Way out of the West’s critical minerals dilemma

share_windows This article appeared in the East Asia Forum Quarterly, vol. 18, no. 1, January - March 2026.

Since 2022, the United States and the EU have shifted rapidly towards a more interventionist industrial policy aimed at building ‘trusted’ critical mineral supply chains free from Chinese inputs. 

The logic of this strategy is understandable. China has demonstrated its capacity to exploit supply chain chokepoints and Western defence planners are right to worry about concentrated sources supply for advanced weapons systems. 

Yet this Western response exposes a deeper problem. Despite differing policy instruments, Washington and Brussels have pursued two intertwined objectives—national security and competitive positioning vis-a-vis China’s state-led development—risking the subordination of critical minerals that are crucial to managing the challenge of climate change to what amounts to a war-oriented logic.

Policymakers in both the United States and the EU have promoted strategies such as ‘strategic autonomy’, ‘friend-shoring’ and ‘secure supply’ for critical minerals and the industrial capabilities that convert them into batteries, magnets and advanced weapons components. Yet this turn towards state capitalism, with governments acting as direct economic actors, applies the logic of military supply chains to what a climate challenge that can only be met by the mobilisation on market forces across the global economy.

Minerals are classified as critical not only because of their functional importance, but because of their supply chain vulnerability. A mineral may be economically vital yet not deemed to be critical if its supply is diversified across markets and resilient. This differs from strategic minerals, which are defined by their specific utility in defence, aerospace or critical infrastructure and by the absence of viable substitutes. The same minerals, used for both security-sensitive/defence and green technologies, are classified differently across jurisdictions to reflect national security priorities.

China’s 2016–2020 National Plan for Mineral Resources focuses on the strategic aspect of the minerals, emphasising their specific utilities for national interests. The United States classifies copper and nickel as both critical and strategic, while the EU and Australia treat them as strategic but not critical.

The concept of critical or strategic minerals has distinct military origins, which works well for security-sensitive and defence sectors. However, this framing constrains their deployment in the energy transition, where the required scale and speed are daunting and supply chains depend on cost-effective solutions. Minerals that dominate public discourse—lithium, cobalt, rare earth minerals, graphite, nickel and increasingly copper—are essential to global energy transition. 

Defence-related applications typically account for only a very small fraction of demand for critical minerals—well under one per cent of global volume for bulk commodities—while the overwhelming demand is driven by green energy and industrial uses essential to decarbonisation.

This mismatch between where demand actually lies and how policy is being designed creates growing tension in current critical-minerals strategies. Western industrial policy on critical minerals risks amplifying climate challenges by adopting protectionist measures that promote decoupling and restrict green trade in products, services and carbon credits. 

US and EU subsidies, procurement preferences and licensing reforms cannot rebuild an entire industrial ecosystem by compressing decades of industrial accumulation into a few years as global demand for clean energy technologies accelerates. Non-tariff barriers may be defensible for military applications, but they sit uneasily with the requirements of deploying energy transition technologies where affordability and standardisation drive adoption.

Treating all minerals equally and adopting security-centred supply chain strategies raises costs—particularly for developing economies—slowing the energy transition. The challenge of reconstructing a parallel, China-free supply chain is compounded by the structure of China’s huge share in these markets. 

China’s market dominance rests on three mutually reinforcing capabilities—access to resources, deep processing know-how and a largescale industrial ecosystem built on accumulated intellectual property and engineering efficiency. The narratives that lax environmental regulation or cheap labour drive China’s dominance are growing outdated since China launched its ‘APEC Blue’ environmental reforms in 2014.

A single policy framework cannot optimise outcomes for both security-sensitive and energy transition minerals, despite their material overlap. The solution lies in segmenting supply tracks for security-sensitive/defence and energy-transition technologies.

In a conflict scenario, rapid increases in demand for processed materials may exceed what commercial just-in-time supply chains can deliver. Ring-fencing security-critical minerals through strict chain-of-custody rules, strategic stockpiles and government-backed offtake provides essential resilience under such circumstances.

But meeting the far larger demand associated with the energy transition requires speed, scale and continued engagement with global supply chains—including China’s. Segmentation allows governments to buy time for technological catch-up in defence-related supply chains without stalling the broader economy or delaying decarbonisation.

To operationalise this approach, the mineral landscape needs to be divided into two tracks. 

The first is a security track, in which minerals meet military specifications or serve as universal enablers for strategic technologies such as semiconductors and artificial intelligence, including dual-use applications. States must be willing to pay a ‘security tax’ to ensure supply chains prioritise control and insulation. The second is a green track, where demand is driven primarily by the energy transition. Policy should focus on liquidity and cost efficiency, with supply chains dependent on standards, scale and affordability.

China already differentiates between security-sensitive and civilian applications, restricting defence-grade materials and advanced processing technologies while exporting and investing in clean energy infrastructure and products. Beijing retains strong incentives to engage in the green track despite geopolitical tensions, both to leverage its cost and scale advantages and to sustain access to global markets.

A dual-track approach allows countries in the Asia Pacific to participate in global green supply chains—including those involving Chinese capital—while developing smaller, secure supply lines for defence and critical infrastructure. This would accelerate decarbonisation, preserve strategic safeguards and avoids the ‘all-or-nothing’ logic that currently stifles investment.

The Asia Pacific region also requires institutional mechanisms that distinguish between stockpiling approaches for the two tracks. For security-track minerals, strategic stockpiles—including those in Australia—need to be modernised to hold processed forms of minerals, providing buffers against surge demand in conflict scenarios. 

For green-track minerals, the region can draw on the models of the Japan Organization for Metals and Energy Security and Seoul’s Korea Mine Rehabilitation and Mineral Resources Corporation, which maintain stockpiles that can be released during price spikes to stabilise markets and de-risk commercial investment.

Escaping the security trap requires a conceptual shift: treating China’s supply-chain dominance as a climate asset rather than merely a security risk, moving from blanket de-risking to targeted protection and removing zero-sum competition. Integrating China’s industrial capacity can lower the global cost of emissions reduction and accelerate deployment. 

The choice is not between security and climate, but whether the West can pursue both without sacrificing one for the other.