Note: This transcript was generated using speech recognition software and may contain errors. Please confirm quotes in the corresponding event audio.
MONICA DE BOLLE: Since the Trump administration came into power in January 2025, policies to protect the environment, reduce reliance on fossil fuels, promote renewable energy, and address climate change have been relegated to the backburner. The desire for critical minerals, however, is as strong as ever. The Trump administration is arguing that critical minerals are needed to protect defense industries and national security.
The new messaging of priorities means that the administration has adopted a more transactional approach to securing supply chains for critical minerals. The government is also focusing on the critical mineral processing sector.
You're listening to an episode of Policy for the Planet, a podcast exploring the global response to the climate crisis. I'm your host Monica de Bolle, a senior fellow at the Peterson Institute for International Economics.
To help us dive in deeper into critical minerals, I'm joined by:
CULLEN HENDRIX: Cullen Hendrix, Senior Fellow, PIIE.
MONICA DE BOLLE: Cullen has studied what this shift in critical mineral policies means for geopolitics across the globe.
Hi, Cullen. It's great to have you back on Policy for the Planet. Just to remind our listeners, we had a great episode with Cullen back in season one. So for you, for anyone who missed that, just go back and listen to it because it was a great conversation. And today is going to be a great conversation as well. today's topic is critical minerals, which of course we know are vital to reducing reliance on fossil fuels, also vital to combating climate change. And Cullen, how has US policy on critical minerals changed?
CULLEN HENDRIX: Great question. And Monica, it's fantastic to be back with you. I look at this as the other side of my coin that I pursue at the Peterson Institute. So on the one side, we're talking about climate change, agriculture, food, et cetera. And on the other side, we're talking about mitigation. We're talking about critical minerals.
So the critical mineral space is actually one that think has changed a great deal in the last 10 months. And it's changed in terms of optics, but it's also changed in terms of concrete kind of policy interventions. So you rightly pointed out that critical minerals are incredibly important for energy transitions. Under the Trump administration, a lot of the messaging about critical minerals has actually pivoted to highlighting the national security vulnerabilities that come from being dependent on other countries for sourcing of many of these minerals and the downstream products.
So I would say that one of the overarching kind of meta changes has been a little bit of a side lining of the discourse around the climate crisis and more emphasis on these nuts and bolts, national security imperatives and the need to have diversified supply chains for these goods in order to fuel the U.S. national security military industrial complex. So I'd say that that's kind of the biggest overarching change. And that's had implications for the list itself. It's had implications for the industrial policy approach and it's had implications for our relations with other critical mineral rich countries.
MONICA DE BOLLE: So in what ways, Cullen, if you can talk a little bit about, say, the list of minerals, what are the changes there? And if you could say something also about industrial policy and US engagement with the countries that have a lot of these critical minerals.
CULLEN HENDRIX: Goodness, I have a lot to say about each of those. So I'll try and chunk it up as best I can. Okay. So let's start with the list itself. So we have a new updated 2025 critical minerals list, which now includes 60 minerals and a couple of alloys. So it's gone from 50 to 60 with some of the notable inclusions.
So the new materials that were not on previous lists would be things like boron, copper, lead, metallurgical coal, phosphate, potash, rhenium, silicon, silver, and uranium. Of all of those, and I think all of those are sensible additions, the two that I think are interesting, right, that kind of perked my ears up, would be the inclusion of uranium, which is clearly a signal that the administration is serious about nuclear coming back into the energy mix. Maybe not necessarily because it'll contribute to decarbonization, but because modular smaller reactors may be helpful for addressing this incredible amount of demand that's coming online from data centers and the AI revolution.
And then the inclusion of metallurgical coal, I think is useful because it reminds us that this list, like virtually any priority list established by the US government, is going to be subject to politics. And so metallurgical coal was not suggested for inclusion by the US Geological Survey. It was suggested for inclusion when the final list came out. And I suspect there was a lot of back-end lobbying from the coal and steel industries that resulted in its inclusion there. so kind of to put a pin on that part of the discussion, right, the list has expanded because there's increased awareness of a variety of supply chain vulnerabilities.
The challenge when you have an expanding list like this is going to be with prioritization. The new methodology for adding things to the list actually helps with prioritization, although that might be a little bit down in the weeds. But just suffice it to say that this is the result of both kind of a hard data-driven exercise, but then also, you know, Washington politics as usual. I'll stop there for that.
MONICA DE BOLLE: Yeah, no, it's interesting that you mentioned uranium and you also mentioned how there's been a shift in sort of the way that the US government is viewing critical minerals more towards national security, less towards climate change and issues like that. And then, of course, uranium coming on is something that does spark your ears quite a bit. So back to sort of industrial policy and thinking about that and thinking about how the US has this changing approach with respect to critical minerals, the industrial policy side of that. We saw under Biden a lot of discussion of this in the Inflation Reduction Act. We've had a couple of episodes on this podcast about the Inflation Reduction Act. We don't want to go there, but we do want to go down the line where we think, "Okay, what is different?"
