Let China take the risk on minerals

It is, on the face of it, an attractive proposition.

Canada becomes a global powerhouse in the production of the critical minerals used in electric vehicles (EVS), smartphones, solar panels, and other means of achieving a decarbonized world.

Demand for those critical minerals and metals, including cobalt, lithium, graphite and nickel sulphate, is poised to skyrocket.

Such a project, much discussed in Ottawa these days, could give Canada greater geopolitical clout.

It also appeals to our “own the podium” quest to achieve world leadership.

But it could also find Ottawa squandering taxpayer funds on a project that doesn’t make a lot of sense. There are better uses for the money, like investing more funds to solve our housing crisis.

That project could also see Canada succumbing to pressure from Washington and many European countries to do its part in a bid to counterbalance China’s overwhelming dominance in critical minerals.

Except that no one has made a convincing case that China’s admittedly large storehouse of critical materials is all that much of a threat to Western economies.

Mind you, Justin Trudeau has embraced the project, eager that the U.S. turn to Canada for critical minerals.

The PM has directed his innovation minister to keep Canadian critical-mineral supplies safe from predatory Chinese-state acquisitors, with marching orders to “mitigate economic security threats from foreign investment.”

Ottawa has poured millions of dollars into critical-minerals research. Its biggest handout is a promised doubling in the mineral exploration tax credit. The criticalminerals chorus hopes that measure will appear in the feds’ spring budget.

The many supporters of taking on China in critical minerals include the Canadian mining sector, national security experts, and environmentalists wanting a secure supply of the materials key to the clean-tech revolution.

After all, demand for those materials could as much as quadruple by 2040, according to the Paris-based International Energy Agency.

Canada does have considerable reserves of critical minerals. But most of them are untapped. Canada produces a very small portion of the world’s cobalt, lithium, graphite, copper and rare earths used in clean-energy technologies.

It currently doesn’t produce a scrap of the lithium, manganese and nickel sulphate essential in making EV batteries.

To do so would require significant government expenditure in kickstarting mine development.

And another major outlay of public funds would be required for infrastructure, including access roads to mineral reserves in the most remote parts of the country.

It probably is wise to block Chinese-state acquisitions of Canadian resource firms.

And it would be useful for Western economies to build stockpiles of critical minerals should China abruptly cut anyone off from them.

China did ban exports of critical minerals to Japan in 2010 over conflicting territorial claims on islands in the Sea of Japan.

That example of the Chinese threat is repeatedly cited by today’s advocates of boosting Western production of critical minerals.

It’s worth noting, though, that Japan

has retained its tech leadership since that incident. Neither has it given up its territorial claims.

China’s leverage with critical minerals isn’t as great as Western alarmists believe.

China’s economic revolution relies on continued access to Western consumer markets, which could easily be closed to it. And its tech sector is dependent on imported high-performance semiconductors, notably from the U.S.

Meanwhile, most critical minerals are not rare. Reserves are abundant outside China, for instance in Australia, Indonesia, Russia, Africa and the Philippines.

And the lithium-ion batteries that are the mainstay of today’s EVS could give way to a new technology, such as the hydrogen batteries that Toyota Motor Corp. is trying to perfect.

Other researchers are working on a cobalt-free EV battery.

So, why not let China take on those risks?

Let it spend the money on mining that poses environmental challenges, and whose output is often dirty. Lithium mining, for instance, is a major source of greenhouse gas emissions.

And let China invest billions of dollars in lithium and cobalt mines whose output might fall out of favour.

Food provides still more Western leverage against China.

To feed its people, China is heavily reliant on food imported from countries like Canada, a powerhouse in nutrition. And in potash, a Canadian export that triples crop yields abroad.

Ottawa would do best concentrating on issues of urgent concern to Canadians.

There are many, but affordable housing looms large.

Canada lags all its G7 peers in number of homes per capita.

It is estimated that Canada needs to build about 1.8 million new homes just to match the G7 average. And that’s in addition to the almost 300,000 homes we currently build each year.

China is a formidable country, but difficult to take seriously as a superpower when it can’t feed itself.

And Canada’s aspirations for owning any podium don’t amount to much if we can’t house ourselves.