Avoiding The Resource Curse: Lessons from Fossil Fuels Applied to Critical Minerals

Can Climate Change be Mitigated?

Abstract

The Resource Curse describes relatively poor nations rich in fossil fuels that have not been able to harness their resource wealth for the betterment of their nations and populations. As the world moves to renewable energy, are there learnings from the Resource Curse that can be applied to countries bestowed with an abundance of essential minerals, such as lithium and cobalt, required for renewable energy production? This study compares fossil fuels' socio-economic and legislative impacts with those of critical mineral mining. An extensive literature review identifies similarities and differences between these types of natural resources. Findings indicate that while critical minerals do not contribute directly to climate change, they share significant economic and political risks experienced in the fossil fuel industry. Risks for these nations include geopolitical power struggles, corruption, and economic dependence. In addition, findings show that lower-income countries rich in critical minerals may face heightened risks of authoritarianism and social unrest. This paper provides policy recommendations for these resource-rich countries to avoid the detrimental effects seen in similar nations with substantive fossil fuel reserves, including promoting transparent resource governance and using mining income to invest in social infrastructure and industrial diversification. Ultimately, this research emphasizes the need for proactive measures for these countries to exploit their critical mineral deposits; with as few risks as possible, thus supporting a sustainable and equitable transition to renewable energy. This approach not only aids in combating climate change but also ensures these countries and their people can benefit socially and economically.