What is different between what was being done under Biden and what is currently being done under Trump?
CULLEN HENDRIX: Yeah. So I mean, if I had to kind of top line it, I would say that the approach that the Trump administration is applying is much less in the realm of kind of marginal gains and tweaks to US industrial base. And it's much more muscular or at least chest first, I guess I would say. I don't know if it's more muscular, but it's definitely more forward in that respect. And I'll come back to what I mean by that here in a minute.
You know, the Biden approach, I don't want to dive too deep into the IRA, but I think it's important to kind of establish the baseline. So where was the United States in terms of its approach to this issue area prior to the second Trump administration? I would say it was classic kind of fiddle at the margins industrial policy.
So trying to reshape incentives through the tax structure, subsidizing kind of established players and startups in order to try to create some sort of competitive ecosystem for development of ex-China supply chains for critical minerals and then renewable technologies and the like. The price tag for the IRA was potentially large, but the approach was largely sound. It's the kind of approach that someone at the Harvard Kennedy School would tell you, this is how you do industrial policy.
You tinker at the margins to get people to do things that they wouldn't necessarily have been doing otherwise, but you change the relative prices and you make this look like a good deal. The Trump administration is doing something very different. And in addition to this significant shift in messaging from green energy to national security, it's also changed the policy approach. So one way it's changed that is by it and the Congress have repealed many of the clean energy and EV tax incentives that were in the IRA.
And as a policy instrument, right, that frees up resources, conceptually, to invest in some of these other more national security mission critical kind of materials. But when I say that it's become more muscular and interventionist, we're not talking about tweaks to the tax code, right? We're talking about taking equity stakes in firms like MP Materials and Lithium Americas. In a certain sense, right? Telling the markets that these are now, right? Not wholly owned, but partially owned subsidiaries of the US government. In effect, making them too big to fail.
MONICA DE BOLLE: Yeah.
CULLEN HENDRIX: And they're going to need to be too big to fail, at least at the outset, because they are going to be facing very challenging kind of price competition coming from the incumbent producers, in particular China. And so that brings us to kind of the next part of this, which has been, and it still hasn't dropped yet, this expansive Section 232 investigation into critical minerals and derivative products, in particular things like neodymium magnets, for instance, which are used in electric vehicles, but also conventional vehicles, radar, rays, robotics, et cetera.
They're all important for our automated future. So I would say that those are two of the big changes. And then the third kind of change would be, I think a move into sidestepping kind of the official channels for mineral collaboration that were established during the Biden administration. So sourcing from say countries with which the US has free trade agreements and that kind of approach to one that's much more explicitly transactional, right? It mirrors the approach that the administration is taking in their more general trade negotiations, striking these bilateral deals with Australia, right? A mining powerhouse, but then also Malaysia, Thailand, Japan, other countries that have significant interest in countering China's geopolitical weight, particularly in their region.
MONICA DE BOLLE: So you have highlighted this markedly different approach that the Trump administration is having with respect to all of these issues and the critical mineral side. How do you view what other developed countries are doing compared to what the US is now doing? How does that work out?
CULLEN HENDRIX: Well, I think that the U.S. is taking kind of the most aggressive approach to this. And, know, in some senses that makes sense. If you are reading the tea leaves and thinking that the international system is moving back in the direction of bipolar competition between the United States and China, maybe with Russia as a subordinate partner on the Chinese side, then yes, it makes sense that the dominant kind of adversary in the largest military within the NATO alliance would be taking the most forceful kind of approach.
The European Union, for instance, is taking an approach that's much more premised in kind of permitting reforms, again, kind of marginal changes to industrial policy. And then, you know, the EU continues to face a persistent challenge, which is that the EU itself can modify the regulatory environment and can create a one-stop shop for, say, permitting for new mines or processing facilities.
What they can't do is issue subsidies themselves. And so, you know, this is going to be a persistent challenge for the European Union, especially as they're facing a lot of pressure to increase expenditures on their militaries and are also, you know, facing kind of somewhat more of a domestic economy. the EU is adopting this kind of approach. It's trying at the margins. The Japanese and the Koreans are both taking an approach which is predicated in strategic stockpiling.
They're less interested in on-shoring some of this capacity and they're less interested in it in large part because both of them are deeply energy import dependent. And it turns out that mining, but especially processing are incredibly energy intensive activities.
MONICA DE BOLLE: And what about the developing countries, Cullen, or the countries in the developing world or the global south or however we want to call them, the ones in particular that are critical mineral producers, the ones that actually have these reserves? How are they reacting to all of this and to some of these changes, in particular these changes coming from the US?
