A New Era for Europe’s Resource Sector?

In the first half of 2020, the Covid-19 virus tore its way through much of Europe, forcing almost all governments to apply strict lockdowns and straining intra-European cooperation and trade. The subsequent economic crisis has triggered a wave of unprecedented stimulus packages across the continent, including a €750 billion recovery fund agreed by the EU in July. Critical Resource’s latest research examines the risks and opportunities for resource companies presented by the drive for carbon neutrality, and increased demand for strategic minerals, as Europe attempts to ‘build back better’.

By Sipke Shaughnessy PhD, Analyst

Europe’s ‘green revolution’ could present major opportunities

Many governments appear to view the crisis as an opportunity to accelerate transitions to a greener economy, with large portions of stimulus packages earmarked for green businesses and projects, and stipulations restricting access to businesses with high carbon emissions. The EU often leads the way in pioneering climate change regulation and recent developments may serve as a bellwether for other developed economies – particularly if Democratic candidate Joe Biden wins the US election in November (having placed climate change at the centre of his campaign). While Europe’s support for a ‘green revolution’ could present major opportunities for resource firms, those looking to develop new projects will need to overcome the NIMBYism, and community and NGO opposition that has stymied so many mining and energy projects over the years.

The full article, which explores these issues in more detail, can be accessed here.

A brief summary of our key findings is found below:

• Europe’s stimulus packages signal a boost for renewables and battery minerals; decreased demand for oil and gas
  The EU’s post-Covid stimulus package, titled Next Generation EU, commits 30% of its spending to climate action, with a view to achieving net-zero within the EU by 2050. Member countries will need to commit to this goal in order to access funding. Meanwhile, national stimulus packages pay particular attention to bolstering electric vehicle production – suggesting a boost in demand for battery minerals and electricity. The EU has also pledged significant investment in ‘green’ hydrogen technology.

• Europe aims to become a world leader in ‘green’ hydrogen
  With China now leading in solar and wind, the EU is angling to claim leadership in ‘green’ hydrogen. The European Commission estimates that investment will range between €180 and €470 billion by 2050 presenting an excellent opportunity for energy companies seeking to transition towards renewable energy production themselves.

• Investment in electric vehicle production signals a major boost for battery minerals, raising concerns about security of supply
  Government support for EV production in France and Germany is likely to be mirrored across the globe in the years to come. This will substantially increase demand for battery minerals globally. This is underscored by the planned construction of battery production facilities across Europe – including in France, Germany, Poland, Sweden, and the UK. Metals like nickel, lithium and cobalt are likely to present a key bottleneck in the EV battery supply chain, and EU leaders have expressed concern over China’s dominance in the supply of these materials.

• Europe remains a challenging jurisdiction for resource projects
  Industry leaders complain of the complexity, arbitrariness, and politicised nature of permitting regimes in Europe. Investors are often unwilling to endure the length of time it takes to acquire permits and win public support for projects in European jurisdictions. Furthermore, both mining and oil and gas suffer from a negative image in many parts of Europe. NGO and community opposition, whether based on environmental grounds or NIMBYism, poses a frequent challenge for resource companies. However, we discuss notable exceptions in the article.

• Covid-19 is accelerating existing trends rather than creating new ones – companies already advanced in their climate and ESG strategies will stand to benefit
  The full impact of the Covid-19 crisis and its associated reforms and stimulus packages remains to be seen. However, much of its impact will be to accelerate trends that have been on the cards for some time. Companies that have already made strides on climate and ESG will find themselves at an early advantage by positioning themselves to seize opportunities in the energy transition and by overcoming stakeholder risks through proactive engagement and robust ESG protocols.