Escaping the Dirty Side of Clean Energy?

Sept. 6, 2023

In an era where the fate of nations intertwines with the health of our planet, Western governments and enterprises stand at a crossroads that demands more than just the pursuit of critical minerals. Beyond the race to secure these essential resources lies a profound truth: The battle against climate change not only hinges on obtaining valuable minerals, but also on upholding the enduring sustainability embedded within democratic principles.

The green energy revolution is setting off a scramble for critical minerals. John Podesta, Senior Advisor to President Joe Biden, recently warned that the U.S. was in a vulnerable position vis-à-vis China’s “lock” on critical rare earth minerals like lithium, niobium, and cobalt. This new “Great Game” for control of precious metals not only carries geoeconomic and geopolitical complications; it poses a serious dilemma for democracy across the globe. In the race for critical minerals, states and mining companies use various coercive and non-coercive tactics to secure and sustain mineral concessions. These often lead to negative consequences such as clientelism, corruption, violence, inequality, and limited economic development. Commonly referred to as the “resource curse,” these consequences undermine stability and democracy.

Resource-rich countries located in places like Latin America, Africa, and Asia face the greatest challenges when it comes to balancing human rights, governance, and corporate demands for access to natural resources that will generate quick profits. The link between climate change and democratic erosion is multifaceted. Analysts have documented that climate change threatens democratic institutions—from disasters and wars to the false promises of authoritarianism. This is a problem because countering climate change necessitates broad social participation and innovative solutions, which are more commonly found in democratic systems. So, climate change not only threatens democracy, but the erosion of democracy could also unravel efforts to mitigate or adapt to the climate crisis. 

Sustainable and equitable outcomes and stability in regions affected by the new Great Game demand that we pay closer attention to the ways in which climate change and responses to it are reshaping ideas and decisions about rights, responsibilities, and recompense in democracies.

The Clean Energy Scramble

The United States’s 2022 Inflation Reduction Act (IRA) and China’s National Plan on Implementation of the 2030 Agenda for Sustainable Development are just two examples of ways in which policy responses to climate change have accelerated the demand for clean energy minerals. A 2017 World Bank report estimated that the materials required for the low-carbon future imagined by green growth include those long in high demand, such as copper and nickel and lithium and cobalt that are key for electric vehicle batteries. The World Economic Forum reports that a typical electric car requires six times the mineral inputs of a conventional car and an onshore wind plant requires nine times the minerals of a gas-fired plant. The World Bank forecasts that demand could increase nearly 500 percent for some minerals. 

But there are contrasting approaches to resource extraction that are already having an effect on the tricky geopolitics of making the leap to renewables. Western multinational firms have dominated the mining sector (partly as a legacy of colonialism) and owned the largest concessions—or rights to extract, explore, and exploit the mineral resources in a territory. Since the 1990s, with financing and political support of the Chinese government, Chinese mining companies have expanded their concessions across the Global South, including in Indonesia for nickel and in Argentina for lithium, among others. The U.S. Geological Survey estimates that China has accounted for 40 to 50 percent of the global demand for minerals over the last three decades. The Chinese government has also emerged as the leader in the world’s renewable energy sector, spending $546 billion in 2022, nearly four times the amount of U.S. investments, which totaled $141 billion. The West has responded by increasing government support for renewable energy initiatives, prioritizing electric vehicle and renewable technology investment. Western mining companies, in turn, have boosted their investments, exploring and licensing new concessions. 

Most of this expansion is in areas where resource curse dynamics loom large. A 2018 International Institute for Sustainable Development report by Claire Church and Alec Crawford show that significant reserves of the 23 key minerals critical for a transition to a low-carbon economy are found in countries characterized by fragility and corruption and rife with non-democratic institutions. Standout regions include Africa, Latin America, and the Middle East. Their 2019 interactive map illustrates that the vast majority of these minerals are concentrated in countries grappling with moderate to severe issues of fragility and corruption. How can we garner clean energy minerals while encouraging—or at least not undermining—democratic processes? 

