Carbon Critical

Jun 26, 2024

“Don’t Buy Greenland, Buy Its Minerals”

In the green resource race, the United States and the EU should look to the big island in the North Atlantic and forge a common approach, providing expertise and facilitating the needed investments.

A graph showing Europe's dependency on Chinese supply of selected critical raw materials
Attribution CC BY

Former US president and real estate mogul Donald Trump sought his biggest purchase of all when he tried to buy Greenland, an autonomous Danish territory in the North Atlantic, in 2019. Trump’s proposition—which he called “essentially a large real estate deal”—was just the latest instance of the United States government considering acquiring Greenland, most recently with a $100 million offer in 1946, which Denmark rejected. In this case, Trump failed to grasp the true art of the deal: It’s not about buying Greenland—the true value for all parties comes from developing what lies beneath.

Underground Riches

With a population of just 57,000 today, Greenland was a Danish colony until it achieved home rule in 1979. The Self-Government Act of 2009 entrusted Greenland with additional domestic responsibilities, whilst Denmark retained control of its foreign affairs, defense, and monetary policy. Since 2010, Greenland’s autonomy has extended to its subsoil resources, including mineral exploration and exploitation activities.

Endowed with deposits of rare earth elements, graphite, and lithium, Greenland has many of the raw inputs needed for electric vehicles, wind turbines, and transmission lines. These final products are necessary for the clean energy transition, but the current extraction and processing of raw materials has been monopolized by states inimical to US interests, like China. 

In 2021, China produced roughly 98 percent of global gallium, 82 percent of global natural graphite, and 60 percent of processed rare earth elements. But it is not just China’s saturation of the global mineral market that jeopardizes security; it is also the degree of US and European Union import reliance that has yielded a system highly vulnerable to supply bottlenecks and geopolitical extortion. China accounts for 72 percent of American import sources for rare earth compounds and 42 percent for graphite. Europe relies on Chinese imports for 100 percent of its heavy rare earth supply. This reliance poses a threat to national security as geopolitical tensions could endanger the US and EU’s ability to manufacture technologies essential to the energy transition.

Countering China’s Mineral Supremacy

Recognition of this security risk has driven G7 allies to insulate supply chains from China. They are pursuing friendshoring—a policy that promotes mineral extraction and processing in states with shared political interests. In 2022, the Biden administration united a coalition of 14 friendly actors through the Minerals Security Partnership with the hopes of securing supply chains for the energy transition. But that has turned out to be easier said than done. 

As Washington and Brussels wrestle with the political challenges of material sourcing, the demand for critical minerals continues to grow. The need for graphite will increase by 25 times due to electric vehicle (EV) manufacturing alone. Enter Greenland. If fully developed, Greenland’s 6 Mt of known graphite resources alone could exceed the projected EV demand for 2040 (3.5 Mt) and counter Chinese mineral supremacy. Supply diversification could be particularly useful for both the US, which imported 100 percent of its natural graphite in 2023 and sourced 42 percent of that from China, and the EU, for whom the comparable figures in 2020 were 98 percent and 47 percent. Western dependency was exploited in 2023 when China imposed graphite export restrictions in retaliation for US limits on the sale of semiconductors.

Yet Greenland has more than graphite. Its most significant deposits are rare earth elements, such as neodymium, which are inputs to technologies ranging from wind turbines to nuclear reactors. Currently, China dominates the supply, with 44Mt of rare earth oxides (REOs) reserves. Estimates suggest that Greenland could possess 42 Mt of REOs. If this potential is realized, Greenland would have the second-largest reserves of rare earth elements, surpassing Vietnam, Brazil, and Russia.

Mining Politics in Greenland

Key political actors in Greenland have indicated support for developing their mining industry. All seven parties in Greenland’s parliament, including the governing Inuit Ataqatigiit (IA) party, recognize the importance of investing in the mining sector to promote future prosperity. Despite stated interest, Prime Minister Múte Bourup Egede’s government issued a ban on uranium exploitation that exceeds 100 ppm in 2021. The ban was instated following local opposition to the Kvanefjeld mine project, which planned to dispose of uranium waste near the town of Narsaq. This ban challenges rare earth element extraction as uranium is commonly found alongside deposits. 

Beyond political diffuculties, Greenland faces other obstacles to mining. First, it is challenging to mine due to Greenland’s “remoteness, harsh climate, and lack of infrastructure.” At present, there are only two operating mines in Greenland, neither of which extract critical minerals. Investors hoping to expand into the critical minerals space may, therefore, face first-mover concerns exacerbated by high costs of infrastructure and lack of geological mapping.Greenland also has a limited available workforce to participate in the mining industry, which forces companies to rely on foreign workers.

While there are potential barriers, thoughtful government coordination could alleviate key concerns and open the door for new private investment. After all, Greenland has a stable political environment, comparatively low investment risks, and a pro-mining government—in sum, a more desirable partner than many other resource-rich states. Not to mention its strategic Atlantic real estate with secure sea lanes to both North American and European markets.

