What Are the Potential Impacts of Seabed Mining?

Transcript

Tom LaTourrette

In response to long-standing concerns about the impacts of fossil fuel use, such as poor air quality and climate change, transportation and electricity generation are in the midst of a major transition to renewable power. With this transition comes a dramatically increased demand for batteries, for electric vehicles, and renewable energy systems that require critical minerals.

One potential source for these critical minerals is polymetallic nodules that lie on the seabed in the deep ocean. These nodules are rich in nickel, cobalt, and other key elements in batteries, and the resource potential is enormous. China currently dominates global supply for these and most other critical minerals and is increasingly manipulating markets to disrupt or influence supply. Seabed mining could be an opportunity to introduce new sources of supply that are not controlled by China, thereby increasing the security of supply for the U.S. and its allies.

One hitch is that the U.S. is one of the few countries that hasn't ratified the United Nations Convention on the Law of the Sea and so can't move forward with seabed mining operations in international waters. Unless that changes, the main opportunity for the U.S. to participate in a potential seabed mining industry would be to process raw nodules into compounds used by battery manufacturers.

Zohan Tariq

Today, the primary application of nickel is the production of steel and other metal alloys. Most of the existing nickel processing capacity around the world is optimized for this purpose, and these facilities just aren't designed to produce the compounds needed to make batteries, much less deal with the cobalt and other metals in polymetallic nodules.

In addition, the vast majority of the world's nickel and cobalt processing capacity is controlled by China, and partnering with Chinese firms presents challenges because they offer unattractive terms, and, also, it would conflict with government and private investors' interests to avoid China, making operations ineligible for production tax credits and making it more difficult to raise private capital.

For these reasons, seabed mining companies want to build new, dedicated nodule-processing facilities outside existing supply chains that are dominated by China, and they have a particular interest in the United States.

Tom LaTourrette

The U.S. government is taking a measured approach to seabed mining. Despite widespread concern about securing a reliable supply of critical minerals, it hasn't incorporated seabed mining into its planning. Any role for the U.S. in nodule processing—or any part of a potential seabed mining industry—is not a major part of the discussion yet.

Fabian Villalobos

For a seabed mining industry to emerge, it must be economically viable. In our RAND research, we used the Five Forces industry analysis framework to compare the relative strengths of seabed mining companies and terrestrial junior mining companies.

We found that seabed miners might face fewer barriers to entry than traditional junior miners. Seabed miners might enjoy the benefits of economies of scale due to a higher mineral content in their nodules. They might enjoy lower capital costs, and they can avoid the lengthy permitting process that terrestrial miners face.

But seabed mining faces opposition based on uncertain but potentially significant environmental impacts. Several nations have called for a moratorium on operations until these impacts are better understood. Until that happens, and until a regulatory system is in place, seabed mining will continue to lack uniform support.

Elisa Yoshiara

Another important concern with seabed mining is how it will affect countries whose economies rely heavily on mining. For some countries, particularly those in the global south, mining accounts for a major portion of their GDP. Increased supply from seabed mining could cause prices for nickel, cobalt, and the other seabed metals to fall, which would lead to less government revenue for poorer mining countries whose budgets are already very constrained.

The International Seabed Authority, which governs seabed mining in international waters, operates under the principle that the ocean floor and its resources belong to all humankind. And so any benefit should be shared in a way that reflects this principle, including by compensating mining countries. The question is whether this compensation will be sufficient to make up for lost revenue from existing land-based mining. We modeled this trade-off for cobalt production in the Democratic Republic of the Congo, which produces over 70 percent of the world's cobalt. And we found that even under the most-generous assumptions, income from seabed mining royalty sharing would fall far short of what countries would otherwise make in the absence of seabed mining.

How these dynamics will play out geopolitically and how they will affect the future of seabed mining are very much open questions.

Fabian Villalobos

To address the potential geopolitical impacts of seabed mining, our team conducted a workshop utilizing RAND and external expertise in mineral supply chains, naval and coast guard operations, international relations, and other topics

After we discussed the possible implications across the diplomacy, international, military, and economic, or DIME, framework, our participants identified several top priorities for policymakers, including, one, how to incentivize nodule processing outside of China and preferably in the United States; two, the potential for nation-states to use military force and gray-zone tactics to protect legal or illegal seabed mining activity; three, how international regulations and penalties for violations will be enforced, especially outside ISA jurisdiction; and, four, the uncertainties and risks of the impacts to seabed ecology and ocean life, to industry safety, and to marine industries like fisheries or tourism.

Given these concerns and more, we highlight the importance that the role bilateral and multilateral relationships and agreements will play in setting rules, regulations, and enforcement of seabed mining operations, especially absent guidance from the International Seabed Authority and any formal enforcement mechanisms.

Tom LaTourrette

If the U.S. government does not more-actively incorporate seabed mining into its planning, industry might forego its concerns about working with China and take its processing business there. If that happens, the opportunity presented by seabed mining to diversify critical mineral supply chains might be lost as China dominates yet another dimension of mineral supply.

There are some important unanswered questions about the implications of a seabed mining industry. Will it have an economic or environmental advantage over expanded terrestrial mining? How can we manage the negative impacts on developing countries dependent on terrestrial mining revenues? And how will nations respond to the variety of geopolitical consequences a seabed mining industry might bring with it?

As we confront the pressing issues of fossil fuel impacts and consider new methods for sourcing renewable energy, we need to consider the potential effects seabed mining might have on the safety and security of the United States and its allies.