Strategies for Mitigating Resource Curse Dynamics: The Importance of a Public Orientation

There is evidence that resource curse dynamics are less prominent in countries with strong democratic institutions. But even in countries without such institutions, there are situations in which resources become a developmental blessing instead of a curse. Marcus Kurtz and Sarah Brooks have argued that human capital and public goods are key to this outcome. When human capital is more widespread, natural resource wealth is more likely to work in tandem with the broader economy, spread wealth, and improve the quantity and quality of public goods. Human capital allows resource wealth to contribute to productive social outcomes: an educated and capable citizenry that can use wealth windfalls for development and growth.

Like many others, Kurtz and Brooks assume that investments in human capital and public goods are the product of government action. But many researchers have demonstrated that companies, civil society organizations, and a wide range of other entities can also push toward actions that generate human capital and public goods. Margaret Keck and Katherine Sikkink showed how transnational activists could nudge governments toward more public respecting action. Virginia Haufler’s pioneering work on companies examined how they increasingly played a public role. And Amanda Murdie argued that whether NGOs helped or harmed depended on their ability to support public goods.

Policymakers have also encouraged public-oriented action by all those involved. The late John Ruggie and Kofi Annan’s endeavors at the U.N. to create the Global Compact and then later to generate the Guiding Principles on Business and Human Rights were designed to enhance the prospect that companies would contribute to global public goods. As early as 2004, Ruggie argued that we were beginning to see evidence that actions by companies and NGOs had begun to reconstitute a global public domain.

Some of this work is specifically about resource extraction. The Voluntary Principles on Security and Human Rights endeavors to ensure that companies in the extractive sector can do their work in ways that support respect for human rights. And the Extractive Industries Transparency Initiative (EITI) espouses a global standard in oil and gas and mineral extraction to promote good governance around these activities. Cullen Hendrix and Marcus Nolan have argued that we can confront the curse through these transnational efforts to encourage greater transparency and improved management around resource wealth.  

This body of research and political action suggests the importance of a democratic public orientation to manage the pernicious impact of resource extraction. But it also assumes that the public is a demarcated group—either national or global—and that democracy is a set of institutions. A pragmatic view of publics sees them instead as those who recognize their interdependence and seek to manage what they share.

Democracy is not only a set of institutions but also practices that focus on common concerns. Interactions animated by a recognition of interdependency can open political possibilities, leading people to see their interests in different ways and generating innovation. Thus actions that encourage people to be aware of their interconnection—whether by companies, governments, civil society groups, or others—can support democracy by helping generate pragmatic publics. 

Mining and the Development of Pragmatic Publics in Arequipa, Peru

In recent research designed to understand whether and how mining companies could help mitigate the resource curse, we traced one pathway toward pragmatic publics in Arequipa, Peru. Our focus was on the mine’s role in these interactions, but also on how the quality of interactions generated publics that managed mining in pursuit of common concerns. 

The Cerro Verde mine, whose major shareholder is Freeport-McMoRan, is just outside of Arequipa, Peru’s second largest city. At night you can see its lights from the city center. Peru has an abundance of resources, has seen an explosion in extractive activities since the 1990s, and has exhibited the inequality, clientelism, and corruption that resource extraction often exacerbates.

In 2003, the mine announced a major expansion that initially looked like it could contribute to local conflict and democratic erosion. The mine promised jobs and investment from the expansion, but people worried about pollution and water stress on a system that was already broken. Protestors mobilized. Crowds blocked roads, stopped operations, and violence ensued. One mining official told us, “I remember watching how crowds of people climbed the mountains into the mine and thinking: Oh my God, what are they doing?”

But months later the dynamic had shifted. Protests quieted, the expansion moved forward, and the mine has not had a single stoppage due to violence since. Cerro Verde not only completed this expansion but also another in 2011. Partnerships with the mine are widely credited with investments that have been used to extend the reach of potable water, expand sewage service, and clean the Chili River that runs through the city. When we visited the area in 2018, the mine was funding human rights awareness training for the Arequipa police in conjunction with the Voluntary Principles on Security and Human Rights. So what changed? How did the extractive investments from Cerro Verde escape contributing to resource curse dynamics despite the country’s rampant reputation for clientelism and corruption?

