FT Rethink
Back to the future: the rising role of metals recycling in the energy transition
The road to carbon-free energy is paved with metal. Aluminium, cobalt, copper, nickel and lithium – the ‘big five’ – are key components of the wind turbines, solar panels, batteries and millions of kilometres of new electricity cables that are powering the world towards a clean-energy future.
Demand for energy-transition metals and critical minerals is forecast to surge in the years ahead. Industry analysts Wood Mackenzie estimate that demand for copper and aluminium could increase by a third by 2040, while demand for nickel could rise by two-thirds, and cobalt and lithium could see growth of as much as 200% and 600% respectively.1
As the electrification of the economy gathers pace, the Energy Transitions Commission (ETC) forecasts that we will need at least 250 new metals mines by the end of decade.2 However, with new processing and mining facilities often hampered by long lead times and environmental concerns, many in the metals industry are warning that the world’s miners will not be able to keep up.3
Increasingly, attention is turning to metals recycling to help keep the energy transition on track. Unlike plastic, which becomes more brittle the more it is recycled, metals can be recovered, melted and reused time after time,4 making them the ideal material for creating a truly circular system.
Read also: How important is nickel in the energy transition?
What’s holding back metals recycling?
To date, designers of clean-energy products have focussed largely on energy-efficiency and cost. In the race to produce and store ever more renewably-generated electricity, disassembly and recycling at the end of a product’s life is often overlooked.
Lithium-ion batteries, for example, are glued or welded together, making disassembly difficult.5 The story is similar with solar panels, which contain a complex mix of metals, polymers and strong adhesives. Currently, 99% of end-of-life solar panels go to landfill,6 leaving large amounts of aluminium, copper and other metals to go to waste. Across the metals industry, only around 40% of copper and aluminium, 30% of cobalt and 1% of rare earth metals are recovered and reused.7
Technological innovation could change this. Researchers at France’s world-leading atomic programme are working on new extraction techniques to recover useful metals from solar panels, wind turbines and the black mass left over after crushing spent electric-vehicle batteries.8 Sensor-based technologies that can differentiate between materials are also spreading.9 While at the other end of the supply chain, innovations such as solid-state batteries – which promise a higher energy density than widely used lithium-ion batteries – would enable straightforward recyclability to be built in by design.10
Policymakers are also stepping in. New EU regulations require that a minimum of 65% of waste electronic equipment must be recycled, and stipulate minimum levels of recycled metals to be used in all new batteries11. In the US, the Inflation Reduction Act offers USD 10 billion in tax credits for projects including recycling facilities for the metals needed for the energy transition.12 Some in the industry are also arguing for a high carbon tax to incentivise recycling investment.13
Read also: “Climate change is forcing capitalism to be different”
The benefits of metals recycling
As recycling scales up, the volume of secondary metals used in the energy transition could match or even exceed that of primary metals. By 2050, a combination of efficiency improvements and the growth of recycling could cut demand for most primary metals by 20-60%.14 According to the International Energy Agency (IEA), “Enhanced metal recovery from waste streams… offer[s] the potential for a step change in future supply volumes.”15
Boosting supply without the need for fresh mining also offers positives in terms of emissions. Recycled aluminium, known as ‘secondary aluminium’, can be responsible for 96% less CO2 than primary aluminium16; recycling cobalt almost eliminates the sulphur oxides17 given off during primary production. Using secondary metals also minimises the land degradation associated with mining, and cuts water use and pollution. Recycling steel, for instance, reduces water pollution by more than three-quarters and lowers freshwater withdrawals by 40%.18
Research further suggests that high levels of recycling could push back the ‘green plateau’ – the point at which renewable energy production growth stalls because of resource constraints – by as much as 60 years.19
Read also: Can plastic-eating enzymes solve the recycling problem?
Investing in the growth of metals recycling
At Lombard Odier, we take a forward-looking approach to sustainable investing. While some investors are turning away from the mining sector due to its high emissions, we recognise that the extraction of primary metals will remain essential for creating a zero-carbon energy future.
At the same time, between now and 2050, numerous factors will combine to push recycling to prominence, including more stringent regulations and commodity price rises that will make metals recycling increasingly cost-competitive. Governments are also likely to promote recycling to secure domestic supply. With much of current primary metals production highly concentrated geographically – 70% of global cobalt supply is mined in the Democratic Republic of the Congo, while 60% of rare earth metals are extracted in China20 – domestic recycling will safeguard against bottlenecks and geopolitical shocks.
For investors, recycling offers an increasingly attractive way to invest in transition metals. New mines are expensive and carry the risk of long lead times.21 For example, the Resolution copper mine in Nevada, USA, is yet to produce any copper despite USD 2 billion having been invested over the last 30 years.22 While this may be an outlier, analysis by the IEA shows that the average mine now takes 16.5 years to go from discovery to production, making new mining projects acutely vulnerable to supply/price shocks. Mines are also exposed to growing climate risks from water stress or flooding. Recycling facilities, by contrast, are more agile, with shorter lead times, lower climate risk and costs as much as 90% lower.23
The energy transition may demand more than 6 billion tonnes of metals between now and 2050.24 For now, much of this must be mined. But recycling could soon begin to provide more and more of the materials we need to build a net-zero future.
1 The Energy Transition Will Be Built With Metals | Wood Mackenzie
2 ETC-Materials-ExecSummary_highres-1.pdf (energy-transitions.org)
3 Lithium producers warn of a global supply shortage for EV demand (mining-technology.com)
4 euric_metal_recycling_factsheet.pdf (europa.eu)
5 The drive to recycle lithium-ion batteries | Feature | Chemistry World
6 Recycling Metals Can Help Transition to Renewables (renewableenergymagazine.com)
7 End-of-life recycling rates for selected metals – Charts – Data & Statistics - IEA; Nickel: from ‘devil’s metal’ to the holy grail - Brunel
8 France taps nuclear know-how to recycle electric car batteries (techxplore.com)
9 How Sensor-Based Sorting Technology is Driving Advances in E-Scrap Recycling (recyclinginside.com)
10 Designing batteries for easier recycling could avert a looming e-waste crisis (theconversation.com)
11 EUR-Lex - 02012L0019-20180704 - EN - EUR-Lex (europa.eu); Council adopts new regulation on batteries and waste batteries - Consilium (europa.eu)
12 New Tax Credit Will Spur Historic Investments in Manufacturing and Critical Materials | Department of Energy
13 Will we need to mine metals in the future? | Wood Mackenzie
14 Scale-up of critical materials and resources for energy transition (energy-transitions.org)
15 Executive summary – The Role of Critical Minerals in Clean Energy Transitions – Analysis - IEA
16 Will we need to mine metals in the future? | Wood Mackenzie
17 Environmental benefits of circular economy approach to use of cobalt - ScienceDirect
18 euric_metal_recycling_factsheet.pdf (europa.eu)
19 Energy transition under mineral constraints and recycling: A low-carbon supply peak - ScienceDirect
20 Executive summary – The Role of Critical Minerals in Clean Energy Transitions – Analysis - IEA
21 Scale-up of critical materials and resources for energy transition (energy-transitions.org)
22 Materials for the energy transition (irena.org)
23 Will we need to mine metals in the future? | Wood Mackenzie
24 Scale-up of critical materials and resources for energy transition (energy-transitions.org)
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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