Critical minerals and the clean energy transition: the role of innovation across the supply chain

Reaching net zero emissions by 2050, a goal now endorsed by many countries, requires the rapid and massive deployment of clean energy systems. However, this transition hinges on a new form of dependence. The technologies required to decarbonise depend on a small set of critical minerals like lithium, cobalt and rare earth elements that have highly concentrated supply chains marked by heavy environmental footprints and challenges regarding labour and community rights.    

This paper presents a simple framework to explore how innovation can strengthen critical mineral supply chains. It examines technological, digital and organisational solutions across the full lifecycle — from mining exploration and processing, to manufacturing, reuse and recycling. The authors examine what drives or hinders innovation, including price volatility, industrial policy, environmental regulation, firm strategies (such as vertical integration), market size and rising demand from competing sectors like AI and defence.

They highlight that a portfolio of innovations is essential for reconciling the growing demand for critical minerals with climate, economic and geopolitical priorities. Innovation can reduce the costs of reform, allowing governments to pursue security and sustainability simultaneously. The challenge is not simply to secure more materials but to build a system that is resilient, circular and adaptive.

Key points for decision-makers

• Innovation is vital to prevent cost reversals. Falling costs for clean technologies are no longer guaranteed. Volatile mineral prices, sharp post-boom adjustments, and concentrated supply chains inhibit investment. Policy tools like contracts-for-difference, cap-and-floor schemes and strategic offtake agreements could help reduce revenue uncertainty, but remain understudied.
• Diversification requires innovation to be viable. Mining and refining outside dominant producer countries is expensive and slow (capital costs can be up to 50% higher). Public-private pilot projects using automation, renewable energy and meeting environmental, social and governance (ESG) criteria can test new models that reduce local resistance and accelerate permitting.
• Recycling and substitution are essential, but they will not eliminate risk. Scrap supply will be limited in the near term, and recycling rare earths is technically challenging. Meanwhile, new battery chemistries (like LFP or sodium-ion) may reduce reliance on cobalt or lithium, but increase demand for other materials like phosphate or manganese.
• Data and design innovation underpin circularity. Digital product passports and traceability systems are crucial for enabling second-life and recycling markets, as well as ensuring ESG compliance. Standards for modular design and material labelling can lower disassembly and separation costs. Clear regulation of end-of-life EV flows is also needed to recover materials at scale.
• Policy priorities for fostering innovation: (1) introduce price or revenue stabilisation mechanisms to reduce the impact of price volatility; (2) develop national strategies to de-risk and financially support early-stage investment (e.g. grants, tax credits, blended finance); (3) embed circularity in design and regulation to ensure that products are durable, repairable, remanufacturable and recyclable; and (4) build interoperable, open-access data systems for reserves, trade, ESG metrics and material flows.