The shift began when the mine hired consultants to help it manage resistance to its expansion plans. The consultants arrived to find the mine’s public relations (PR) office busily advertising the benefits the expansion would bring to the city—more jobs, more investment, increased wealth—and even passing out gifts to targeted communities. We label this very common practice as transactional. It seeks, in a sense, to buy a social license to operate. 

That, according to the consultant, was exactly the wrong way to proceed. They advised that the PR office should stop raising expectations around investment. Instead, they recommended that leaders at the mine listen and consider what was at stake for the community. Who were the protesters? What was their life like? What did they need? How did they fit into the larger picture of Arequipa? How did they see the mine fitting into that image? 

The consultant’s background in conflict management and human development led them to recognize that while the protests mobilized around the mine’s pollution and water consumption, many of the protestors were occupants of shantytowns on the outskirts of the city. Long ignored by the wealthy and white population of Arequipa, who were hostile to what they saw as an Indigenous invasion, those living in shantytowns were potentially as concerned with water and services as stopping the mine altogether. Cerro Verde began a series of open meetings with protestors and community members to understand their concerns. Instead of assuming that people wanted payoffs or an end to the expansion, the company began to listen to those who were impacted.

The discussions quickly settled on the importance of potable water. A leading organization for the protests, the Front for Development and Integration of the North Cone (FREDICON), had long advocated for the expansion of potable water to unserved communities. The company’s newfound human development lens led it to support bringing in subject-matter experts—from international organizations, universities, and other groups—to cultivate knowledge and a common discourse with which to discuss human development and the importance of water to it in Arequipa. In practice, this meant that company leadership sat side by side with government officials, civil society members, and representatives from other economic sectors to consider how human development might unfold in Arequipa. 

The human development angle also pointed to measurable indicators from the Human Development Index, through which the mine could track how its investments were affecting Arequipa. Cerro Verde offered to pay for a baseline study to both begin charting its impact efforts and also to help identify other impediments to human development in the area.

The journey was far from smooth. Many members of the community remained suspicious of the mine. Company representatives were advised to acknowledge the validity of these concerns and recognize that political leaders and civil society organizations needed to take a firm stance toward the mine to maintain credibility among their supporters. Instead of responding with defensiveness, “you just accept them,” one mining official told us. The process went through six months of what one interviewee called “rituals,” whereby local leaders demonstrated that they had not been co-opted by the mine. Slowly, in discussions with experts, the mine joined with local political leaders, other economic sectors, and community members to form a vision of Arequipa. One mining official reflected, “We began to ask ourselves what Arequipa would look like 30 years from now, after the mine had closed.” 

The mine’s approach to corporate social responsibility (CSR) can be best described as transformational. It put stock in new connections consistent with an open network that values a “brokerage” style of social capital. The engagement among all affected by the mine helped focus attention to what they shared—their common concerns—rather than what Cerro Verde should pay out to individuals or specific localities. As one interviewee put it, “If you generate a language of development, you set the stage for political leaders to speak it.” 

This approach initiated a process that led people in Arequipa—the protesters and politicians, but also other economic actors like farmers—to see themselves as interconnected. In pragmatic terms, they began to form publics. Their interactions shifted the way actors saw themselves and their relationships. The mine’s focus on the protestors’ concerns elevated the political stature of those occupying the shantytowns in Arequipa’s outskirts. When mining representatives interacted with FREDICON and found common ground, it gave that group more leverage with local politicians. FREDICON came to see Cerro Verde as a partner in elevating the concerns of squatter communities for which they had long fought. Local politicians came to see these communities as constituencies. The human development conversations included local farmers (an important part of Arequipa’s economy) as well as mining. Political leaders used the human development language to move from using mining revenue to build sumptuary projects like dinosaur parks or sports stadiums to focusing on larger efforts to expand water and sewage services. This not only spoke to a broader constituency, but it was also more effective in discussions with regional and national leaders. These leaders were happy to see the mine expansion go forward. 

