Are Current Regulations Enough to Solve EV Battery Critical Mineral Supply Chain Challenges?

By Lucas Bettle

The rapid growth of the electric vehicle (EV) market has amplified global demand for critical minerals such as lithium, cobalt, nickel, manganese, graphite, and others. While these resources play a key role in reaching transportation decarbonization and climate goals, their extraction and processing pose a wide range of challenges concerning labor rights, environmental integrity, and geopolitical stability (Barman, 2023).

Many initiatives have been established to build more sustainable and ethical critical minerals supply chains. In Canada, the Critical Minerals Strategy is backed by $4 billion in federal funding, with the goal of making Canada a leading supplier of critical minerals while maintaining environmental stewardship (Government of Canada, 2022). The United States similarly seeks to bolster domestic production and reduce supply chain dependence on non-allied countries (Dou, 2023). This article examines whether the existing policies, regulatory frameworks, and industry programs can truly solve the ethical and sustainability challenges surrounding critical mineral supply chains.

Critical Challenges in Mineral Supply Chains

The anticipated surge in EV adoption is expected to place unprecedented pressure on critical mineral supplies. These resources are obtained from diverse geographic regions under varied governance regimes. The rising demand for lithium, cobalt, and nickel highlights the fragility of supply chains where production is concentrated in only a few countries (Ballinger, 2019). China’s dominance in mining and refining is a prime example, spurring concerns about price volatility, export restrictions, and broader geopolitical leverage (Dou, 2023). The country has a near-monopoly on rare earth extraction vital for the production of electric motors, including neodymium, praseodymium, dysprosium, and terbium (Ballinger, 2019). China also produces 65% of flake graphite globally, another critical resource for EV battery production (Ballinger, 2019).

The Democratic Republic of the Congo (DRC) provides an estimated two-thirds of the global cobalt supply, and ongoing ethical and human rights challenges persist there despite growing international awareness of child labor and forced labor in cobalt mining (Sovacool, 2019). While many companies pledge conflict-free sourcing, the reality on the ground often includes smuggling, poor health and safety standards, and mining operations that elude official oversight (Seay, 2012). In other high-value mineral regions, such as the lithium triangle in South America, water-intensive extraction harms local agriculture and livelihoods (Yang, 2022).

Frameworks such as Canada’s Critical Minerals Strategy set targets for rigorous environmental, social, and governance standards. However, the actual implementation is much more complex. New mining and refining sites also pose environmental risks related to tailings, acid mine drainage, and water consumption, requiring close monitoring. There is a strong push to develop domestic critical minerals supply, but the fast pace targeted for mining approvals raises tensions with local stakeholders.

Existing Critical Mineral Supply Chain Regulation

Current mineral supply chain regulation focuses largely on conflict minerals legislation such as the US Dodd-Frank Act Section 1502 and EU Regulation 2017/821. These laws mandate transparency reports from corporations sourcing conflict minerals, including tin, tantalum, tungsten, and gold, often referred to as “3TG”, from conflict-affected regions such as the DRC (Deberdt, 2021). These requirements have brought attention to the role of mining profits in financing armed groups, prompting organizations to adopt stricter due diligence policies (Young, 2015).

In the United States, the Inflation Reduction Act is a recent effort to increase the proportion of battery minerals and components sourced either domestically or from free-trade partner countries through tax incentives. This provision incentivizes automakers to develop more localized and allied supply chains (Dou, 2023). The measure also focuses on minimizing reliance on Foreign Entities of Concern (FEOC), which include organizations incorporated, headquartered, or performing relevant activities in countries including China, Russia, North Korea, and Iran.

There are also industry organizations working to improve sustainability and ethics in supply chains through audit protocols, supply chain traceability, and other means. The Responsible Minerals Assurance Process (RMAP) evaluates and certifies smelters and refiners to ease ethical sourcing for automakers. The Responsible Cobalt Initiative extends similar principles to the cobalt supply chain in particular.

The Uyghur Forced Labor Prevention Act (UFLPA) bans the import of goods linked to forced labor in China’s Xinjiang Uyghur Autonomous Region. While automakers claim to abide by this regulation, complex supply chains make verification difficult and raise serious concerns about compliance and enforcement (Salcito, 2023).

Do These Regulations and Approaches Truly Address the Issues?

While progress has been made toward more transparent and ethically driven mineral supply chains, current regulations and industry-led initiatives often fail to resolve fundamental issues. There is a major divide between the policies as conceived by governments and industry leaders and the reality of implementing and enforcing them in areas with weak governance and entrenched corruption (Stoop, 2018). Corporate reporting under Dodd-Frank or the EU rules can highlight risks but doesn’t necessarily translate into effective local oversight. In the DRC, cobalt production remains poorly monitored, and child labor persists despite corporate pledges to eliminate such abuses (Sovacool, 2019).

Another major gap exists in environmental management. Frameworks such as the Canadian Critical Minerals Strategy specify investments in green infrastructure and technologies to reduce the carbon footprint of mining operations. However, most international guidelines only tangentially address vital sustainability targets such as water conservation and biodiversity (Dou, 2023). Many existing certification schemes, such as the Conflict-Free Sourcing Program (CFSP), focus solely on conflict issues without any measures to address environmental concerns such as tailings disposal, land rehabilitation, and toxic chemical usage.

Market-driven compliance has also failed to achieve the desired results. While many global automakers insist on conflict-free minerals, enforcement typically halts at the smelter or refiner level. The networks of mining operations that supply these refiners are often highly complex and enable smuggling or paperwork falsification (Young, 2015).

Conclusions and Recommendations

While supply chain regulations, national strategies, and industry certifications have made some progress, deeper structural reforms are necessary to ensure that EV battery minerals are sourced and processed ethically. Recent measures such as Canada’s Critical Minerals Strategy and the US Inflation Reduction Act aim to refine policies and encourage ethical, environmentally sound domestic mineral production but may not be sufficient to address international issues surrounding supply chains in a timely manner.

Closing persistent gaps will require solutions that implement more rigorous on-site governance, wider adoption of local benefit-sharing mechanisms, and stronger environmental provisions integrated into existing conflict-free and due diligence frameworks. Collaboration across governments, private firms, and civil society organizations can help reduce the fragmentation that has undermined international efforts in the past. A truly sustainable and ethical transition to widespread EV adoption must go beyond simply replacing internal combustion vehicles with battery counterparts. It must ensure that the critical minerals that go into producing those vehicles do not come at the expense of vulnerable communities and fragile ecosystems.

References

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