The current energy transition will require a significant expansion of the global supply chain for critical materials needed for electrification of the economy, and deployment of new energy infrastructure. This electrification and decarbonization strategy depends on extraction of natural resources such as copper, nickel, cobalt, lithium, rare earth minerals, and many more. Reports by the World Bank, International Energy Agency, IHS Markit / S&P Global, Goldman Sachs, and other financial, research and government organizations, as well as the media (NYT, WSJ), highlight the need for large increases in mining for and processing of large volumes of critical materials, and environmental and social impacts associated with their supply chains.
These materials are used to manufacture equipment, such as transmission and distribution wiring, solar panels, wind turbines, and batteries. Mining, processing, manufacturing, and deploying power plants, occurring in distant parts of the world, requires multiple intercontinental trips. At the same time, the need for gas-fired generation from dispatchable units remains strong, both to replace retiring coal-fired power plants and to ensure availability of electricity at all times. The supply of natural gas to the power plants necessitates production, processing and transmission of new hydrocarbon resources. These “upstream” activities, as well as power plant operation and equipment disposal at the end of their useful life, emit greenhouse gases (GHG). They also have immediate impact on local air, land and water use and pollution, and ecosystems.
The energy transition touches all dimensions of the environment, social and governance (ESG) framework, which are critical considerations for investors, publicly traded companies, and policymakers. As this transition accelerates, societies need to balance a complex variety of environmental, economic and social dimensions with diverse geographical and temporal manifestation of impacts.