The changes generated by Cerro Verde’s transformational CSR strategy also shifted power in ways that benefitted the mine. The power shift, though, was not zero sum. It also gave additional influence to a social movement fighting to empower underserved communities. Furthermore, because local politicians came to see their role as facilitating development outcomes, they did not see themselves as losing power. Engagement with experts enhanced the capacity of localities and the regional government in Arequipa to bargain with the national government, but the national government in Lima was happy to have the mine proceed and did not see themselves as losing either. Like Anne-Marie Slaughter’s conception of “power with,” the shift led to an ability of many to work in tandem toward improved human development outcomes. Cerro Verde’s practices were instrumental in empowering Arequipa to focus on common concerns rather than narrower interests. This, in turn, contributed to governmental responses more attentive to these publics. And it mediated rather than encouraged violent protests. 

It is important to resist overplaying the beneficence of the Cerro Verde mine. Relations between Arequipa and Cerro Verde remain contested. Civil society organizations continue to voice concerns about the mine’s impact on water, health issues, and the livelihoods of small-scale farmers. Criticism has also been directed at the mine for its perceived lack of responsiveness to requests for employment opportunities and other economic benefits, and the mine has lost legal battles with the federal government over unpaid taxes. 

Nonetheless, the company's CSR strategy generated a politics around mining in Arequipa that has both enabled the mine to sustain its operations while also fostering attention to common concerns. Key to the mitigation of the resource curse has been the mine’s actions to help reorient relationships between the company, the local community, and the government around attention to common concerns.

Mining and Resource Curse Dynamics in Cajamarca, Peru

To drive home the importance of Cerro Verde’s transformational CSR strategy, our paper compares it to the more transactional approach of the Yanacocha mine just 2,000 kilometers north of Cerro Verde in Cajamarca, Peru. John Ruggie used Yanacocha as the poster child of all that was wrong with business as usual in the introduction to his 2014 book

Like Cerro Verde, Yanacocha also announced an expansion—into Cerro Quilish—in the early 2000s. The expansion plans came on the heels of a mercury spill in 2000, which Larry Kurlander, Senior Vice President and Chief Administrative Officer of Yanacocha’s parent company, Newmont Mining, had labeled a wakeup call on the importance of gaining a “social license” to operate. But the mine went about obtaining this social license much as Cerro Verde had initially, adopting a transactional strategy.

The transactional approach to CSR operates through more of a closed network logic, valuing what Ronald Stuart Burt calls “closure” social capital. It puts stock in deepening existing relationships against an outside or “other” perspective. It is more likely to see negotiations as zero sum and circle the wagons in response to criticism. It does not have mechanisms for generating new understandings.

Yanacocha promoted job opportunities and investment benefits, attempting to reward supporters in Cajamarca. They also funded an NGO, Asociación Los Andes de Cajamarca (ALAC), to invest in private sector development initiatives. The leadership at the mine assumed that communities wanted payoffs from the expansion. When problems surfaced, they focused on either paying off those complaining or denying their responsibility. 

Protesters and civil society organizations in Cajamarca had few reasons to engage with this approach. GRUFIDES, a collective oriented toward defending the environment and human rights in mining areas, led the charge to halt the mine’s Cerro Quilish expansion. There was little discussion between the mine and the protestors, and the expansion was halted. 

Yanacocha continued to operate and to promise specific investments in exchange for small additional expansions. Despite building schools and micro-reservoirs in targeted communities and investing as much in the Cajamarca area as Cerro Verde had in Arequipa, the approach did not yield the support Yanacocha desired. As one interviewee put it, “When you build a school in a community, you have one community that is grateful and several others that say, ‘Where’s my school?’”

