What is Circular Resource Nationalism?

Circular resource nationalism is a policy approach where a country prioritizes sovereign control over its secondary material resources (at all stages of their lifecycle) and asserts this control through the principles of the circular economy.

This often involves leveraging circular economy strategies to maximize the value derived from domestic primary and secondary resources, reduce reliance on foreign resources and technologies, and promote economic security.

Specific policy measures that could be considered circular resource nationalist include strategic securitisation approach to circularity, domestic targets for recycling and processing of strategic raw materials, state support for domestic recycling businesses and export control measures targeting secondary materials and products containing valuable materials to ensure availability for domestic industries, especially the energy, transport and defence sectors.

Resource nationalism, where countries aim to control their natural resources by imposing rules on international industries, is back in the spotlight. This affects many sectors, such as oil, gas, mining, agriculture, and forestry. Essentially, resource nationalism involves strategies on how a country secures, manages, and distributes profits from its resources. It can take different forms of policy measures including export taxes or bans of resource exports, local content requirements for input-sourcing, acquiring state ownership through nationalisation or mining contract renegotiations for greater government revenues.

Recently, the global focus on critical raw materials needed for renewable industries and military uses has been driving resource nationalism and causing disputes between mining companies and governments.

The 2023 Resource Nationalism Index, prepared by the global risk intelligence company Verisk Maplecroft, highlighted the escalating threat of resource nationalism. The index assesses the risk of expropriation or the imposition of more stringent fiscal regimes and identified 39 countries at increasing risk. Latin American and African nations, rich in critical minerals like Zambia’s copper, Democratic Republic of the Congo’s cobalt and Bolivia’s lithium, dominate this list. In Namibia, government interventions in 2023 in the extractives industry included a move to ban the export of unprocessed lithium and other minerals critical to the green transition.

Historically, Latin America has experienced waves of resource nationalism, marked by notable conflicts between governments and extractive industries, primarily in the oil sector. Recently, there is renewed momentum for Latin American countries to assert control over national resources. This time the focus extends beyond traditional energy sectors to include minerals essential for the clean energy transition. Bolivia exemplifies this trend. Resource nationalism has been a recurring theme in its modern history, from the Nationalist Revolutionary Movement's rise in the 1950s to the Morales government's quasi-nationalization of the natural gas industry in 2006. In 2008, Morales launched a radical resource nationalism strategy for lithium, aiming to control a domestic lithium and battery cell industry while excluding private companies and international investors.

This shift brings to the fore the complex problems faced by resource-rich nations: for many mineral-rich countries the shift to resource nationalist policies is linked to the focus on value addition from minerals as a key driver of industrialisation. However, achieving long term developmental objectives and entering high-tech value chains such as battery manufacturing requires strategies and roadmaps beyond short-term revenue generation through resource nationalist measures.

Another challenge is to maximize national economic benefits and value-added industrial production from their finite resources without deterring international investment. As countries worldwide strive for greater resource control, businesses in the natural resources and mining sectors must navigate the risks of resource nationalism, which can manifest through the loss of mining concessions and significantly impact investor returns.

The circular economy, which reduces waste by reusing and recycling materials, is becoming popular globally. A study by Chatham House and UNIDO found that more than 75 national circular economy roadmaps and strategies have been published, with 14 more on the way.

As political support for the circular economy grows, trends towards deglobalization and nationalism are making governments view the circular economy as a tool for resource nationalism.

Circular resource nationalism extends the traditional concept of resource nationalism by incorporating the principles of the circular economy, which emphasizes the importance of not only virgin natural resources but also critical secondary raw materials, scraps, and residues. Traditionally, resource nationalism has focused on asserting control over primary resources such as minerals, oil, and gas, with limited attention to the potential value of secondary resources. This conventional approach often overlooks the significant economic, security and environmental benefits that can be derived from recycling, reusing, and repurposing materials.

