The conflict in Ukraine has the potential to reduce the global supply of critical elements used in the production of green technology.
The EU imports 40 per cent of its natural gas from Russia and nearly half of Russia's daily crude oil exports go to Europe. Because fossil fuel revenue funds Putin's aggression in Ukraine, the European Commission recently announced plans to phase out Russian fuel imports this decade.
Major economies taking decisive action to reduce coal, oil, and gas imports from one of the world's largest sources could hasten the global transition to green energy. However, there is a catch. The disruption in the supply of critical metals and other materials caused by the Ukraine war could stymie the adoption of alternative technologies.
Decarbonisation, for example, will necessitate massive amounts of renewable electricity as well as novel methods of transporting and storing it. Countries that rely heavily on Russian fuel imports will need to replace pipelines and fuel depots with new transmission networks and batteries. The technologies involved are typically made with a variety of scarce metals and materials. Regrettably, Russia and Ukraine both play important roles in their supply.
Platinum and palladium are precious metals used in the manufacture of catalytic converters, which reduce the concentration of air pollutants in the emissions of vehicles powered by internal combustion engines. These metals will also be used in the production of fuel cells in cars and buses that run on clean-burning hydrogen in the coming years.
As part of a larger strategy to phase out fossil fuel, injecting hydrogen into gas networks could displace some of the natural gas that is currently burned to heat homes and generate electricity. Electrolysers are machines that can produce hydrogen fuel by splitting water molecules with electricity and are made of platinum and palladium.
Russia accounts for more than 35% of the world's palladium supply. Nornickel, the largest producer, is headquartered in Moscow and accounts for 40% of global palladium mine production. Meanwhile, Russia accounts for 12% of the global platinum supply.
Metals such as lithium, nickel, and cobalt are used in electric vehicle (EV) batteries. Donbas, Ukraine's breakaway region, has an abundance of lithium reserves. Ukraine is not a major producer of lithium at the moment, but the country drew attention before the invasion for its own reserves. As a result of the war, production in the region has ceased.
The majority of the world's cobalt comes from mines in the Democratic Republic of the Congo, where human rights violations are widespread. Russia is the world's second-largest producer, accounting for 4% of global supply. While EV battery manufacturers race to substitute cobalt for ever greater quantities of high-quality nickel, Russia accounts for 10% of global nickel supply.
Because of the disruption to this supply caused by the war, the London Metal Exchange recently suspended trading for the first time since 1985, as the price of nickel topped $100,000 (£76,000) per ton. According to Morgan Stanley, a nickel price increase could add up to $1,000 to the cost of an electric vehicle.
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There is some hope that new battery designs will reduce reliance on cobalt and nickel. However, success is not guaranteed, as Russia is the fourth-largest producer of phosphate rock, a raw material used in lithium iron phosphate batteries (a leading alternative design).
Recycling EV batteries could provide an alternate source of critical materials in the future. However, these will not be available in sufficient quantities until many EV batteries reach the end of their useful lives. Lithium-ion batteries have a lifespan of eight to ten years, but some last longer or have a second life in other applications.
In the coming years, global demand for rare-earth minerals will be insatiable. These include neodymium and dysprosium, which can be used to make the extremely strong magnets used in wind turbine generators as well as the efficient motors used in EVs.
Because Russia accounts for only about 2% of the global production of rare-earth minerals, the immediate impact of the war is likely to be minor. However, the country has a large number of undeveloped reserves. In 2020, the country announced a US$1.5 billion investment to expand its rare earth industry. Russia currently lacks the industry and technological foundation required to refine these materials and bring them to market. However, with ambitions to expand in this sector, Russia may close the door to countries seeking access to these materials.
The human toll of Putin's war on Ukraine is incalculable, but the global costs of climate change will be felt if carbon emissions continue to rise. New supply chains take years, if not decades, to develop, and with a pressing need to decarbonize as soon as possible, the world is left with few options for powering its green transition.
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