Western governments should consider stockpiling critical battery metals such as cobalt and lithium, the International Energy Agency said, in a stark warning of the geopolitical risks that accompany the green-energy transition. That call comes as some policymakers worry the shift from burning fossil fuels to a greener economy will expose the world to new threats. Unlike oil, a relatively ubiquitous commodity, production and processing of minerals such as lithium, cobalt and some rare earth elements is highly concentrated, with the top three producers accounting for more than 75% of global supply.

Stockpiling programs could provide a valuable buffer as leading industrial nations look to develop reliable supplies of metals and minerals that will play a critical role in a decarbonizing world, the energy watchdog said in a report on Wednesday.

“Meeting our climate change goals will turbocharge demand for mineral resources,” Fatih Birol, the head of the IEA, said by phone. “Voluntary strategic stockpiling can in some cases help countries weather short-term supply disruptions.”

Battery Boost

Demand from electric vehicle batteries will spur a group of metals

Source: BloombergNEF

The IEA was founded in 1974 following the first global oil shock as leading industrial nations including the U.S., Japan and Germany sought to enhance energy security through stockpiling. Those strategic oil reserves have been used several times, including during the Gulf War in 1990-1991 and during the Libyan civil war in 2011.

The agency has since broadened its remit, advising governments on energy policy and increasingly on climate change. Now the influential watchdog is urging governments to brace against new supply risks as the world becomes increasingly reliant on an array of critical minerals that are often only produced at scale in a handful of countries.

Building new strategic reserves could have unintended consequences, potentially boosting demand and prices as governments vie with automakers for scarce metals. Commodities from copper to palladium are already soaring as the global economy rebounds from the pandemic.

While China and Japan have strategic inventories of critical metals, such stockpiles are not widely held by western nations. China also has a strong presence in the processing of such metals, as well as producing about 60% of the world’s rare earth elements.