Financial Benefit-Sharing Issues for Critical Minerals

The report examines how developing countries can capture a fair share of financial benefits from critical minerals, highlighting risks such as price volatility, oversupply, and opaque markets. It suggests opportunities for these nations to increase state participation, develop downstream processing capabilities, and reform fiscal incentives to maximize economic gains from the energy transition.

• Mineral-rich countries could see significant additional annual revenues between USD 98 billion and USD 259 billion by 2040, though these gains are unevenly distributed. High-income and upper-middle-income countries like Australia, Chile, Peru, and South Africa are expected to capture most of this, while low-income countries such as the Democratic Republic of Congo, Guinea, Madagascar, and Zambia are projected to receive only 8% of total additional gross revenues.
• There is a risk that producing countries may miss a limited window of opportunity for revenue gains if supply eventually catches up with or exceeds demand, leading to downward price pressure. This risk is compounded by the potential for mineral substitutes (e.g., sodium-ion or zinc-ion for lithium) and the possibility of deep seabed mining reducing the need for land-based operations.
• Price transparency is a major hurdle for governments attempting to project revenues, particularly for minerals like cobalt and lithium. Cobalt prices are opaque because most countries export cobalt hydroxide and other intermediate products that lack quoted prices, while lithium production is concentrated among a small group of companies.
• Alternative financing methods, such as metals streaming and royalty financing, present new risks to government revenue collection. These include a lack of legislative guidance on whether transactions should be treated as debt for tax purposes, risks of transfer pricing abuse, and the use of low-tax jurisdictions to divert profits through base erosion and profit shifting (BEPS).
• The strategic importance of critical minerals may shift bargaining power toward producing countries, allowing for greater state involvement. Examples include Mexico nationalizing lithium resources and the use of state-owned companies like Codelco in Chile and LitioMX in Mexico, though the report warns that poor implementation can lead to corruption and operational inefficiency.
• Developing economies can increase financial benefits by enhancing downstream processing capacity to lock in value domestically. Tools to achieve this include export restrictions (as used in Indonesia), investment allowances (as used in Namibia), and variable royalty rates linked to beneficiation (as used in Mongolia).
• The introduction of the Global Minimum Tax (GloBe) from 2024 may render traditional profit-based tax incentives, such as tax holidays, redundant, as multinational companies with annual turnovers of EUR 750 million or more must pay an effective tax rate of at least 15% in every jurisdiction.
• There is an opportunity to develop new revenue streams by specifically addressing co-products and by-products in fiscal frameworks. For instance, the DRC taxes 'strategic minerals' like cobalt and coltan at a higher rate of 10% compared to 3.5% for other minerals.
• Carbon pricing mechanisms, such as the EU's Carbon Border Adjustment Mechanism (CBAM), may impose additional costs on mineral-rich countries that export processed minerals to the EU, potentially making them worse off unless they implement their own carbon pricing.

APA

Omonbude, E., & Mataba, K. (2024). Financial Benefit-Sharing Issues for Critical Minerals. International Institute for Sustainable Development. https://www.iisd.org/system/files/2024-03/financial-benefit-sharing-issues-critical-minerals.pdf

Chicago

Omonbude, Ekpen, and Kudzai Mataba. Financial Benefit-Sharing Issues for Critical Minerals. International Institute for Sustainable Development, 2024. https://www.iisd.org/system/files/2024-03/financial-benefit-sharing-issues-critical-minerals.pdf.

Wikipedia

{{cite report |last1=Omonbude |first1=Ekpen |last2=Mataba |first2=Kudzai |title=Financial Benefit-Sharing Issues for Critical Minerals |publisher=International Institute for Sustainable Development |date=March 2024 |url=https://www.iisd.org/system/files/2024-03/financial-benefit-sharing-issues-critical-minerals.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{omonbude2024financial, author = {Omonbude, Ekpen and Mataba, Kudzai}, title = {{Financial Benefit-Sharing Issues for Critical Minerals}}, institution = {International Institute for Sustainable Development}, year = {2024}, month = mar, url = {https://www.iisd.org/system/files/2024-03/financial-benefit-sharing-issues-critical-minerals.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }