Global instability set to accelerate energy transition and mineral competition

Rising geopolitical tensions around crises such as Greenland and Venezuela should bolster the case for the transition away from fossil fuels, even as the shift creates new rivalries around the critical minerals needed for renewable energy technologies, experts say.

US president Donald Trump said the recent attack on Venezuela was motivated by access to its huge oil resources. That might be expected to slow the shift to renewables if it meant increasing the supply of cheap fossil fuels. However, oil experts suggest it will take many years – and huge investment – before that oil comes on stream, especially due to the difficulty of refining heavy Venezuelan crude.

By the time that happens, growing global instability and precarious supply chains are likely to have cemented the economic and security case for the shift to renewables.

“Trump’s attack on Venezuela reminds us that a world dependent on fossil fuels is one that’s riven with conflict, instability and human rights abuses,” said Mike Davis, chief executive of campaign group Global Witness. “Switching to renewables is great for the climate but it is also a form of liberation, as it frees us all from dependence on dictators and warmongers.”

Even Arab oil-producing states are coming to the same conclusion. The Centre for Environment and Development for the Arab Region and Europe, a thinktank based in Cairo, said the current increase in political risk and supply chain disruptions might slow the shift towards a low-carbon future. However, the Venezuela move should ultimately encourage Arab nations to double down on the energy transition as oil prices fall.

“Emphasising investment in renewables and energy efficiency can mitigate the risks of renewed fossil fuel dominance and price downfall, and support long-term economic resilience,” the centre wrote in a recent article.

Old world, new world: Trump bets on oil as China dominates renewables

To be sure, the energy transition carries with it new geopolitical risks due to China’s dominance of the critical minerals needed for renewable technologies, particularly lithium for batteries.

And those critical minerals are one of the reasons for Washington’s new round of sabre rattling over Greenland, seen as a key strategic location as the Arctic ice melts. The island is also a potential source of many resources needed for the energy transition, as well as for fast-growing defence and technology sectors.

“Energy transition narratives have shifted from economic efficiency and decarbonisation to national security concerns. However, this reordering carries real commercial consequences,” wrotes Alex Dustan, a partner at UK law firm Slaughter and May.

Even though Trump has celebrated the oil wealth of Venezuela, analysts have questioned whether energy companies will be prepared to invest in rebuilding the country’s oil infrastructure given the falling price of crude and political instability in the country and region.

Juan Pablo Martinez, a policy analyst at the London School of Economic’s Centre for Economic Transition Expertise (CETEx), said the breakeven price to get Venezuelan crude to market is about US$60 a barrel, far higher than oil coming from Saudi Arabia, Brazil or new reserves in Guyana.

“Even if Venezuelan crude became available in the market it’s quite likely that there would be losses in the long run if prices went down, particularly because crude oil is really abundant,” Martinez said. “There’s scope for renewables to stay really cheap and still compete with fossil fuel.”

ING bank analysts noted that the oil price, which fell 18% last year due to excess supply, looks set to continue its downward trend. That makes investment in Venezuelan oil fields harder to justify.

Investment booms in clean technologies, led by China

Meanwhile, investment in clean technologies – renewables, nuclear, grids, storage, low-emissions fuels, efficiency and electrification – was on track to hit a record $2.2tn in 2025, driven in part by energy security concerns, according to the International Energy Agency, which is double the investment made in oil, natural gas and coal.

The IEA said China’s share of global clean energy spending has risen from a quarter to almost a third over the last decade due to investment in green tech.

“China has sown up much of the electrification decarbonisation industry. This is bad from the point of view of Washington and US capital, and their version of how to respond to that is carve it out and concentrate on fossil fuel production,” said James Meadway, an economist and host of the Macrodose podcast.

China is the leading refiner for 19 out of 20 important strategic minerals, with an average market share of 70%, according to the IEA. That market share rises to 94% for the rare-earth-containing magnets used in cars, wind turbines, industrial motors, data centres and defence systems.

The future supply and demand dynamics of such minerals is a key factor determining the feasibility of the energy transition, according to a new paper by the Grantham Research Institute on Climate Change and the Environment.

Strategic minerals is one of the reasons for the rise in interest in Greenland: the country is one of the top 10 locations for rare earth elements, although it does not have commercial production, in part because of environmental regulations but also because its hostile climate has made mining very difficult.

Martinez, one of the paper’s authors, said Greenland has some minerals needed for electric vehicles and offshore wind turbines, but he does not see it as a critical player.

“Even if the extraction of these rare earth elements started in Greenland, a lot of the refining still happens in China so it wouldn’t help diversify supply chains for low-carbon technologies,” he said. “It’s never going to be a big producer.”

Hugh Miller, a consultant with CETEx who also co-authored the recent critical minerals paper, sees a bigger impact on the energy transition from rising tensions between the US and Europe over Greenland. “The indirect impact might be greater in terms of what it means for US-EU relations and cooperation on the energy transition,” he said.

Meadway said the US was more interested in gaining access to Greenland and its resources rather than a full occupation: “What the US is doing is a form of bullying to get preferential terms in a world where there’s resource constraints and you can try and carve China out,” he said.

Trump-linked figures have signed deals with countries including Pakistan, Somalia and Haiti, with many bartering key resources including minerals in exchange for humanitarian or military support, according to Global Witness.

But this is not a sector where you can make a quick buck. China has cemented its dominance in rare earths because long-term state investment has allowed it to pursue projects that might have been abandoned by the west which has been more reliant on private capital, according to Clement Sefa-Nyarko, a lecturer in security, development and leadership in Africa at King’s College, London.

“China can afford to invest in rare earth minerals which requires a certain degree of losses to be able to make the kind of gains you need and no private capital would want to go into that unless there’s that government backing,” said Sefa-Nyarko.

Energy security drives critical mineral stockpiling and focus on mining sector

Miller said many countries are now looking for ways to stockpile critical minerals, noting that the EU had learnt its lesson about energy security due to its reliance on Russian natural gas before the full-scale invasion of Ukraine.

However, if the west is to compete with China to mine minerals in places like Ghana or the Democratic Republic of Congo, it will need to shift away from an extractive, colonial mindset and also be more aware of environmental degradation, human rights abuses, and governance failures, Sefa-Nyarko said.

“The west needs to think about all countries and communities that have any kind of critical mineral as partners of value, as collaborative partners who must also benefit,” he said. “Sustainable mining and responsible sourcing must be treated as integral to supply chain security, not as peripheral technical issues.”

While the shift to renewables makes countries more dependent on China for the supply of critical minerals, Martinez said the reliance would be less critical than their current dependence on fossil fuel imports, especially if countries develop ways to recycle those minerals.

“If you had a supply shock with regards to critical minerals it would be a much slower transmission mechanism in terms of how that affects energy prices,” he said.

However, investing in renewables still carries risks. Dustan said the offshore wind industry is actively exploring cheaper turbine supply options from new markets due to rising turbine and vessel costs, which have hit bids in recent European auctions for new wind energy projects.

“Ultimately, the energy transition’s commercial opportunities remain substantial, but these are increasingly conditional on geopolitical resilience,” he said. “The organising principle can be simple: build for resilience so that when geopolitics intrudes, projects bend rather than break, capital remains deployed and stakeholder confidence endures.”

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