Interviews / Energy and Raw Materials
14 December 2023
Historic Agreement at COP28: “The 21st Century Will Be a New Golden Age for Metals!”

On December 13, an agreement was reached at COP28 with a transition decided outside of fossil fuels. While COP28 was held in the United Arab Emirates, a major oil-producing country, and with the presence of numerous lobbying groups, can this agreement be considered historic? What will the implications be for the economic model of oil-producing countries and oil companies? What is their level of preparation for the energy transition? What geopolitical reshuffling can we expect? By moving away from the oil economy, is there a risk of entering a new energy dependence, particularly in relation to rare metals? A point of discussion with Emmanuel Hache, research director at IRIS, specialist in energy foresight and natural resource economics. His latest book, “Metals, the New Black Gold” (Du Rocher, Sept. 2023), received the 2023 Marcel Boiteux Prize from the Association of Energy Economists.
On December 13, an agreement was reached at COP28 with a transition decided outside of fossil fuels. Should we consider this agreement historic?
At first glance, it is difficult to consider this agreement as historic, as opinions differ greatly among the various stakeholders. Some call it historic, others view it as a step or an important moment, and some judge it insufficient. However, for the first time in 28 years of COPs, a reference to a gradual phase-out of fossil fuels appears in the final text. While one may regret the absence of terms like “elimination” or a precise “exit” with a clear deadline, it is probably the first time that a transition to a non-fossil fuel-based economy is addressed so clearly. What is also clear is that we have witnessed a great moment of semantic creativity in the final text. The term “Phasing out” was replaced by “Transitioning away” to allow for consensus. The agreement is also somewhat unsatisfactory on methane emissions or coal, for which there is neither a timeline nor precise targets or new advancements.
In the face of the climate emergency, however, we must look at the positive points and the global will to accelerate: accelerating investments in renewable energy (a tripling by 2030), energy efficiency, and advancing on Loss and Damage issues. A successful COP is one that leads to action, and we will see the momentum on which future developments on climate issues will rely. Questioning the organization of a COP in an oil-producing country is, in my opinion, meaningless. Where should it have been organized? In an oil-dependent consumer country? If we are looking for a virtuous country to host COPs, the choice is quite simple and quick. Except for Costa Rica and perhaps Bhutan, it would be difficult to find a country that is virtuous on these issues.
What will be the implications of this agreement for the economic model of oil-producing countries and for oil companies? What is their level of preparation for the energy transition? Should we expect geopolitical reshuffling?
The agreement is not binding, but it is a renewed invitation to various actors on the necessity to transform their economic and energy models. Oil companies have been facing numerous challenges for a decade: the obligation to maintain part of their core business to avoid disappearing, continuing to remunerate their shareholders, and investing in the energy transition. Pressures from the international banking system to stop financing carbon-heavy activities are not yet strong enough, nor are public or shareholder pressures. However, they will need to transform quickly or risk losing appeal among young graduates, having stranded assets on their balance sheets, and ultimately disappearing. Some companies are attempting to transform into global energy companies, but this shift is excessively slow and not up to the challenges. European majors (BP, Shell, and Total Energies) are indeed much further along on this issue than their American counterparts, with investments in solar, wind, batteries, and the distribution of gas and electricity, but these only represent a small percentage of their revenues.
For countries, the observations are similar. The Gulf oil monarchies (Saudi Arabia, Kuwait, Bahrain, Oman, Qatar, and the United Arab Emirates, Iraq, and Iran) hold nearly 50% of global oil reserves (40% for gas), and their degree of diversification is highly uneven. Economic trajectories have always been thought of independently. For example, within OPEC, there has never been a common fund for redistribution or diversification. For oil-producing countries, the low-carbon transition is an unknown. For most, they neither control the pace of the global energy transition nor the dynamics of low-carbon technology deployment in consumer countries, and thus, the evolution of oil demand. Some countries have taken the lead in the diversification process. The most advanced countries (UAE and Qatar) provide good examples of advanced diversification, combined with a rise in their soft power globally. Despite efforts made since the 1970s, and more particularly since 2010 with the establishment of plans or visions, including the 2030 vision observed in Saudi Arabia, the lack of diversification remains evident in most oil-exporting countries. This absence of reinforced dynamics keeps the state and the economy dependent on oil. The issue of diversification requires radically transforming the economic structures of rentier countries. The problem is financial and temporal, as the countdown has begun for the producing countries if, as forecast by the International Energy Agency (IEA), oil demand peaks by 2030.
Integrating into global or regional value chains, developing technological innovation, and adapting the economic and social model to the new global ecological reality require skills, financial means, cooperation, and vision.
What type of energy should this agreement benefit from? By moving away from the oil economy, is there a risk of entering a new energy dependence, particularly in relation to rare metals?
The low-carbon transition will involve electrification of usage, particularly in the transport sector, which consumes nearly 60% of global oil. Likewise, the electricity generation sector is undergoing a major transformation with the deployment of renewable energies (wind and solar) replacing thermal power plants (coal, gas, etc.). For reference, the largest source of electricity generation worldwide remains coal (36%).
Each new MW of installed low-carbon technology requires significant use of metals. The substitution of thermal vehicles with electric vehicles is not without financial challenges for consumers (cost of acquiring vehicles), but also on a global and geopolitical level. Behind every electric vehicle is a battery composed of metals, including cobalt, lithium, nickel, and copper. The International Energy Agency estimates that a thermal vehicle contains 50 kg of strategic materials, compared to nearly 200 kg for an electric vehicle. However, it should be noted that despite the production of the battery (and the associated environmental impacts), an electric vehicle will have a better environmental performance in terms of greenhouse gas emissions. Furthermore, these impacts will decrease over time, especially due to the decarbonization of the global electricity mix.
Alongside this environmental gain, it is clear that the race for transport electrification will add a layer of complexity to the global low-carbon transition. Indeed, this is primarily a metallic and metal-consuming transition, as our consumption of metals will increase exponentially in the coming decades. And consumption means imports and dependencies on metal-producing countries. Thus, the low-carbon transition risks reshaping the global energy landscape, with new metal producers becoming a cornerstone of international relations.
The 21st century will be a new golden age for metals! Among these metals are the countries producing key metals for vehicle batteries: lithium, produced in Australia, Latin America (Chile, Peru, Argentina), and China; cobalt, most of which is located in the Democratic Republic of Congo (DRC); and nickel, which is mined in Indonesia and the Philippines. Rare earths, found in permanent magnets, are extracted over 60% by China.
All raw materials for the energy transition present very high levels of production concentration and reserves, far exceeding those of the world’s most traded commodity, oil. This situation raises the question of potential cartelization of markets in the medium term, particularly for lithium or all battery materials. While this is not the most certain prospect, it has the merit of placing metal-producing countries, so often overlooked in the low-carbon transition in favor of countries developing technological innovations, at the center of global ecological developments. Historically, conflicts over raw materials have often focused on energy-related resources, but the context of the dual digital and ecological transition exacerbates competition in the strategic materials markets, particularly between China, a major player in the production and refining of metals, the United States, and Europe.
Ultimately, we are facing a true geopolitical reshuffling in the coming decades, and metals will be at the heart of global geopolitical developments.