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COVID-19 Reveals Downsides of Globalized Supply Chains and Perils of Sole-Player Domination

It’s like a scene from the movies.

COVID-19 has not only taken over the headlines all over the world, it has slowed down economic activity, drastically scaled back public life, turned parents into homeschoolers, and sent financial markets into turmoil.

It has also, as Forbes contributors Nives Dolsak and Aseem Prakash point out in a recent piece for the publication – at least temporarily — reduced China’s carbon emissions, and with public life slowing to a crawl or even standstill, likely will do so for other parts of the world.

In the piece, the authors look at the deeper implication for climate policy, specifically the fact that “decarbonization depends on global supply chains for inputs required for electric vehicles, solar panels, and wind turbines.”

They argue that the consequences of disruptions to these supply chains are particularly serious “when inputs come predominantly from a handful of countries,” pointing to China as the lead supplier for REEs and the world’s reliance on supplies from “conflict-ridden and politically unstable countries, such as Congo” for other critical minerals like cobalt.

The bottom-line, they argue, “is that supply disruptions abroad can derail decarbonization at home.”

Dolsak and Prakash walk through the strategic challenges of sourcing inputs that can be found only in specific countries, arguing that “[g]iven the current configurations of the material supply chains, decarbonization could become hostage to Chinese politics, whether political or public health-related.”

They point to policy approaches already underway and options available to diversify supply chains — i.e. legislation to ease the mine permitting process to increase domestic production where possible, relying on R&D to find ways to reduce critical mineral use in products as well as recycling and engaging in multi-stakeholder initiatives improve environmental and labor rights in the mining industry.

They conclude: 

“The coronavirus episode reveals the downside of globalized supply chain and the political perils of allowing China to dominate them. Without a clear mineral supply chain strategy, decarbonization by 2040 or 2050 will be challenging to achieve.”

Fortunately, as we pointed out in a previous post on our blog“even before the outbreak and ongoing spread of COVID-19 placing a magnifying glass over our resource dependencies, and against the backdrop of the nascent tech war between China and the United States U.S. stakeholders were beginning to take steps to reduce supply chain vulnerabilities, particularly for Rare Earths.” 

The recent emergence of a more strategic approach to mineral resource policy on the part of the United States has laid some important groundwork for tackling the new realities of global supply chains in the wake of coronavirus.  We’ll have to ensure stakeholders don’t lose sight of this focus in light of the myriad of challenges ahead of us.