CULLEN HENDRIX: So the mineral rich countries that have been exporting these raw materials, primarily for processing, in China or by Chinese firms abroad.
They're interested in moving into critical mineral processing, which is actually the stage of that value chain that the United States is most interested in moving into as well. Because that's the link in the chain where China has the most dominant position, therefore poses the largest national security risk. So for the United States, this isn't really about an economic competitiveness or growth mindset. It's really predicated in energy and national security imperatives.
For these developing and middle income countries that are mineral rich, they view moving into the processing realm as actually moving up the value chain. So this is a central component of many of these mineral rich countries industrial policies, largely inspired by the success of Indonesia, which famously in 2020 banned the export of unprocessed requiring many of the Chinese firms that were processing that nickel to invest in Indonesia and process there.
And the Indonesian government is now claiming anywhere from 20 to 30 fold increase in value added associated with that industry for the country. And so a lot of developing countries and middle income countries are looking to get on this train as well.
And so this is setting up what I'm going to be watching, I think, for the next several years closely is something of a scramble for the midstream in these value chains seems to want ex-China supply chains, but it's particular about the structure that those take, with a heavy emphasis on processing occurring within the homeland, so to speak, so that supply can't be interdicted.
That's a less of a relevant concern if you're Bolivia or Namibia or a country like that. What you're interested in is moving some of that processing into your own jurisdiction to create manufacturing jobs, to provide a resource base for your own industrialization that doesn't make you as dependent on sourcing imports from increasingly unpredictable global markets. And so I think that this is going to be one of the defining political economy challenges in the energy sphere and by extension, the national security sphere for the next five to 10 years is where is this going to shake out? Who is going to win this scramble?
On the one hand, you've got the mineral producers themselves, who can shut off the spigot if they don't like the terms that are coming from these governments. But as you are well aware, and we know from the Cold War, under those circumstances, especially when national security concerns are activated in major powers, that can also potentially court intervention, which is something that these lower middle income countries are desperate to avoid.
MONICA DE BOLLE: Yeah, absolutely. And thinking about this and thinking about this changing or this shifting geopolitical landscape that we're in with the US and China having their various interests, you know, everywhere in the world and in particular in these countries, in these mineral rich, but not just mineral rich, commodity rich in general countries. You and I have had several conversations about this. How do you see these countries actually positioning themselves? What is it that they can do so in a sense that so that they're not just reacting, they're not just being reactive, they're not just scrambling, but they're actually positioning themselves to face this very different world from what it was say less than five years ago.
CULLEN HENDRIX: I think it's a different world from the one that we were looking at 12 months ago. I mean, I think that it is really remarkably changed in that amount of time. And it's all being driven by a change in leadership in the United States, which has really amplified the stakes, I think, for these mineral rich countries, because they are increasingly finding themselves right in between, there was a rock in a hard place or the siren and caribdis or whatever kind of metaphor you want to use. And so I think that the most important thing for these countries is how to maintain some strategic autonomy from both, let's say to the extent you still think this is a coherent geopolitical unit, The West, and then on the other hand, kind of falling into sort of the Chinese or Russian sort of sphere of influence.
Now, how do you do that? I mean, I think that one of the ways that you do that is by trying to make sure that you're recording investment from all sources, right? It is a bad position to be in if you're a mineral exporting country to be fully kind of aligned with either side because effectively your interests can be captured. And there are certain circumstances under which that's actually led to some autonomy.
For pretty ugly reasons, there's a story to be told about the apartheid regime in South Africa lasting as long as it did because it was a critical supplier of mineral resources to the West during the Cold War. That's a bad form of autonomy. The kind of policy autonomy I'm talking about is a policy autonomy that will allow them to benefit from inward foreign direct investment in their mineral sectors while also allowing them to move up value chains.
Indonesia's example is definitely one that is dramatic and it's definitely attracted a lot of attention in the developing world. Whether or not the Indonesian example is replicable in other contexts, Indonesia's big, it has a home market, has abundant coal energy, et cetera, for fueling all of this, those might not be things that Namibia or Zimbabwe have access to. And so it will look different in those countries.
MONICA DE BOLLE: Yeah. Yeah.
CULLEN HENDRIX: The important thing is to just remember that is the direction that they want to be going in. that is going to, I think, as I said before, kind of define kind of their external engagement with the global economy to a great degree, because this isn't just a source of export earnings. It's a significant source of what little geopolitical leverage they have. so maintaining that and courting investment from all of the relevant major powers and parties is a good way of diluting the influence that any one of them has on a particular country.
And a lot of countries are actually headed down this route. Indonesia itself is aware of this challenge and is seeking greater investment from firms in Korea and the United States to diversify the influence of Chinese firms in its mineral sector. So there are lessons to be learned from the countries that were the first movers.
