This article is part of a Synergies series on Next generation trade arrangements for environment and sustainable development. Any views and opinions expressed are those of the author(s).

-----

Trade and environment goals have not always been easy bedfellows. Measures that support the environment can be seen as restricting trade or raising costs, while expanding economic growth through increased exports has been criticized by some as driving resource exploitation and increasing emissions. By focusing on international cooperation that advances the green economy, however, countries in the Indo-Pacific are looking to bridge these two areas in a way that can advance both policy objectives. 

The just transition to a low-carbon economy is often described as the defining economic transformation of the twenty-first century. At its core lies a group of resources that have become indispensable for clean energy technologies, digitalization, advanced manufacturing, and strategic industries: critical energy transition minerals (CETMs). 

Copper, lithium, cobalt, nickel, graphite, manganese, and rare earth elements are the building blocks of electric vehicles, renewable energy systems, electricity grids, semiconductors, solar panels, batteries, and energy storage technologies.

These minerals are not merely inputs into the just transition to a low-carbon economy. They are increasingly the foundation of the present and future global economy. Consequently, demand for many CETMs is projected to grow significantly over the coming decades as countries pursue climate goals, electrification strategies, and industrial modernization. 

The International Energy Agency (IEA) projects that demand for CETMs from clean energy technologies alone will nearly double by 2040. For resource-rich developing countries, this presents a historic opportunity. 

Unlike previous commodity cycles that often resulted in limited domestic transformation, the CETM boom offers a unique and distinct opportunity to act as a catalyst for industrialization, economic diversification, technological upgrading, higher-value participation in global value chains, and prosperity for resource-rich communities and countries.

Yet this opportunity is far from guaranteed.

Critical minerals have also become increasingly important in industrial policy, national security considerations, and broader geopolitical dynamics. As major economies seek to secure access to critical mineral supply chains, new strategic partnerships, investment frameworks, and supply chain initiatives are emerging. Trade and investment patterns are being influenced not only by economic efficiency considerations but also by resilience, sustainability, and security objectives. In this evolving landscape, developing countries face a complex policy environment as they seek to engage with multiple partners while advancing their own development priorities.

The question is whether alignment with a particular set of partners is the only path available. Can developing countries pursue alternative strategies that maximize development gains while preserving policy space and strategic flexibility? More importantly, how can trade, investment, and international cooperation support resource-rich economies in moving beyond extraction towards greater value addition, economic diversification, and structural transformation?

Historically, many developing countries have participated in commodity markets primarily as suppliers of raw materials. Today, UNCTAD estimates that 94 of 143 developing countries remain commodity-dependent. While mineral exports can generate foreign exchange and fiscal revenues, so far, they have produced limited spillovers for domestic industrial development.

The challenge is particularly acute in the CETM sector. Developing countries, especially in Africa and Latin America, account for a substantial share of CETM global reserves and production. Yet much of the processing, refining, manufacturing, and technological innovation associated with these minerals takes place elsewhere. As a result, the highest value-added segments of the supply chain remain concentrated in a relatively small number of economies.

The central development challenge is not the extraction of CETMs itself, but how resource-rich developing countries can use them as a platform for industrialization, technological upgrading, and economic diversification, while ensuring respect for human rights and protecting the environment and biodiversity throughout the value chain. 

Achieving this requires a shift from an export model centred on raw minerals to one that captures greater value through processing, refining, manufacturing, and related services. By expanding participation in higher-value segments of the supply chain, countries can increase domestic value capture, create skilled jobs, strengthen resilience, and reduce dependence on volatile commodity markets. 

Yet these outcomes are far from automatic. They depend on policy space, investment, infrastructure, technology transfer, skills development, and strong institutions capable of supporting long-term structural transformation.

Recognizing both the opportunities and risks associated with CETMs, the United Nations Secretary-General's Panel on Critical Energy Transition Minerals emphasizes that the energy transition must be equitable, inclusive, and supportive of sustainable development.

The report challenges the traditional pattern in which many developing countries participate primarily as suppliers of raw materials while higher-value activities take place elsewhere. Instead, it underscores the importance of enabling resource-rich developing countries to participate across a broader range of value-added segments and to benefit more fully from the economic opportunities created by the global energy transition.

A central message of the report is that trade and investment arrangements should advance sustainable development objectives rather than perpetuate existing asymmetries in the global economy. Resource-rich countries should have opportunities to develop domestic processing and refining industries, strengthen productive capacities, attract responsible investment, and integrate into higher-value segments of regional and global value chains.

The report also emphasizes that greater transparency, traceability, and accountability across mineral supply chains will be essential to ensure that the benefits of the energy transition are shared more broadly and that environmental, social, and governance standards are upheld.

The multilateral trading system provides a stable framework for national policies affecting international trade and investment. World Trade Organization (WTO) disciplines promote predictability, non-discrimination, and transparency, all of which can support the development of mineral value chains.

However, many of the existing WTO rules were negotiated before the emergence of today's strategic concerns surrounding CETMs and the growing emphasis on resilience, diversification, and domestic value addition.

Many developing countries seeking to promote domestic processing and industrial upgrading face limitations arising from disciplines on local content requirements, performance requirements, and certain forms of industrial policy. Governments attempting to encourage investment in downstream activities often encounter restrictions on measures that were historically used by a number of today's industrialized economies during earlier stages of their own development.

Similarly, WTO rules place disciplines on import licensing systems and various forms of export restrictions. Yet in recent years, export controls, export licensing requirements, and export bans have become increasingly common instruments used by both developed and developing countries to secure access to strategic resources, strengthen supply chain resilience, and encourage domestic processing.

