China — DRC Cobalt Trade Externalities: Introduction
This series of articles discusses a data — driven methodology for analyzing the potential trans-boundary externalities of public policies that the People’s Republic of China implements to aid the development of its electric vehicle industry.
China is a dominant player in the rapidly expanding electric vehicle industry, with recognized strategic interests in leading the global climate change initiative. In January 2009, the Chinese Government released their Thousands of Vehicles, Tens of Cities program, a subsection of their 12th 5-year plan. This program set regional targets for EV adoption over 5 years, allowing each major city considerable freedom to determine the optimal strategy to meet said targets. It also launched a national subsidy for electric vehicles, with gradations based on the energy capacity of the battery used (¥3000 per kWh with a cap of approximately ¥50,000 for plug-in hybrid electric vehicles (PHEVs) and ¥60,000 for battery electric vehicles (BEVs)). In 2016, it surpassed the United States in the number of electric vehicles in operation, hosting 25% of all passenger vehicle manufacturing and 43% of electric vehicle manufacturing.
Major Chinese EV manufacturers such as BYD Auto, Kandi Technologies and BAIC Motor, as well as their Western competitors such as Volkswagen and Tesla, rely heavily on lithium-ion batteries to power their electric vehicles (EV). Lithium-ion batteries function by “shuttling lithium ions back and forth between the electrodes,” and require cathodes with specifications that efficiently facilitate this procedure. Transition metal oxides are the preferred cathode materials for optimizing battery energy density and cobalt is critical to lithium — ion battery chemistry as it remains remarkably immobile during the transfer of lithium ions and generates the highest specific energy. Different types of lithium-ion batteries comprise varying proportions of cobalt, with Lithium Cobalt Oxide (LCO) batteries on the high end at 55% and Lithium Nickel Cobalt Aluminum Oxide (LNCA) batteries on the low end at 11%. On average, electric vehicles are said to contain between 10kg and 22.5kg of cobalt.
China currently leads the global race to secure control over the supply chains of strategically significant components. It has secured 67.6% of the market for cathode materials and gained a dominant position in the global cobalt supply chain. In 2017, China refined 57% of cobalt material and produced 80% of cobalt salt necessary for battery manufacturing. Despite being the global leader in refined cobalt output, China does not produce significant amounts of raw cobalt and imports 90% of it from the DRC.
We extracted annual data concerning Chinese imports of cobalt metal and cobalt ore and concentrate from the Democratic Republic of Congo, from data provided by the Observatory of Economic Complexity of the MIT Media Lab. The graphs below summarize the results.
Supply of cobalt is rendered inelastic due to economic, political and geographic restrictions and presents perhaps the most critical bottleneck in the EV supply chain. It is found in low concentrations and 98% of it is produced as a byproduct of copper and nickel. Furthermore, 60% of cobalt supplies are sourced in the Democratic Republic of Congo (DRC), which presents significant risk of supply chain disruption due to geopolitical volatility, infrastructure deficit.
Cobalt production in the Democratic Republic of Congo is concentrated in territories that intersect with the Central African Copper Belt. Map 1 illustrates the concentration of copper and cobalt producing assets in the south of the Katanga region. Map 2 illustrates the proximity of Lubumbashi, the largest city in the region and the central hub of the mining industry, to large industrial copper-cobalt mining and processing assets.
Although cobalt exports are significant source of foreign capital for the Democratic Republic of Congo, cobalt mining has well-documented links to a wide variety of classifications of environmental damage, including “air pollution, soil contamination, water pollution and siltation, geotechnical issues, and land degradation”. Discussions concerning negative health effects of cobalt mining in the DRC dominate literature concerning environmental impacts. Hazardous contamination of major waterways such as the Dikanga river has elevated health risks for individuals who rely on them for “fishing, irrigating farmland, washing and drinking”. Air pollution is another primary source of exposure to hazardous mining waste, either through inhalation of fumes and dust directly from nearby mines or by proximity to roads that serve as transport and logistic infrastructure for industrial mines. Residents of Lubumbashi for instance, are reported to have excessive exposure to airborne heavy metal and radioactive particulate matter. Consistent exposure to dust containing cobalt compounds has been linked to chronic bronchitis, hard metal lung disease, asthma, impaired lung function and pneumonia.
Separate studies have found that elevated levels of urinary concentrations of cobalt are highly correlated with the incidence of chronic bronchitis. Surveys carried out on residents of Lubumbashi discovered that large portions of the population have average urinary concentrations of cobalt that are between 5 and 15 times higher than those of the control group. 53% of subjects, and 87% of children, living near mining and refining facilities exhibit urinary concentrations of cobalt that exceed normal levels by a factor of 43.
Our aim is to contribute to the evolving discourse concerning environmental externalities of public policies aimed at pollution and greenhouse gas abatement, that do not account for trans-boundary environmental impacts. As such, our objective is to quantify potential externalities of public policies that China implements to aid the development of its electric vehicle industry, by estimating the financial cost of its impact on public health in Lubumbashi, Katanga Province, DRC.
