Dec '08/Jan '09

MAC Economic Commentary

Mining as a core supplier to the global clean energy revolution

By P. Stothart

Few subjects are receiving as much attention in the daily media as that of our societal need to move towards a clean energy economy. This theme was fundamental to the platforms of all the Canadian federal parties in the recent election — each featuring an array of programs supporting this transition. In the United States, the platform of President-elect Obama talks extensively of hybrid vehicles, electricity from renewable sources, low carbon standards and the ultimate objective of eliminating oil imports from the Middle East and Venezuela within a decade. Republicans in Washington talk of nuclear power, carbon capture and sequestration and battery development, among other initiatives.

Beyond the political and media coverage, it is evident that few subjects offer comparable transformative potential as changes to the world’s energy infrastructure. Developed economies have been driven for two centuries by the industrial combustion of fossil fuel — indeed there has long existed a direct macro-economic correlation of living standards with per-capita energy consumption. Societies that have been able to efficiently generate and transport energy from fossil sources have become far wealthier than those that cannot. To shift away from this dependency, even in a gradual manner, requires major changes in our underlying financial, fiscal and technological practices.

The market potential for new products and technologies associated with such a shift is staggering. As noted in a recent analysis by the UN Environment Program, a combination of climate change worries, growing support from world governments, rising oil prices and ongoing energy security concerns combined to generate a record-setting year of investment in the renewable energy and energy-efficiency industries in 2007. Over $148 billion in new funding entered the sustainable energy sector globally in 2007, up 60 per cent from 2006. Wind energy attracted the most investment ($50 billion in 2007), while solar power grew most rapidly — attracting $29 billion of new capital and growing at an average annual rate of 254 per cent since 2004. Regionally, most of the new money flowed into Europe, followed by the United States. However, China, India and Brazil are drawing growing investor interest, their share of new investment growing from 12 per cent in 2004 to 22 per cent in 2007, an increase in absolute terms of 14-fold, from $1.8 billion to $26 billion. These figures, impressive as they are, remain dwarfed by projected levels of future investment. Global investment in sustainable energy technologies and projects is expected to reach $450 billion per year by 2012, rising to $600 billion a year from 2020 onward.

The present demand for clean energy investments, and the substantial growth that lies ahead, cannot be met without the availability of the fundamental building blocks supplied by the mining and minerals industry.

Hybrid vehicles, for example, draw upon nickel hydride batteries as well as cobalt and several rare earth minerals. Catalytic converters require cerium and platinum. Nuclear energy needs uranium as a fuel source, and beryllium, among other minerals, for the reactors. Solar energy cells use tellurium and germanium. Lightweight materials require lithium and niobium. Wind turbines use aluminum, lightweight composites, and steel (iron ore, metallurgical coal), among other minerals and metals. The electronic controls and generators of all these clean energy sources require significant amounts of copper.

The transformative nature of the clean energy economy, and the core supply dependency on minerals and metals, serves to heighten the importance of the world finding and developing new mineral reserves. In the aim of consistency and logic, it is therefore incumbent upon governments, environmental groups, aboriginal groups and other stakeholders to work in support of the mining industry’s effort, in Canada and abroad, to find and develop new mineral reserves in a socially and environmentally responsible manner.


Paul Stothart
Paul Stothart is vice-president, economic affairs, at the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

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