How decarbonisation pathways shape circularity outcomes

Demand growth as a constraint on circularity

The three decarbonisation pathways produce much larger differences in demand for some materials than for others, as reflected in the outcomes shown in Chart 44 below. By 2050, lithium demand under a high decarbonisation pathway could be roughly 57% higher than under a low pathway, whereas copper demand differs only by around 10%. Silicon runs counter to this pattern, with slightly lower demand under high decarbonisation. This reflects the composition of silicon demand: ferrosilicon for steel accounts for the large majority of silicon use by mass, while the polysilicon required for solar deployment is consumed at much higher purity but in far smaller volumes.^{167 168} Faster industrial decarbonisation, through reduced steel production and improved material intensity, therefore removes more silicon from demand than that added by accelerated solar photovoltaic deployment.

Materials for which demand is more significantly impacted by the pace of decarbonisation are also those where circularity has the least capacity to compensate. The demand gap grows fastest precisely where the available pool of secondary material is smallest at that time. Lithium illustrates this clearly: its demand grows most steeply across the decarbonisation pathways, but its in-use stock remains relatively small because large-scale deployment is recent. As a result, relatively little lithium is currently reaching end of life and becoming available for recovery, limiting the extent to which end-of-life circularity can offset rapidly growing demand, although its contribution is expected to increase as larger volumes of electric-vehicle batteries retire after 2030.^{169 170 171}

This can further be illustrated by looking at whether circularity can offset the supply stress caused by rapid, material-intensive decarbonisation. To test this, the model compares a scenario with high circularity ambition under a high decarbonisation pathway with one of low circularity ambition under a low pathway.¹⁷² Again, while copper is comfortably able to absorb additional demand pressure, cobalt and silicon do so with less margin. Nickel comes close to a balanced system. Lithium, however, stands out: under rapid decarbonisation, demand is so overwhelming that even high circularity ambition leaves more accumulated supply stress than a slower transition with no additional circularity effort.

A slower decarbonisation pathway should not be interpreted as the preferable outcome. The model quantifies material supply stress but does not show the broader consequences of slower decarbonisation. The costs of delay—including continued GHG emissions and potentially worsening extreme weather events as a result of changing climatic conditions—fall outside the model boundary. For materials such as lithium, circularity levers alone cannot reconcile the pace of decarbonisation with the material system's capacity to supply it. Additional strategies are required, a point revisited in the closing section of this chapter.

The resilience benefits of greater circularity ambition increase sharply at higher levels of decarbonisation ambition. Under a high decarbonisation pathway, copper experiences 16 years below the threshold required to meet demand at low circularity ambition, 13 at medium ambition, and just one at high ambition. Cobalt follows a similar pattern, declining from 22 years to 17 and then to three. In both cases, moving from medium to high circularity ambition delivers radically higher benefits than moving from low to medium ambition. Where system thresholds behave in this way, incremental increases in circularity targets may deliver limited real-world benefits: the system only escapes prolonged stress once recovery reaches a level sufficient to materially change the supply balance, rather than merely soften the pressure. This has important implications for how policy targets are set, a dimension which is explored further in Chapter five.