In response to larger and more violent protests over a new “Conga” project between 2011 and 2016, the mine established CSR teams to regularly visit localities. While a step toward social engagement, these did not provide venues for more general community discussions on public matters. Instead, people in the communities saw the teams as conduits to resources and jobs. In one meeting we attended, the representative gave a presentation on skin cancer risks and distributed Yanacocha-branded hats to schoolchildren and their parents. Parents lined up afterward to ask about job opportunities. 

Yanacocha’s approach has not mediated the resource curse. Instead, many argue it has fed into the clientelist governance practices common in Peru. Despite its financial investments in surrounding areas, relations have not improved. Protests shut down the Cerro Quilish expansion in 2005 and the new Conga project in 2016. The slogan “Agua sí, Conga no,” is peppered on hillsides and buildings, reflecting a hyper-polarized environment where stakeholders campaign either for or against mining rather than engaging in discussions about Cajamarca’s future.

While the mine did little to foster investments in public matters, one community near the mine, Porcón, has. The impetus came from a mayor whose strong leadership and commitment to transparency and public purpose facilitated community engagement around mining revenue and investments from ALAC. The result has been government investment in the kind of public works and human capital Kurtz and Brooks write about—but at the local level. Though on a much smaller scale than in Arequipa, Porcón boasts better development outcomes and more productive relations with Yanacocha than other communities in Cajamarca. 

Lessons for the “Great Game”

Policymakers concerned about climate change should look beyond geopolitical competition and consider the processes involved in obtaining access to critical minerals. Viewing critical minerals only through the lens of a great game could incentivize rapid growth that ignores the processes through which minerals are obtained. We can see this in recent legislation on both sides of the aisle as U.S. Senator Cortez Masto (D-NV) urges a turn away from environmental concerns and the Critical Mineral Independence Act of 2023 introduced by Mitt Romney (R-UT), Dan Sullivan (R-AK), and Gary Peters (D-MI) pays little heed to how the U.S. should gain access to these minerals. 

There are reasons to believe that U.S. and other Western companies may be more likely to pursue transformational strategies overall. Academic and policy analyses commonly argue that actors situated in Western democracies are more likely to pursue open strategies than actors associated with China, given their distinct state-business relations. Western firms, as part of the Organization for Economic Co-operation and Development (OECD), have harmonized around norms that reflect a more open network approach. In mining, this has led to a particular orientation toward local communities, including social acceptability mechanisms, environmental impact assessment, and financial remediation. Even the Newmont example above demonstrates awareness of the need for a social license to operate even as the steps it took fell short.

In contrast, Chinese firms have developed a pattern of state-business relations centered on the competing dynamics of Chinese state-owned enterprises and private enterprises, central and provincial governments, and Chinese ministries. In this more extreme closed network logic, Chinese mining firms adhere less to the principles espoused by the OECD and local concerns. Instead, they develop relationships with host country elites to forward their business interests in ways that often undermine democratic practices.  

The key to productive mining, though, is less whether it is associated with U.S. or Chinese investment and more whether it enables the formation of publics that both reflect, and are more supportive of, democratic practices. The Cerro Verde story offers one pathway through which a company’s transformational strategy can kick start such a process in partnership with community groups and receptive politicians. Though there are likely many others, the outsized role that mining companies play in resource-dependent economies—as investors as well as mechanisms for connection with broader global processes—makes this pathway particularly important. The story of mining in Arequipa demonstrates how engagement among those impacted can generate important shifts that enable publics to form and enact democratic practices. This can help avoid resource curse dynamics and also enhance the sustainability of mining. Despite increased political and economic turmoil in Peru affecting mining activities in various regions, Cerro Verde has managed to continue its operations. 

Research demonstrated that it is not just the resources, but how they feed into the political context that has generated the resource curse. Transactional strategies—whether employed by governments or companies—threaten to generate resource curse risks in the race for clean energy minerals, just as they often did in the race for oil. If Western governments and companies want to avoid these risks, they should recognize that combating climate change is not only about winning the race to obtain critical minerals: it is also about preserving the long-term sustainability promised by democratic practices.