MONICA DE BOLLE: Cullen, so we know that critical mineral production or mineral extraction for that matter, whatever the mineral happens to be, is a process that is not necessarily very climate friendly. In fact, it can be very complicated and it can create a lot of problems. And of course, the mineral producing countries are well aware of that. Other parts of the world developed economies that are actually demanding these minerals are also well aware of that.
What is, how is that playing out now in terms of how is the European Union positioning itself? How is the US positioning itself? What is the concern out there with respect to the kinds of implications that critical mineral extraction can have on the environment itself?
CULLEN HENDRIX: Sure. No, mean, what, so I'm really glad that you raised this point because one of the old saws that kind of floats around as a joke and in critical minerals policy want kind of circles, right, is that rare earths aren't particularly rare. What's rare is sort of the political tolerance for the environmental and energy costs of producing them. And so this is, this is an issue that is, I think, going to drive something of a wedge between a US response and a European Union response to you know, essentially Chinese critical mineral dominance, if you want to cast it in those terms. The European Union doesn't like having this source of strategic leverage over it, but it also has significant kind of environmental regulatory hurdles to on-shoring a lot of this kind of mineral processing capacity. Those are hurdles that are likely to come down to a certain extent, I think, for very national security mission critical kind of minerals, but I don't think there'll be a broader kind of pivot.
In the United States, you've got a drill baby drill president who is more than willing to tap fossil energy and also has signaled that deregulation of the permitting process and environmental review is also something that is likely to be lessened in pursuit of these kind of minerals. As for the developing countries and mineral rich countries themselves, I mean, this is a huge domestic political issue and problem because, this is a classic sort of resource curse potential kind of dynamic, right? You're exporting most of the goods. Most of the goods are being, you know, processed and mined by transnational corporations. So a lot of the profit is going outside of the country, the tailing ponds, the emissions, the disruption to agricultural land and herding land, et cetera, that stays within the country.
And so I think that many of these, many developing and middle income countries are looking for suitors who are going to come to them, not just with a good economic proposition, but also a broader kind of suite of development interventions. given the cuts to USAID and the general shift in policy orientation in the United States, I think it's going to be less well positioned to deliver those. It might be better positioned to deliver kind of, you know, cash on the barrel head, handshake agreements that are attractive to rulers and other heads of state, whether those will translate into kind of actionable, durable, environmentally sound business processes is another question entirely.
MONICA DE BOLLE: Let me ask you a kind of speculative question. Do you see the BRICS being helpful in this regard? In other words, do you see this group, this geopolitical group called the BRICS being helpful in terms of positioning these countries in a way that is not directly confrontational either with the United States or with China?
CULLEN HENDRIX: Well, that, I mean, that, that, is, that's really challenging because of course the sea in bricks refers to China, right? So in a very real sense, it is part of the problem, at least to the extent it's a problem, right? From the U S perspective, it's part of the problem, but other members, right? Are part of the solution. For instance, Brazil is one of the places that the United States and other Western countries are looking for dysprosium and terbium, which is a very difficult mineral to replace, uh, Chinese supply right? And then, you you've got the UAE has massive energy endowments, lots of investment capital that's looking for ways in which it can be a productive part of these kinds of conversations. And so I think that the individual countries themselves are going to play a large role. Russia itself is also a significant exporter of critical minerals. And so, you know, to the extent that the war in Ukraine ends, eventually, and to the extent that Russia is renormalized as a member of the global economy and the international system, it will provide an additional source of supply for these materials, but will also continue to come with concerns about the specter of Russian kind of geopolitical influence coming with those kinds of investments. But I want to be very clear about this because although I am from the United States, I am not speaking for the United States. And I think that many advanced economies and many lower and middle income economies for that matter need to be just as concerned about the potential for geopolitical meddling and mineral coercion coming from the United States as they are coming from places like Russia or China. It's starting to look a little 19th century out there in the international system, and that is not a status quo ex ante we want to return to.
MONICA DE BOLLE: I love that you said that because that is exactly how it feels. It does feel like we're returning to a 19th century kind of environment. But bottom line is there are no shortage of interesting topics for us to follow, Cullen. And we will certainly ask you to come back, maybe even again in this season. So thank you so much.
CULLEN HENDRIX: My goodness, I don't know if I can handle it. No, this has been fantastic, Monica. I love the podcast. Thank you for having me on and can't wait to see what comes of the rest of the season. Good luck.
MONICA DE BOLLE: You've just finished an episode of Policy for the Planet — thanks for joining us! Don't forget to rate, review and subscribe.
Special thanks to Isabel Robertson and Alex Martin, our producers, Melina Kolb, our supervising producer, and Steve Weisman, our editorial adviser. This podcast is brought to you by the Peterson Institute for International Economics. Learn more at piie.com.
Until next time, here's to creating meaningful impact through interesting conversations.
