Relinquishing Australia’s Energy Security

The desire to achieve Net Zero emissions by 2050 has become the all-encompassing, quasi-religious quest for countless governments, NGOs, and activists.

However, the consequences of the transition from affordable and reliable energy sources, such as coal and gas, to so-called green, intermittent, and renewable energy sources, such as solar and wind, has attracted very little attention.

This is a remarkable oversight, given the risk it holds for Australia.

What governments and renewable energy activists do not want to tell you is that Australia currently has sovereign control of its energy supply.

Put simply, we control the fuel and generators that keep the lights on. Australia is blessed to have an abundance of coal and natural gas, which we rightly use as a reliable and affordable source of energy, and which for decades has constituted a significant competitive advantage.

Yet, thanks to the Net Zero dream, this is all about to change.

The mandated switch to renewable energy requires an extensive investment in physical assets.

According to McKinsey & Company, to achieve Net Zero global spending on physical assets would need to reach $9.2 trillion annually.

Global spending on physical assets currently falls well short of this target. In order achieve this level of investment, spending would need to increase by $3.5 trillion annually for the next thirty years.

Aside from this ridiculously large price tag, the additional cost arising from the pursuit of decarbonisation – and one that is almost entirely overlooked – is national security.

Renewable energy brings with it an extraordinary demand for new infrastructure such as intermittent solar panels, batteries, and wind turbines.

Although containing many different components, a key factor underpinning this infrastructure is rare earth elements. The role that rare earths play in the production of green energy is difficult to overstate.

For example, neodymium and praseodymium are highly magnetic and as such are of great use when turning movement into energy. Both elements are central to the production of the permanent magnets which are fundamental to wind turbines and the traction motors in electric vehicles.

You cannot have Net Zero without rare earth elements.

In the years to come, demand for rare earths driven by energy technology is expected to increase sharply. According to the International Energy Agency, conservative estimates suggest a three-fold increase by 2040, and other estimates, which assume Net Zero is achieved, suggest a seven-fold increase.

This rise in demand is a matter of particular concern for Australia and the West, given that the supply of rare earths is undisputedly dominated by one nation.

In 2021, China accounted for over half of the globally mined production of rare earths and 85 per cent of their refined production. So, the regional power most hostile to a rules-based international order, and to the liberal democracies which support it, is ideally placed to exercise unchallenged leverage over those democracies.

As history demonstrates, the control of a crucial resource can often be weaponised by those with exclusive possession of such.

‘The Middle East has its oil, China has its rare earths,’ said Deng Xiaoping, the former chairman of the Chinese Communist Party and the architect of China’s stronghold on rare earth production.

Just as oil has undeniably been a point of leverage over the past two centuries, assuming the push for renewables remains a global focus, rare earths will increasingly be a lever by which China can impose its will.

This is precisely what occurred in 2010 when China banned the export of rare earth to Japan on the back of a territorial dispute. This resulted in a supply shock which led to a thirty-fold increase in the price of neodymium, causing volatility and uncertainty within Japan’s electric and auto industries.

More recently, China has decided to restrict the export of gallium and germanium. Under the new rules which came into effect this month, special licences will be required to export the two rare earths. Both metals are mainly used in the production of semiconductors, also known as microchips.

The elements are also key to the production of military equipment and solar panels. This decision is understood to be a response to the United States’ decision last October to cut exports of semiconductors to China. So, the US restricts China from buying its microchips, and China responds by restricting the US from buying the materials needed to produce the microchips.

According to Critical Raw Minerals Alliance, China is the largest supplier of gallium and germanium, responsible for around 80 per cent and 60 per cent of microchip production respectively, which again demonstrates China’s ability, and willingness, to weaponise the leverage it has within the rare earth supply chain. Australia is as exposed as any nation to these risks.

Kneeling at the Net Zero altar will cause Australia to become increasingly dependent on these rare earths, and therefore dependent on China.

Given recent history, and China’s increasingly belligerent attitude to the West under Xi Jinping, it is by no means unlikely that relations between Australia and China will deteriorate over the medium to long term. But by then it will be too late, and China will hold all the cards.

Fortunately, the promised and widely promoted global energy transition is not happening at anywhere near the pace politicians and renewable advocates are suggesting. However, Australian policy makers are sleepwalking into a national security disaster.

The inescapable reality is that the more we outlaw the sovereign energy sources we control and force ourselves to import energy generation sources from hostile foreign nations, the more bullets we load into the aggressor’s gun that is pointed squarely at us.

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