Especially critical minerals, essential for the low-carbon transition, renewable industries and military applications, are becoming particularly contentious drivers for circular resource nationalism. One striking example is the reshoring of lithium mining and battery manufacturing to support low-carbon technologies where a ‘security–sustainability nexus’ has emerged – Global North governments and multinational corporations promote lithium onshoring with a focus on sustainable sourcing. For policymakers and corporate leaders, ‘secure’ lithium is becoming synonymous with ‘sustainable’ lithium. This dynamic reflects a broader trend where governments aim to control not only mining operations and supply chains but also secondary resources from domestic waste. The goal is to safeguard critical raw materials and mineral commodities against potential cut-offs by foreign entities.

This shift towards circular resource nationalism is linked to the resurgence of isolationist and nationalist economic practices. This trend is strongly influenced by geopolitical competition between the US and China, and the impacts were most notable under the Trump administration, challenging economic globalization and the multilateral trade system.

In this context, the increasing desire for resource security seemingly underpins and shapes circular economy strategies, with secondary materials increasingly viewed as strategic assets to be preserved and retained. The primary objective shifts from merely reducing environmental impacts and boosting local industry and jobs to ensuring resource security for national industries, reducing reliance on other states, and enhancing technological capabilities for competitive advantage.

Specific policy measures that could be considered circular resource nationalist include strategic securitisation approach to circularity, domestic targets for recycling and processing of strategic raw materials, state support for domestic recycling businesses and export control measures targeting secondary materials and products containing valuable materials to ensure availability for domestic industries, especially the energy, transport and defence sectors.

The intersection of resource nationalism and circular economy strategies is increasingly evident in recent policy documents, reflecting a global imperative for secure supply chains. The Biden administration's ‘100-day review’ underscored the necessity for resilient supply chains to safeguard national and economic security, emphasizing recycling and reusing industrial waste streams and critical material recovery. Similarly, the US Department of Energy's strategy prioritizes diversifying supply and improving reuse and recycling, aligning with circular economy principles. President Biden's invocation of the Defense Production Act
further emphasizes this focus, allocating funds for domestic lithium, nickel, cobalt, graphite and manganese mining and recycling. The US government aims to establish a critical minerals agreement with the EU, which is expected to invigorate the EU’s extraction, processing and recycling capabilities in tandem with the EU’s recently passed Critical Raw Materials Act.

Echoing this sentiment, the UK and EU have also integrated several circular economy elements into their national strategies. The UK's ‘Critical materials refresh’
underscores the importance of domestic capabilities for national security, explicitly mentioning circular economy initiatives to enhance recycling and recovery of critical materials. Likewise, the EU's Critical Raw Materials Act aims to bolster resource security, improve circularity and reduce dependency on imports, with targets set for recycling and self-sufficiency. While the sustainability dimension remains in the foreground of Europe’s circular economy transition, the elements of self-sufficiency and resource security are gaining in prominence. Several European countries, coordinated by the European Defence Agency through the Incubation Forum for Circular Economy in European Defence (IF CEED), have begun to introduce circular economy into their defence sectors. These developments can be seen as priming Europe for ‘selective fortification’ in a decentred world of intensified geo-economic competition.

China, a global leader in circular economy legislation, has intensified its circular strategies to enhance resource security and reduce reliance on imports. The 'dual circulation' strategy reflects China's commitment to self-sufficiency and insulating its domestic market from global volatility. This approach, driven by ongoing trade tensions and a pursuit of economic autonomy, prioritizes domestic recovery and recycling of materials over imports, aligning with circular economy principles. Xi Jinping’s concept for the future of the country's economic security – ‘new quality productive forces’ – is closely linked to domestic green technology manufacturing, and the transformation of traditional industries and value chains. Finally, China’s dominant processing capacity for many critical minerals, especially rare earth metals, and recent bans on exporting processing technologies for rare earths can be regarded as a circular resource nationalist approach.

