Investors should think twice before backing the deep sea mining (DSM) industry due to high financial risks related to technological challenges and poor market opportunities, a newly released report has found.
The US-based Ocean Foundation warned against the dangers of engaging in the “volatile minerals market”, highlighting that deep sea mining is set to lead to irreparable damage to marine biodiversity.
As business models count on an expected growth in demand for electric vehicle (EV) minerals, potential miners are actively pursuing capital. However, a return on investment remains uncertain due to several factors ranging from technical difficulties in extraction at unprecedented depths below the surface to incomplete regulations at the national and international levels, the report warned.
“Trying to mine minerals from the ocean floor is an unproven industrial endeavour fraught with technical, financial, and regulatory uncertainty,” said Bobbi-Jo Dobush of the Ocean Foundation, one of the authors of the report. “More so, the industry faces strong Indigenous opposition and human rights concerns.”
Several global organisations have criticised the controversial activity. In a 2022 report, the UN Environment Programme Finance Initiative (UNEP FI) claimed that DSM isn’t aligned with sustainable finance principles due to the significant reputational, regulatory, and operational risks associated with plans to mine deep seabed minerals.
VOLATILE MINERAL MARKET
In its report, the Ocean Foundation referred to a separate study commissioned by the International Seabed Authority (ISA), underscoring the high uncertainty around prices for commercial metals. According to ISA, metals prices have not risen with EV production: between 2016 and 2023, EV production increased by 2,000%, while cobalt prices declined by 10%.
“The high cost of DSM mining operations and production may make the industry uncompetitive on price, directly threatening profitability,” the report said.
Also, innovations in energy transition and the growth of the circular economy will likely make DSM unnecessary.
“Currently, just 8.6% of the world’s materials are part of a circular economy, but by 2050, researchers predict 45-52% of cobalt, 22-27% of lithium, and 40-46% of nickel could be supplied from recycled materials.”
“New chemistries for electric vehicle batteries and reducing dependence on lithium-ion batteries for non-moveable uses could reduce the demand for cobalt, nickel, and manganese by 40-50% between 2022 and 2050.”
According to Maddie Warner – one of the report’s lead authors – innovations in battery power will soon provoke a drop in demand for seabed minerals.
Notably, researchers at the Massachusetts Institute of Technology (MIT) presented in January a battery cathode based on organic materials designed to reduce the EV industry’s reliance on cobalt.
ENVIRONMENTAL AND HUMAN COSTS
“While damage to the ocean and its ecosystems is guaranteed, who will pay that damage and how much it will cost is undefined,” the study said.
Researchers argued that investors could be required to take accountability for the destruction of ocean biodiversity, being asked for monetary compensation by injured third parties – such as fishers, Indigenous peoples, and local communities – or under international frameworks that are being developed.
“The new treaty on Biodiversity Beyond National Jurisdiction is beginning to define a regulatory regime around marine genetic resources, and there are legal cases pending that will define how those who have made the climate worse must remunerate the most affected.”
Indigenous peoples worldwide are speaking out against deep sea mining in a bid to protect the marine biodiversity and their cultural heritage.
“With 80% of the seabed unmapped, DSM is a threat to this relationship as well as a wide variety of other underwater cultural heritage including human remains and sunken vessels,” said the report.
Due to the unknown risks related to DSM, last year a group of 37 financial institutions called on governments to pause deep seabed mining, while 39 companies pledged not to invest in DSM – including Google, Samsung, Philips, Patagonia, BMW, Rivian, Volkswagen, and Salesforce.
As well, 24 countries have called for a ban or moratorium on deep sea mining.
The EU Commission expressed concerns about environmental impacts earlier this year after the Norwegian parliament voted for opening up for deep sea mining in the Arctic region, becoming the first country to do so.
By Giada Ferraglioni – giada@carbon-pulse.com
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