Minerals | East Asia Forum Quarterly: Critical Minerals and the Reimagining of Globalization

Industrial policy was largely out of favor at the time. The mainstream view held that governments’ primary responsibility was to establish a stable legal, regulatory, and financial institutional framework—enabling the private sector to flourish. Broad government intervention in the economy was deemed appropriate only to correct market failures. Thus, governments were expected to remain neutral regarding industrial investment directions. Although exceptions existed for specific strategic national sectors—such as defense—the general principle remained market-led allocation. Most advanced economies adopted a hands-off approach to industrial policy concerning rare earths and other critical minerals, instead focusing policy efforts on improving market functioning. Japan, Europe, and the United States filed complaints with the World Trade Organization (WTO), accusing China of violating its WTO membership obligations through export restrictions on rare earths—placing overseas customers at a disadvantage. China ultimately lost the case and subsequently abolished rare earth export tariffs and quotas. Beyond this, Japan, Europe, and the United States continued to rely on traditional governmental roles: conducting geological surveys; investing in R&D to reduce production costs and environmental impacts; providing market information; developing education and workforce capacity; and streamlining pre-operational permitting processes. Numerous multilateral international cooperation initiatives were also launched. While governments assisted in mitigating raw material supply risks, private enterprises remained the principal actors. Starting in the late 2010s, businesses and governments began re-evaluating their embrace of globalization. The pandemic-induced global supply chain disruptions—compounded by the Russia-Ukraine conflict and intensifying U.S.-China geopolitical rivalry—further accelerated this ideological shift. Entering the 2020s, companies increasingly prioritized supply chain diversification—even while striving to control raw material costs. Many automakers signed offtake agreements with new rare earth producers to secure long-term supplies of rare earths for electric vehicle motor magnets, and lithium, nickel, and cobalt for batteries—aligning with rapidly expanding future demand. At the same time, governments revived industrial policy, moving beyond traditional roles to actively safeguard domestic private and manufacturing firms’ access to critical minerals. Measures included joint financing for critical mineral projects—both domestically and among allied partner economies—price protection mechanisms, production subsidies, and the use of tariffs and other international trade restrictions. Europe and the United States fully abandoned sectoral neutrality, elevating critical minerals to top priority status in both domestic and foreign policy. Examples include: • The U.S. Inflation Reduction Act (2022), which provides production tax credits for certain critical minerals and related materials mined and processed domestically. • In 2025, the U.S. Department of Defense acquired minority equity stakes in a domestic rare earth mining and processing firm via direct investment and loan financing. • The European Union’s Critical Raw Materials Act, which sets targets for domestic mining, processing, and recycling of critical raw materials—and commits to accelerating approval procedures for strategic projects. Why have governments abandoned globalization and embraced industrial policy anew? First, real-world geopolitical competition constrains countries’ ability to pursue optimal solutions. This logic holds that if one country pursues self-sufficiency in critical minerals, other economies are compelled to adopt their own protectionist policies.

World Bank Group Climate Finance Strategy and Outlook

The World Bank Group comprises five institutions. First is the International Bank for Reconstruction and Development (IBRD), commonly known as the ‘World Bank’. As the Group’s principal institution, the IBRD primarily provides loans to governments of middle-income countries and creditworthy low-income countries. Second is the International Finance Corporation (IFC), one of the Group’s two affiliated institutions. Its main objective is to complement the IBRD’s operations by extending loans or equity investments—without government guarantees—to key private enterprises in member countries, especially developing ones. It aims to channel international private capital into developing countries, thereby fostering growth of their private sectors and promoting economic development. Third is the International Development Association (IDA), the Group’s other affiliated institution. Its primary goal is to provide highly concessional, long-term loans to low-income countries to support their economic development. Loans are extended exclusively to member governments and are mainly used for agriculture, transportation, telecommunications, education, and related sectors. Fourth is the Multilateral Investment Guarantee Agency (MIGA), whose principal mandate is to offer political risk insurance to foreign private investors—including coverage against expropriation, currency transfer restrictions, breach of contract, and war and civil disturbance—as well as investment promotion services to member governments, thereby enhancing their capacity to attract foreign investment and encouraging foreign direct investment flows into developing countries. Fifth is the International Centre for Settlement of Investment Disputes (ICSID), an institution established specifically to facilitate the resolution of investment disputes between governments and foreign private investors through conciliation and arbitration. Its mission is to formulate rules for conciliation and arbitration of investment disputes, receive requests for such proceedings, handle investment disputes, and otherwise facilitate dispute resolution between member states and foreign investors—thereby strengthening mutual trust between investors and host countries and encouraging international private capital flows to developing countries. II. Climate Policy and Investment Strategy In recent years, the World Bank Group has proactively advanced climate policy and promoted climate-related financing activities. In 2016, the World Bank Group launched the World Bank Group Climate Change Action Plan (2016–2020), scaling up action in areas including renewable energy, sustainable cities, climate-smart agriculture, green transport, and others. It set ambitious goals for 2020: to help developing countries add 30 GW of renewable energy capacity; establish early warning systems for 100 million people; and assist at least 40 countries in formulating climate-smart agriculture investment plans.

World Bank Sets Goal to Quintuple Critical Minerals Financing in Five Years

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World Bank President Ajay Banga announced a plan to quintuple critical minerals financing to $19 billion over fiscal 2026-2030. The initiative targets partnerships with 20 countries while adopting a precautionary stance on deep-sea mining.

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