McKinsey Quarterly 2023 Number 1

The need for critical minerals presents multiple challenges. Sources and processing capabilities for many minerals are highly concentrated in just a few countries. For example, China produces most of the world’s rare-earth elements and refines most of its lithium and cobalt. The concentration of and demand for critical minerals may only heighten compe tition among global powers. Diversification is possible, but it takes time and very signif icant, sustained investment. Moreover, processing requires technologies and human capital that may take many years to develop. - - The environmental and social tolls associated with some of these developments pose yet another hurdle to a number of potential projects. And while many want the world to decarbonize, few want the mine that provides the necessary minerals to support this goal to be dug in their backyard. In late 2021, Serbia, citing environmental concerns, revoked the mining license for what would have become one of the world’s largest lithium mines. Beyond the issue of minerals, the invasion of Ukraine highlighted how millions–particularly the world’s most vulnerably situated–rely on global flows of food. Key grain crops are perhaps surprisingly concentrated in just a few breadbasket regions. The top ten grain exporters accounted for around 70 percent of global exports in 2019. The Middle East and North Africa region, for instance, relies on imports for 60 percent of its grains (and its wheat largely comes from Ukraine and southern Russia). Moreover, key fertilizers are highly concentrated in just a few producer countries. In the case of potassium chloride, which accounts for most potash fertilizer, around 80 percent of exports originate in Belarus, Canada, and Russia. That leaves importing countries vulnerable to disruption. The issue of food security was already climbing the global agenda because of early evidence of the impact of climate change on global food supplies, and disrupted supplies in Europe have served only to accentuate susceptibilities. ● How will the world navigate an affordable, resilient, and feasible path to climate stability? Net zero by 2050 is an ambition unprecedented in scale. Achieving it will depend on significant investment. The incremental annual global investment required is estimated to be as much as $3.5 trillion. It will also require rapid cross-sectoral innovation. To drive the required investment and innovation, supportive economic and political frameworks need to be in place. Again, many outcomes are on the table. Global collaboration and effective investment could spur innovation and deliver an affordable and resilient path to net zero. Conversely, progress could stall and innovation could founder, leading nations, individuals, and the biosphere to undertake a difficult adaptation to a climatically different world. ● What dynamics will play out among groups that have critical resources and those that don’t? The salience of that question derives from recent global events, but it’s one that has been asked for centuries. In the most recent era, market-based systems and global interconnectedness have supported relatively peaceful and efficient exchange. One path to the future enables that to continue, bolstered by improved mechanisms to Unresolved questions The following are some unresolved questions regarding resource and energy systems:

McKinsey Quarterly 2023 Number 1

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