Material Chain Management and Open Trade: The Cases of Coltan and PGM

1. Material Chain Management and Open Trade: The Cases of Coltan and PGM Prof. Dr. Raimund Bleischwitz Transatlantic Academy Fellow & Wuppertal Institute, Germany Presentation at the Conference:Governing Trade in Critical Raw Materials, GMF Washington DCDec 8, 2011

2. Outline

3. The Issue: challenges for material value chain management • Transparency and certification could strengthen material chain management. • Material value chains are complex and often involve dozens of actors across many companies and jurisdictions. • Small-scale mining and early stages of trading and processing offer many ways of by-passing any proper management. • Some countries involved (e.g. China) may have strategic interests. • Traded products (and semi-products) inhibit materials as hidden flows. Material leakages are significant. => Transparency and certification require resilient institutions with support from companies and key countries.

4. The case ofColtan • Coltan (tantalum) is used in mobile phones, other ICT products, medicine, optics, cutter technologies, etc. • Largest Mine (Australia)has abandoned its operations in 2008 • Central Africa (incl. Mozambique) now serves as largest supplier, followed by Brazil and Australia • Small-scale mining, civil war, lootability and profitability give incentives for illicit trade: ca. 20 % of worldwide coltan market (2009/10) • China deeply involved.

6. Coltan: Risks and threats Intersection and cumulativeness of risks Affected Industries Resource Nationalism Global & transat-lantic scale Low Growth Low standards, enhanced climate change Civil war Failing states Piratery, Organized crime Regional scale Migra- tion Decrea- sing Re- venues Decrea- sing agri- culture Local scale Small- Scale Mining Illicit trade Increa- sed bush- meat hun- ting Defo- restation Source: own compilation after Folke et al. 2011

7. The case of Platinum (PGM) • Important for car catalysts and electronics as well as for fuel cells & electric vehicles. • Projected future demand for these applications in 2030 likely to be 1.5 times higher than total production today. • Mining environmentally intensive (large amounts of water and energy, sulphurdioxide etc.): for the production of one single ounce a volume of 7 – 12 tons of ore have to be processed. • Main producers and South Africa and Russia. Source: Saurat/Bringezu 2008.

8. PGM flows in Europe • PGMs in glass industry: • organized in closed loop • secondary PGM input represent ~ 43 % of European secondary input • primary input representonly 0.5 % of European primary input • PGMs in car catalysts: • lowrecycling rate (~30 %), mainly due to exports • expanding car fleet, growingaveragecylindercapacity, stricteremissions standards • => The automotiveindustryrepresents 76 % of PGM primary input to Europe PGM flows in EU 25 + Norway + Switzerland in 2004 Sources: Saurat/Bringezu 2008/9; Wilts 2011

9. PGM: Losses, Risks and Threats • High material leakage • For car catalysts: In Germany e.g., only 15 % of registered cars are dismantled and recycled domestically. Most used cars are being exported to West Africa and Central Asia. • For mobile phones: 243 kg PGM inputs compared to 16,5 kg outputs to recycling (2009, Germany). • For discarded screens: 355 kg PGM inputs compared to 35-70 kg outputs to recycling (2009, Germany). • Shady business, grey markets, illegal shipping, organized crime (money laundry etc.). • Health and environmental risks • „Responsibility gap“ for post consumer waste abroad

10. Proposal: An International Metal Covenant • Rationale: poor performance, material leakages internationally, low recycling standards in many countries. • Covenant to include industry (recycling, automotive) and target countries. • To set long-term goals to increase the resource productivity by high quality recycling of old cars • To define the responsibilities of different actors in terms of operation, implementation, and evaluation. • Establishes material stewardship internationally. • States shall guarantee stable and supportive regulatory framework conditions • Going beyond compliance! Recycling industry Automotive industry Exporting countries Importing countries Source: Wilts / Bleischwitz 2010:

11. Conclusions • Sustainable sourcing and recycling improve material chain management • Spillovers and secondary benefits create further contributions to green and inclusive growth • Policies: to focus on life-cycle aspects and material leakages Opportunities Global Challenges • Critical metal markets put companies, high-tech industries and regions at risk • Transparency and certification encounters challenges from open markets and Chinese involvement • Material chain management (incl. mining, recycling and waste) at an international scale • New alliances beyond transparency and certification: an international metals covenant • ….export restrictions should not be an option! Response options • Material chain management and material stewardship raise collective action problems • Data base not yet fully established • Commodities have a collective goods dimension (externalities, property rights, dissociated markets, knowledge management) • Policies for mining countries (taxation issues, diversification, etc.) to be aligned with international resource politics Rethinking Trade