be monetized and/or create the opportunity for the producers of such critical minerals to charge a premium for the reduction of greenhouse gas emissions. 

To understand the opportunities in the sustainable asset markets, it is important to understand the legal and regulatory landscape applicable to the potential opportunities in the metals, critical minerals, and sustainable assets markets. This includes the current construct of the commodities regulations that are applicable to the purchase, sale and trade of not only the critical minerals themselves, but any additional sustainable assets that may be generated by the above-mentioned new technologies and recycling processes.