A Critical Moment

Executive Summary

Joint statements from global leaders summits present snapshots of the cross-border issues of the moment. And so the fact that critical minerals was the subject of one of nine joint statements from the most recent G7 summit in France speaks volumes.

Specifically, the statement described “the urgency of diversifying our supply chains and building our collective resilience.” With the majority of the world’s critical mineral supply concentrated in a handful of countries, China in particular, reforging supply chains has become a priority for many of Canada’s allies and trading partners.

Indeed, with the energy transition driving huge increases in demand for metals and minerals (a typical EV requires six times the mineral inputs of a conventional vehicle, for example), critical minerals are becoming the new oil.

Canada is home to reserves of many of the minerals required to power the energy transition. Canada’s lithium reserves, for instance, could supply around half of cumulative global demand from 2030 to 2050, with 95% of the demand generated by the clean energy transition—electric vehicle batteries in particular. And with a widely touted vision of becoming a clean energy superpower, critical minerals are essential to realizing our global clean economic ambitions.

But vision and potential can only go so far. And if Canada is going to realize its huge critical mineral opportunity, it will need the right policy and the right trade partners.

When it comes to the energy transition, the EU is arguably Canada’s most forward-thinking ally, with some of the world’s leading clean energy and climate policies. And as the EU rolls out clean technologies—like EVs and renewables—in huge quantities, its demand for critical minerals is set to skyrocket. EU lithium demand from EVs and energy storage is projected to increase nine to 12 fold by 2030, for example.

However, the EU does not have sufficient domestic resources to meet this demand without partnerships. The recent European Critical Raw Materials Act sets ambitious targets to diversify its supply chains and seek partners. Notably, it is only aiming to supply 10% of its extraction needs domestically and so will require global partners that meet its high environmental, social and governance standards to help reduce reliance from single third-party countries.

With our clean grid, growing opportunities for Indigenous-led mining projects, and existing trade agreements, Canada is well-placed to be a key supplier. In fact, only Norway ranked higher than Canada in our analysis of how well the EU’s current suppliers meet its trade and ESG criteria. But despite ticking all the right boxes, Canada’s exports to the EU have barely increased in recent years.

There have, however, been some recent signs of change. The last year or so has seen a flurry of MOUs and agreements on critical minerals, with Canada signing deals with numerous EU partners, including Italy, Germany, and Sweden.

While these represent real progress, the next step is to move past the MOU stage and focus on key areas of EU demand while leveraging Canada’s existing strengths. In this report, we recommend that, instead of trying to split investment resources across tens of critical minerals, Canada should focus on just six that are essential to the global energy transition and the EU’s growing clean energy sector: cobalt, copper, graphite, lithium, nickel, and rare earth elements.

In each case, Canada has a number of specific opportunities, from sending our low-carbon raw cobalt to refineries in Finland to reduce the EU’s dependence on the Democratic Republic of the Congo, to supplying graphite to German EV battery manufacturers to limit their reliance on Chinese supply.

With critical minerals clearly a priority for both the EU and Canadian governments, and the wheels already turning, Canada now needs to ensure it is playing to its strengths. Specifically, the federal government, working with its provincial and territorial counterparts, needs to:

• Prioritize the six critical minerals featured in this report (cobalt, copper, graphite, lithium, nickel, and rare earth elements) and in the updated Canadian Critical Minerals Strategy due to their long-term demand growth prospects that support electrification and energy security, while building supply chain resilience across Canada and the EU.
• More aggressively promote Canada’s clean critical mineral advantages.
• Operationalize the European Investment Bank framework so that more EU financing can flow into specific Canadian mining and processing projects.
• Continue converting more of the existing MOUs with European partners into binding offtake agreements.
• Build a Canada–EU “strategic projects pipeline” portfolio aligned with the EU’s Critical Raw
  Materials Act.
• Develop purpose-built “mineral corridors” marketed specifically to European industrial partners, with a Quebec-centred “low-carbon battery minerals corridor” as a top priority.

In a rapidly changing world, Canada rightly wants to be a clean energy superpower—and critical minerals are its new oil. Now it must translate its potential into action.