Critical minerals are pivotal to clean energy and are a cornerstone in the transition to a green economy. The global shift towards clean energy technologies is fueling the growing demand for these essential minerals. They are integral to the production of rechargeable batteries, solar panels, and wind turbines, making them crucial for the clean energy transition.
The critical minerals industry is a strategic sector for many countries, significantly contributing to the development and diversification of national economies. It also strengthens efforts to enhance long-term and sustainable economic growth opportunities. Consequently, these minerals have garnered significant attention from Arab countries, particularly in the Gulf region.
Impact on Clean Energy
The installed capacity of renewable energy has surged worldwide in recent years, reaching approximately 3,870 gigawatts in 2023, according to the International Renewable Energy Agency. By 2027, clean and renewable energy is expected to account for about 90% of the total global electricity generation expansion.
Critical minerals are essential for the economic growth of both major and emerging countries, including those in the Middle East and Gulf regions. However, the supply of these minerals faces risks due to geological scarcity, geopolitical conflicts, and other factors.
In the clean energy industry, the demand for critical minerals was minimal at the end of 2010. This scenario changed significantly post-2015, driven by the accelerated transition to clean energy and increased investments in green technologies. In 2022, global spending on renewable energy reached approximately $600 billion.
The clean energy industry has now become the largest market in terms of capacity and the most demanding for critical minerals. This is due to several technical reasons, including the extensive infrastructure requirements of the clean energy sector, which necessitates these minerals at various stages more than the fossil fuel industry.
Efforts to transition to clean energy are projected to quadruple global demand for critical minerals by 2040. Additionally, the global demand for rare earth elements is expected to grow by more than 40% in the coming years. The expansion of electricity grids will be a significant driver of global demand for copper, a crucial metal in this industry. Similarly, the rising demand for photovoltaic energy is likely to increase global demand for critical minerals.
In contrast, nuclear and biomass energy will represent limited proportions of global demand for critical minerals, as these energy types require relatively small amounts of these materials.
Arab and Gulf Interest
The clean energy sector in the Arab region experienced significant growth in 2023, driven by Gulf countries' efforts to transition to clean energy while maintaining their pivotal role in the global energy market, particularly in the crude oil industry. Numerous countries in the region have launched clean energy projects, recognizing the importance of sustainable energy in addressing the global energy crisis, mitigating climate change, and reducing carbon emissions.
Many Arab countries, especially in the Gulf, have set ambitious goals to increase the share of clean energy in electricity generation by 2035, with targets ranging from 25% to 65% depending on each country's plan. This focus on clean energy is a response to the growing demand for electricity and the need to decrease reliance on traditional fuels for economic, environmental, and other reasons.
Significant progress in clean energy capacity
In 2023, several Arab countries, notably Egypt, the UAE, and Saudi Arabia, have made tangible advancements in increasing their installed clean energy capacity. These nations benefit from a variety of clean energy sources and have proven reserves of critical minerals, which are essential for adopting clean energy technologies.
The presence of critical minerals thus offers Arab countries a unique opportunity to create an attractive investment environment. Investments in the critical minerals industry not only contribute to economic diversification but also enhance revenue growth and foreign investment inflows. This, in turn, positively impacts investment returns and development rates while addressing unemployment by creating numerous direct and indirect jobs.
Strategic development and infrastructure
Gulf countries are leveraging their abundant critical minerals and advanced infrastructure, including seaports, to enhance their export operations and add substantial value to their economies. They are heavily investing in the exploration and extraction of critical minerals such as copper, nickel, aluminum, and other strategic resources essential for producing clean energy.
Economic diversification and environmental goals
These investments are part of broader efforts to diversify economies and reduce dependence on fossil fuels like crude oil, natural gas, and coal. By focusing on reducing carbon emissions and advancing towards green and clean energy goals, Gulf countries are taking significant steps toward a sustainable and environmentally friendly future.
The UAE Experience
The United Arab Emirates (UAE) is at the forefront of enhancing the utilization of critical minerals. The nation boasts an abundance of essential resources such as chromite, aluminum, and raw steel. Consequently, the UAE's strategy focuses on securing its domestic mineral needs, particularly strategic or critical minerals, by bolstering research, exploration, and extraction operations.
To foster comprehensive development, the UAE aims to increase foreign investments and attract global investors by establishing robust legal and regulatory frameworks within the mining sector. This initiative aligns with the country's broader objectives, which include localizing the renewable energy industry, supporting ambitious goals to reduce reliance on traditional energy sources, accelerating the energy transition process, and positioning critical minerals as a formidable alternative to conventional fuels in the coming years.
Additionally, the UAE is forging significant partnerships within the critical minerals sector with numerous governments worldwide. The country’s extensive network of interconnected vital ports further cements its position as a pivotal hub for global trade in critical minerals.
Countries worldwide are intensifying their efforts to advance clean energy technologies to address the phenomenon of climate change and meet carbon neutrality commitments. This shift has notably impacted the global markets for critical minerals, revealing a significant gap between the soaring demand and current supply levels.
Critical minerals such as nickel, lithium, cobalt, and copper are essential to the green and clean energy industry. They are integral to the production of storage batteries, wind turbines, and various other components necessary for the global clean energy sector.
Given this context, bolstering Gulf investments in the critical minerals sector emerges as a strategic priority. This initiative aims to fortify the concept of Gulf energy security and empower GCC countries to become pivotal regional and global hubs for the trade and industry of critical minerals. Additionally, this sector plays a crucial role in generating future revenues and diversifying energy sources.
