How to Stop a Boom from Busting: A Policy-Oriented Research Agenda for Capitalizing on China’s Demand for Transition Materials in Latin America

Avoiding catastrophic climate change requires the dramatic acceleration of renewable energy deployment. This expansion is already occurring, with China playing the largest role in the expansion of solar and wind energy supply chains. Several of these supply chains begin in Latin America, which leads the world in deposits of lithium, copper and other critical transition minerals. Thus, the Latin America-China economic relationship will likely be key to the global expansion of renewable energy to mitigate climate change.

A new report by the Working Group on Development and Environment in the Americas explores knowledge gaps within current research trends on the form that these new supply chains are likely to take and the applicability of policy lessons learned during previous commodity booms. Identifying areas of under-supported research is critical to developing financially, socially and environmentally sustainable supply chains.

The report is the outcome of an August 2023 workshop for the Working Group on Development and Environment in the Americas, hosted by the Boston University Global Development Policy Center, the Universidad del Pacífico’s Centro de Estudios sobre China y Asia-Pacífico and Peking University’s Institute for New Structural Economics. The Working Group consists of 24 experts with the goal of developing a policy-oriented research agenda to equip leaders, civil society members and investors as they navigate new supply chains that bring novel opportunities along with revived and nascent policy challenges. During the workshop, the Working Group reviewed key evidence and the state of current knowledge, to identify existing knowledge gaps and to propose a research agenda to fill those gaps.

The Working Group identified three broad categories of research gaps: 

1. A better understanding of structural factors and market conditions that are poised to shape a likely commodity boom to support future energy transitions; 
2. The application of lessons on governance for development and risk mitigation from past commodity booms; and 
3. Mapping and developing the role of outside stakeholders, such as multilateral and Chinese development finance institutions, in supporting institutions and building integrated supply chains. 

Specifically, the Working Group recommends incorporating the following elements into an interdisciplinary, policy-relevant research agenda: 

• Regarding structural factors and market conditions:
  • Anticipated transition material demand should consider expected changes in the growth of the renewable energy manufacturing and deployment sectors in China, the speed of its energy transition and the composition of its new energy generation capacity.
  • Integrating regional divergences in investment expansion and technological deployment with the varied possible trajectories of China’s renewable energy and electric mobility sector will be crucial for the development of realistic policy recommendations.
  • Outlining obstacles and bottlenecks like institutional development, physical integration and policy coordination will be key for LAC economies to leverage market power.
• Regarding governance for development and risk mitigation:
  • New research must evaluate the extent and circumstances in which policy lessons from past resources booms can be applied to a 21st century transition metals boom, also needing to include changes in policy space due to international investment and trade agreements.
  • New approaches should identify specific policies and institutional capacities necessary to mitigate overlapping risks, including tradeoffs and complementarities among policy priorities.
  • Mapping local, national and regional stakeholders and their varied incentives should be prioritized, including analyzing  inequalities among actors as they relate to national policy frameworks, local implementation and international coordination.
• Regarding the role of external stakeholders:
  • Future research should map international stakeholders whose incentives and institutional strengths make them advantageous partners in developing and deploying policies for sustainable supply chains of LAC countries.
  • An evaluation is needed of the readiness of LAC states and regional bodies to coordinate responses to a competitive extra-regional environment in which the traditional regional partners of China, the United States and the European Union exhibit increasing competition.
  • Renewed analysis should focus on assessing external stakeholders’ willingness and capacity to support LAC’s stated goals and strategies, considering Chinese actors’ willingness to invest in value-added stages of production in LAC, establish upstream and downstream linkages with broader economies and allow for technology transfer.
  • Potential roles for LAC regional development finance and coordination
    institutions and their capacity to guide regional policy and investment coordination should be explored under new scrutiny.

Given the urgency of deploying supply chains to support renewable energy expansion, it is vital for researchers to lay the groundwork for practitioners, policymakers and civil society as they face the opportunities and challenges of leveraging LAC’s location-specific assets in transition metals into sustainable and inclusive growth. The knowledge gaps identified in the report are as urgent as they are significant. The future of global energy and mobility depends on a solid foundation of public knowledge, necessitating a commitment to creating a more sustainable and inclusive future for Latin America and beyond.