Capability and Risk: A New Framework for Downstream Diversification in Mineral-Rich Developing Countries

Abstract Downstream diversification has long been a common aim of mineral-rich countries. These countries are now increasingly interested in moving downstream to capture value from the energy transition. However, countries’ efforts to diversify downstream have met various challenges and mixed results in the past. The complexity of the energy transition and a fragmenting trade system now introduce not only more opportunity, but also more risk, for these efforts. This paper offers a framework to support countries in more efficiently and successfully pursuing downstream diversification. The framework consists of an internal model based on an analysis of capabilities, pathways to diversification, and opportunity costs. The internal model is supported by an external model that focuses on geopolitical and technological trends. Together, these internal and external considerations help provide a more robust framework for countries to evaluate their policy options against the backdrop of the energy transition and an evolving global landscape.