The electric vehicle revolution could be a benchmark for the circular economy

Earlier this year, AXA IM invited clients to a briefing in Amsterdam to explore emerging themes in responsible investment. Our guest speaker was Gerrard Barron, CEO of mining company DeepGreen. The session raised some intriguing questions about the future of electric vehicles – and the opportunities and risks at play.

Back in 1872, a team of scientists boarded the HMS Challenger in Portsmouth, UK and set off on a 130,000-kilometre tour of the globe. The expedition catalogued more than 4,000 new species, but one of the most dramatic discoveries is only now bearing fruit as the world heads for a more sustainable horizon.

Ever since the industrial revolution, we have enjoyed the benefits of the “take, make and dispose” model. It has delivered improvements in health and living standards for many. But it has also exacerbated inequalities and made our environment creak under the strain. The fragility of global supply chains shown up by the coronavirus pandemic has only underpinned enthusiasm for a “make, use and recycle” alternative. But to create a circular economy, you need to obtain the raw materials that will circulate – and that’s where our 150-year-old ship comes in.

From the deep-sea bed, the HMS Challenger’s crew dredged up catchily named “polymetallic nodules”. These were later found to spread across vast stretches of the ocean, and to contain an abundance of materials, among them nickel, cobalt and manganese. In the 21st Century, those three metals are the holy trinity of most electric vehicle (EV) batteries – combining to form the positive electrode where lithium ions gather as the battery delivers its power.

Battery storage is key

This is perhaps the front line of the shift to a sustainable economy. Battery storage will form part of the foundations for energy solutions in this new era, and it poses an intriguing challenge for industry and investors.

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If nickel, cobalt and manganese can wean us off our addiction to the combustion engine, that means we will have to adapt to a likely surge in demand[1]. As the supply pressure builds, there is a risk that in the sourcing of those metals (or in the generation of electricity for batteries) decisions are made that are not sustainable, and that are not in the best interests of people or the planet.

As it stands, those metals are sourced from the land, and for now much of this activity is out of sight, out of mind. But a sharp spike in EV use would be likely to send the extractive industries into more fragile environments. Much of the world’s nickel, for example, rests in the equatorial rainforests.

Cobalt supply, meanwhile, has worried researchers at the Massachusetts Institute of Technology, the University of California and the Rochester Institute of Technology. "Cobalt availability will be greatly affected by the geopolitical stability of the DRC [Congo]," they warned in an article earlier this year[2].

The search for materials

The search is on for new ways to deliver the crucial materials. In 2019, the UK government announced a £250m fund[3] to find out if lithium, that other crucial battery ingredient, could be extracted from the ground in the county of Cornwall, better known for its history of tin mining. And as we seek to fill 250 million electric vehicles[4] with batteries by 2030, people like DeepGreen CEO Gerard Barron are looking back to the sea bed as a viable alternative source.

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Supported by shipping giant Maersk, DeepGreen is a mining firm with a notable difference. It might just point the way to how our energy economy will evolve. Barron’s big idea is to gather up enough raw materials from the ocean floor to support the growth of the EV industry – the company estimates there is enough raw material in its prospective fields to supply 255 million EVs[5] – and then for the company to morph into something else entirely. Stage one is to produce enough virgin metals with the minimum possible environmental impact; the second and third acts of DeepGreen’s life are envisaged as a pure-play recycler. It is the dream of a closed-loop system.

The dream is shared. French mining company Eramet, German chemicals group BASF and French water and waste firm Suez have teamed up for a small scale, two-year project that began in January 2020 to test the collection, dismantling and recycling of electrode materials[6]. And a study published in Nature magazine[7] by researchers at Worcester Polytechnic Institute in the US last year claimed to demonstrate that the “closed-loop recycling process has great adaptability and can be further developed into industrial scale.”

This might be a key part of the coming decade of transition to a more sustainable economic model: Producers becoming recyclers. DeepGreen is a daring attempt to make that a reality in the deep Pacific Ocean, but it will have to convince those who doubt the low environmental impact of its plans, and it must overcome the immense difficulties of open water production. There is, however, a tantalising possibility that its business model offers a blueprint for the energy revolution as we move into what many hope will be a “green recovery” from the COVID-19 outbreak. And it will be a curious footnote to that story if a steam-and-sail vessel from a century and a half ago helps pave the road to a low-carbon, electric vehicle future.

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[1] “New projects for battery material nickel need a price spur” Reuters. August 2019. https://www.reuters.com/article/us-nickel-batteries-electric-graphic/new-projects-for-battery-material-nickel-need-a-price-spur-idUSKCN1VH18Z

[2] “How 3 metals could drive the EV revolution” E&E News. February 2020. https://www.eenews.net/stories/1062467737

[3] “UK government backs hunt for lithium to meet EV demand” Financial Times. June 2019. https://www.ft.com/content/08ef0d38-8c5a-11e9-a1c1-51bf8f989972

[4] “Global EV Outlook 2019: Scaling up the transition to electric mobility” International Energy Agency, May 2019. https://www.iea.org/reports/global-ev-outlook-2019

[5] DeepGreen plans to operate in an area called the Clarion-Clipperton Zone (CCZ) between Hawaii and Mexico, representing about 0.34% of the ocean floor. The deposits of high-grade manganese, nickel, copper and cobalt rest in clusters on top of loose sediment, 4-6km deep.

[6] “Recycling EV batteries” The Chemical Engineer. October 2019. https://www.thechemicalengineer.com/news/recycling-ev-batteries/

[7] “Closed Loop Recycling of Electric Vehicle Batteries to Enable Ultra-high Quality Cathode Powder” Nature. February 2019. https://www.nature.com/articles/s41598-018-38238-3

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