Indonesia's nickel industrialization strategy is perhaps the most widely cited example. In an effort to promote domestic processing and move up the value chain, Indonesia imposed restrictions on exports of unprocessed nickel ore. These measures were subsequently challenged at the WTO by the European Union, with a panel finding that certain aspects of the measures were inconsistent with WTO obligations. 

The case has nevertheless sparked a broader debate about whether existing WTO rules provide sufficient policy space for resource-rich developing countries to pursue industrialization and value-addition strategies linked to critical minerals.

Similar policy debates are now emerging across other mineral-producing economies seeking to capture a greater share of value from the energy transition. As the strategic importance of CETMs continues to grow, tensions between industrial development objectives and existing trade disciplines are likely to become more pronounced. At the same time, slow or incomplete notification of trade-related measures can undermine transparency, weaken preparedness among trading partners, and reduce confidence in the rules-based trading system.

On one side we have WTO disciplines focused on trade liberalization and non-discrimination. On the other we have investment agreements designed primarily to protect investors and their investments. Alongside these are environmental agreements, national industrial strategies, regional trade agreements, and an expanding network of critical mineral partnerships and memoranda of understanding.

Governments are increasingly negotiating bilateral and plurilateral arrangements aimed at securing access to critical minerals, attracting processing investments, and integrating firms into supply chains. Examples include critical mineral partnerships, strategic investment agreements, battery value chain initiatives, or mineral security arrangements, to name a few.

While these agreements can mobilize capital, facilitate market access, and strengthen supply chain resilience, they do not necessarily address broader development objectives, including industrialization, technology upgrading, and economic diversification in resource-rich developing countries.

So the central challenge is to create a governance framework that simultaneously enables trade and investment in CETMs while also advancing economic development and social inclusion.

Future rules governing CETMs should encourage investment while fostering technology transfer and technological learning. They should facilitate trade while enabling greater domestic value addition. They should promote supply chain resilience while preserving the policy space needed for structural transformation. They should also support greater coherence and coordination in sustainability standards, reducing fragmentation while allowing for adaptation to different national circumstances. This is essential to ensure that compliance costs do not become barriers to participation but instead enable developing countries to seize emerging opportunities in low-carbon industries and integrate into higher-value segments of global supply chains.

Resource-rich developing countries need not choose between openness and development, nor between global integration and domestic value creation. The challenge is not whether CETMs will generate value, but how that value can be distributed more broadly and sustainably across the countries and communities that contribute to the energy transition.

This need not be a zero-sum proposition. Resource-rich countries can benefit from greater value addition, industrialization, and economic diversification, while countries that rely on critical minerals as inputs can benefit from more resilient, diversified, and sustainable supply chains. A more balanced and cooperative approach can therefore create mutual gains across the global economy.

Such an approach could be built around a new development compact for critical minerals based on four pillars:

• First, greater transparency, traceability and corporate responsibility across supply chains to strengthen governance, accountability, and market access.
• Second, targeted support for domestic value addition, including processing, refining, supplier development, associated manufacturing activities, and diversification into low-carbon industries.
• Third, international cooperation on infrastructure, finance, technology transfer, standards interoperability, and skills development to address structural constraints and expand productive capacities.
• Fourth, the modernization of trade and investment frameworks to reflect the realities of the energy transition while safeguarding sustainable development objectives and preserving appropriate policy space for development.

The energy transition will reshape patterns of trade, investment, and industrial production for decades to come. Countries endowed with critical minerals possess resources that the world urgently needs. Yet natural resource wealth alone does not guarantee development. The experience of many commodity-dependent economies, so far, demonstrates that long-term prosperity depends on building productive capacities, technological capabilities, and diversified economic structures that are sustainable and inclusive.

The real opportunity lies in transforming mineral wealth into a catalyst for industrial development, innovation, and structural transformation. Achieving this will require governance frameworks that recognize developing countries not merely as suppliers of raw materials, but as partners in creating value across the entire supply chain.

The rules governing CETMs are still evolving. We have in front of us a historic opportunity to shape arrangements that advance development, strengthen supply chain resilience, and support a just energy transition. If designed effectively, the CETM boom can become more than a new phase of resource extraction. It can help build a more inclusive global economy in which resource-rich countries, manufacturing economies, and consumers alike share in the benefits of the energy transition.

Realizing this vision will require leadership, cooperation, and new forms of international governance. But precisely because the institutional architecture is still being shaped, there remains an opportunity to ensure that the energy transition becomes not only greener, but also more equitable and development-oriented.

----------

Luz María de la Mora is Director, Division on International Trade and Commodities, UN Trade and Development (UNCTAD).

-----

Synergies is an online platform featuring expert commentary and opinions curated by TESS. We foster dialogue and incubate ideas on how to shape a global trading system that effectively addresses global environmental crises and advances sustainable development. Synergies draws on perspectives from leading experts and practitioners across policy communities from around the world. We seek to cultivate solutions-oriented policy analysis for a sustainable future.

The Executive Editor is Fabrice Lehmann.

Disclaimer

Any views and opinions expressed in Synergies are those of the author(s) and do not necessarily reflect those of TESS or any of its partner organizations or funders.

License

All of the content on Synergies is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) license. This means you are welcome to adapt, copy, and share it on your platforms with attribution to the source and author(s), but not for commercial purposes. You must also share it under the same CC BY-NC-SA 4.0 license.

If you would like to reuse any material published here or if you have any other question related to Synergies, send an email.