Geopolitics of the energy transition: implications for Australia in the reshaping of the political map

It is a profound conundrum: humanity cannot survive unless we decarbonise, no-one can decarbonise alone, and we are entering an era of increased geostrategic competition.

The energy transition to a decarbonised world will drive a reshaping of the global geopolitical map. Those countries who have invested early and hard in the non-fossil energy resources of the future will find themselves in a very different power dynamic from where they are now. Cooperation and conflict will look very different to today, as some countries benefit from the transition, and some countries lose.  Australia has the potential to become an energy superpower with considerable international leverage. However, we can’t do it by ourselves, and neither can anyone else — no single nation has access to all the elements that will be needed for energy security in a decarbonised world.

The future energy security/national security challenge

Energy security has long underpinned national security – the ability to ensure sufficient fuel to power the economy is critical for a nation-state to prosper. In addition to national security, control over energy supply also results in power over others, as we saw during the oil crisis in 1973 when members of the Organisation of Arab Petroleum Exporting Countries (OAPEC) imposed an oil embargo against nations seen as supporting Israel in the Yom Kippur War.

Energy security – and therefore national security, as well as the capability to exert power over others — in a decarbonised world will come from renewable energy, and almost all renewables – wind turbines, solar panels, batteries – require a particular set of minerals and metals to build and run them. This is also true of green hydrogen, given that what makes it genuinely ‘green’ is the energy used to separate hydrogen from oxygen in water to create it, which will rely on this set of minerals.  While often described as ‘rare earths’, or ‘critical’ minerals, these elements are not inherently critical or rare. Criticality is defined as such by nation-states on the basis of how much we need them, and because their supply may be uncertain, potentially threatened by geopolitics, geological accessibility, political and commercial will, economic rules, or other factors. The ‘rarity’ terminology comes from how dispersed the minerals are, not often found in clusters concentrated enough to make them viable for mining.

Not inherently rare, or critical, these elements are finite, and demand is growing exponentially. Some analysts predicted as far back as 2013 that between 2010 and 2030, the annual global demand for elements like gallium, indium, selenium, tellurium and rare earths to manufacture solar panels and wind turbines would increase by up to 230 percent of world supply. More recent research shows that these predictions that demand would outstrip supply were correct – demand for REEs is currently ahead of supply by about 3000 tons per year, and likely to accelerate given the electric vehicle market alone could increase nearly tenfold over the next decade. Material substitutions are very limited – although technology substitutions may be more available, like wind turbines that don’t use permanent magnets.

Ensuring supply meets demand will also be challenged by the potential for environmental risks and social impacts associated with extracting the minerals and elements necessary for a decarbonised world. These risks will be exacerbated by any rush to meet demand undermining due diligence around potential risks and impacts, and with the increasing frequency and severity of extreme weather events.

So what for Australia?

No single nation has access to all the elements for energy security in a decarbonised world, yet we must decarbonise because the cost of not doing so for the global economy is far worse. What is needed now is global cooperation on the management of raw materials to ensure economic, political, social, and environmental sustainability and stability. However, what we have is a context of growing uncertainty and mistrust, where competition for minerals will grow in order to protect energy security and national security.

While the global geopolitical context is outside of our control, Australia can navigate the volatile circumstances and position itself as a strong global player able to resist the risk of coercion or influence by others who could seek to disrupt energy supplies. Australia is estimated to have the world’s sixth-largest resource of rare earth elements and critical minerals and there is opportunity for Australian mineral businesses to position themselves as preferred suppliers.

At the same time as the global energy transition is increasing demand for some resources, it is also having a negative impact over time on existing hydrocarbon exports. We can work towards achieving our own energy security, as well as becoming a trusted provider of energy security to others if we build towards export dominance in clean electricity, green hydrogen, green steel, and ethically sourced critical minerals, and improve the resilience of supply chains. Fast-growing markets in our region like Japan are already indicating that they are interested in developing new energy trading relationships with reliable suppliers like Australia.

In the energy transition, countries that move first, and move decisively, will gain the advantage in new industries, technologies, and export markets. In the current geopolitical environment, developing and building up Australia’s green energy industry has scope to bring a myriad of benefits for businesses, the economy, and national security.

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