Regulatory Approaches to Critical Minerals Worldwide

The loss of domestic mineral supply chains didn't happen overnight. In the 1940s, driven by the World War II effort, the U.S. had a fully integrated domestic supply chain with world-class R&D capabilities.

By the 1960s, environmental activism began demanding clean air and clean water. This led to the formation of the U.S. Environmental Protection Agency (EPA) in the 1970s, which forced companies - not just mining, but also chemical and processing firms - to meet stricter environmental standards.

The 1970s became a decade of "not in my backyard" sentiment. Mineral supply, processing, and R&D gradually moved outside the United States - primarily to China.

In 2010, the China-Japan rare earth trade dispute served as an early warning. When China withheld rare earth exports to Japan, it had a severe impact on Japan's economy. It should have been a major wake-up call, but the broader implications went largely unaddressed.

The 2020 COVID-19 pandemic exposed the vulnerability of global supply chains and disrupted just-in-time inventory models across industries.

In 2022, Europe recognized the risks of depending on Russian natural gas following Russia's invasion of Ukraine. That same year, the United States began to acknowledge that it had effectively exported its mineral supply, processing capacity, and R&D expertise over the previous 50 years - and now faced a significant catch-up challenge.

Climate change policy drives the transition away from hydrocarbons toward green energy. Combined with social momentum, government regulation, and financial incentives, this is accelerating the electrification of transportation, industry, and infrastructure.

Electrification, in turn, is driving massive demand for critical minerals - lithium, cobalt, nickel, rare earths, and others essential for batteries, electric motors, and renewable energy systems.

The problem: policymakers realized that these minerals are no longer produced or processed domestically. This recognition has created a critical minerals rush and a shift from "not in my backyard" to "now in my backyard" - the reason governments worldwide are compiling critical minerals lists and developing new supply chain strategies.

The global distribution of critical mineral production is highly concentrated:

• Indonesia produces approximately 60% of the world's nickel
• The Democratic Republic of Congo supplies around 70% of the world's cobalt
• Although Bolivia and Argentina hold the largest lithium resources, Australia is the leading producer, followed by Chile

The central issue is that China processes the majority of the world's critical minerals. Global industry remains heavily reliant on Chinese processing capacity for the minerals required to support the green energy transition.

Most countries maintain their own designations for critical minerals. The European Union has designated 34 minerals as critical - those important to the EU economy that face supply disruption risks due to concentrated supply chains and processing locations.

Of those 34, the EU classified 17 as strategic minerals based on their importance, global demand, and supply imbalances. Strategic minerals represent a higher-priority subset where supply disruptions would have the most severe economic consequences.

Governments are responding with financial incentives to rebuild domestic supply chains. The United States has emerged as a leader through the Inflation Reduction Act (IRA), which is generating significant investment demand for mineral development and processing within the U.S. - in some cases drawing investment away from Europe and the Nordic countries due to the scale of incentives offered.