Circular resource nationalism is also gaining momentum beyond governmental initiatives and policies, with industry associations representing circular businesses advocating for export bans and domestic recycling mandates. For instance, British Steel's call to scrap export bans aims to boost domestic green steel production and reduce the environmental impact. Similarly, the European Recycling Industries Confederation is urging the EU to classify lithium-ion battery waste
– so-called ‘black mass’ – as hazardous, restricting its export and incentivizing domestic recycling.

As circular strategies develop, Europe is set to boost its lithium-ion battery (LIB) recycling capacity to 400,000 tons per year by 2025, improving resource security and reducing reliance on imports.

In the EU, capacity for the first steps of LIB recycling will increase to 160,000 tons per year by the end of 2023, spread across 37 sites. Compared to 2020, capacities have increased by more than 100,000 tons per year with the commissioning of 13 major recycling facilities. Another 16 plants are planned and will bring further capacity gains.

In a world of intensified geo-economic competition, the integration of circular economy principles into national resource strategies represents a concerted effort to fortify supply chains, reduce reliance on external sources and enhance domestic capabilities. Circular resource nationalism, driven by both governmental and industrial stakeholders, underscores the importance of self-sufficiency and economic resilience in an increasingly interconnected world.

However, there are many disagreements about whether self-sufficiency through circular economy is possible and how important it is compared to addressing global environmental issues. The policy developments by the US, EU, UK and China indicate a possible move towards the stockpiling of recovered critical materials by advanced industrialized countries through circular economy practices. One concern is that it will create a ‘circularity divide’ between advanced industrialized countries and low- and middle-income countries.

There are potentially several significant negative economic and human development implications of an increasing tendency towards circular resource nationalism.

Some degree of circular resource nationalism that simply tries to build more domestic circular capacity and resilience, supports domestic companies and innovators but still maintains an overall globalization agenda is justifiable and needed. However, more extreme versions can lead to ‘fortress economy’-style circular economies – depending on where a country sits (and how many countries choose to sit at either end) on the spectrum will amplify these negatives.

First, securing recovery and processing of secondary raw materials by high-income countries can potentially deprive resource-intensive developing countries of opportunities for domestic value-adding processes as well as access to affordable secondary raw materials.

Second, deglobalization and reshoring of supply chains may impose net additional costs on the global economy due to the lack of ability of countries to replicate the cost efficiencies achieved by competitors with economies of scale. This poses a particular risk to global and local businesses by potentially increasing costs of circular goods and services, especially if the pursuit of a circular economy turns into a competitive race among companies and countries for economic and geopolitical control over resources. Furthermore, it will potentially increase the cost of goods for consumers - which can lead to protests, populism and a societal pushback on the concept of circularity.

Third, while recent strategies and policies for critical raw materials acknowledge the circular economy as a means to secure essential resources for clean energy technologies, an excessive focus on resource security can create new global tensions and frictions. The circular economy research community has critiqued the prevailing neoliberal approach, in which large multinational companies are the key actors, yet there has been limited analysis of how emerging resource nationalist strategies might conflict with sustainability goals and the governance of global commons.

Future research is needed to observe policy trends and better understand these conflicting objectives in policy design and implementation to navigate the complexities of a circular economy on an international scale. We believe the following questions need to be addressed:

1. How could changing from a linear economy to a circular economy affect international politics related to resource security and access? And vice versa, how are international political dynamics shaping the circular economy transition?
2. What is the spectrum of circular resource nationalist policies and how do these affect domestic industries, secondary material trade and costs of the transition?
3. How might a circular economy help prevent and reduce conflicts over resource distribution?
4. How do international politics and economic factors limit the transition to an inclusive circular economy and its ability to support global sustainability solutions?

Research into these areas could potentially enable new insights to advance not only theoretical development, but also find workable policy solutions to the international political and global environmental challenges.

The shift to a circular economy changes the political and economic relationships between resource exporters and importers. Issues about how resources and power are shared globally are now more important than ever.