Chinese Ambitions

The opportunity, however, will not wait for meaningful transatlantic partnerships forever, as other actors are already taking note. Chinese companies are pursuing mining in Greenland and though many of these projects have not come to fruition, Greenland is still key to Beijing’s Polar Silk Road ambitions.

The EU launched the first attempt to counter Chinese influence, signing a Memorandum of Understanding in November 2023 for a strategic minerals partnership with Greenland. On March 15, the European Commission launched a €22.5 million Green Growth program. Although the Memorandum of Understanding does not stipulate trade, extraction, or export requirements, the intention is clear: recruit Greenland for the EU’s clean energy initiatives, such as the European Raw Materials Alliance, and ward off Chinese intervention. Following suit, the US should supplement the EU’s initial investment through a partnership with Greenland.

What is the US up to? Under the Trump and Biden administrations, the US has penned a series of agreements with allies to establish a core constituency of like-minded, demand-oriented partners attempting to diversify their supply chains. As the US continues to solidify deals with longstanding allies, attention must turn to a new set of arrangements with less obvious partners. The launch of the MSP Forum is the first step toward building a supply-side cadre with robust support from the US and EU. While Greenland would benefit from inclusion in the forum, its mining industry will require additional support to succeed. 

Fortunately, the groundwork has already been laid. In 2020, the US opened a consulate in Nuuk—perhaps as a constructive consolation for Trump’s failed acquisition. Two years later, under the Biden administration, USAID launched a two-year Enterprise-Driven Growth Initiative (EDGI) to support Greenland’s commercial coordination and US trade relationship. Yet despite these efforts, the industry is not biting. Of the 41 companies that held operating licenses in Greenland in 2021, none were US-owned, and there is little indication of progress. 

A New Kind of Mineral Agreement

The end of EDGI’s project lifespan in June 2024 presents an opening for a new kind of catalytic agreement targeting Greenland’s mining sector. The partnership’s core mandate should be lowering barriers to crowd in private investment from US and allied raw material producers. With this goal in mind, a development-oriented critical minerals agreement must address three key bottlenecks: resource mapping, early investment anxiety, and labor challenges.

On the exploration front, technical assistance from the US Geological Survey, NASA, and mining engineering institutionslike the Colorado School of Mines should expand on the information in Greenland’s existing Mineral Resource Portal. US programs like the Earth Mapping Resources Initiative could provide precise assessments of subsoil resources—without digging up half of the country. 

As accurate, low-impact assessments are produced, attention can turn to de-risking new ventures for US and EU firms. The US Export-Import Bank (EXIM) should continue collaborating with industry and Greenland’s ministries responsible for mineral licensing to expand eligibility for competitive loans, guarantees, and insurance to new sites. EXIM’s lending package to the Australian-owned Citronen Zinc mine in Greenland’s northern territory should be extended to other firms looking to outmaneuver Chinese investment. 

Europe has a role to play, too. The European Investment Bank could bolster this financing strategy by offering new investment partnerships for industrial buildout, following a similar model to its recent raw materials investment partnership with Rwanda. EIB and EXIM should offer these services through initiatives designed to increase competitiveness with Chinese firms, such as 402(A) direct China competition transactions. In conjunction with EXIM, the trade and development agencies can support early expansion of industrial capacity by financing feasibility assessments for new projects that evaluate not only environmental impacts but also cascading effects on existing sectors like tourism and fishing.

Finally, the US International Trade Advisory Committee on Critical Minerals (ITAC5) can also play a critical role in catching the industry’s eye given its composition of industry executives. Alongside transatlantic policy planning bodiesand the Greenlandic Mineral Resources Authority, ITAC5 should produce recommendations designed to lower trade barriers and prepare the ground for greater investment. 

Another issue is the labor force, which will need to grow as firms move in and industrial capacity expands on the sparsely populated island. While Greenland’s existing labor capacity can absorb a small fraction of demand, foreign workers will be required across the value chain. In collaboration with Greenland’s government, the US Department of Labor could assist with develouping a strategy for the mining industry, ensuring equitable and inclusive provisions for Greenland’s domestic workforce and native population. 

Blank checks and vague commitments will fail to catalyze a new mining industrial base in the North Atlantic. However, dedicated coordination and targeted finance from transatlantic partners could jumpstart Greenland’s nascent capacity to offer a new source of raw materials necessary for a secure energy transition. As the US and EU confront heightened supply chain vulnerability and Greenland seeks greater economic autonomy, both polities stand to gain from further collaboration. Although an outright Trump-style purchase of Greenland is off the table, a mineral partnership could facilitate a smooth energy transition. It’s about time that the transatlantic allies work to develop Greenland’s minerals. 

Emily Hardy is a James C. Gaither Junior Fellow in the Sustainability, Climate, and Geopolitics Program at the Carnegie Endowment for International Peace (CEIP) in Washington, DC.

Dan Helmeci is a James C. Gaither Junior Fellow in the Sustainability, Climate, and Geopolitics Program at the Carnegie Endowment for International Peace (CEIP) in Washington, DC.

Katrine Westgaard is a James C. Gaither Junior Fellow in the Europe Program at the Carnegie Endowment for International Peace (CEIP) in Washington, DC.

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