Ministers are exploring the creation of a national stockpile of so-called rare earth metals amid rising fears that Britain's efforts to adopt electric cars are at risk from a Chinese stranglehold on supplies.
It is understood that officials at the Department for Business are discussing options to protect the UK's access to vital materials including lithium and cobalt, which are essential for batteries and part of a global commodity prices boom as expectation rise for massive demand.
Whitehall sources said Britain could build a national stockpile to avoid shortages, support attempts to create domestic sources such as potential lithium mines in Cornwall, or use its diplomatic network to secure supplies from abroad in partnership with private businesses.
The moves are at an early stage and come as fears grow that China is ruthlessly cornering the market in the metals needed for the global green revolution.
On Wednesday, the International Energy Agency (IEA) warned Western governments to build up supplies of rare earth elements or face a setback in the fight against climate change.
The agency said that three countries dominate supplies of lithium, cobalt and rare earth elements and are jointly responsible for 75pc of global output. In some cases, a single country is responsible for around half of worldwide production.
It means a future stand-off with China could severely damage the West's efforts to end its reliance on fossil fuels. Boris Johnson has vowed to ban production of petrol and diesel cars in 2030, meaning the number of electric cars on the road will increase hugely and their production will become vital to many thousands of UK jobs.
The Democratic Republic of the Congo and China were behind 70pc and 60pc of world production of cobalt and other rare earth elements respectively in 2019, the IEA said. Chile is also a major producer.
Concentration is even higher for processing operations. China refines about 35pc of all global nickel, between 50pc and 70pc of lithium and cobalt, and nearly 90pc of other rare earth elements.
Stockpiling would create a buffer for Western countries if relations break down with China and Beijing decides to cut off global supplies, giving Western countries crucial time to find alternative sources.
Fatih Birol, head of the IEA, said: “Meeting our climate change goals will turbocharge demand for mineral resources. Voluntary strategic stockpiling can in some cases help countries weather short-term supply disruptions.”
Bosses at the agency also called for more widespread recycling of key materials, and policy changes to encourage the opening of new mines.
The IEA was founded after the first global oil shock of the 1970s and aims to enhance energy security through stockpiling. It was instrumental in the creation of strategic oil reserves which have been repeatedly tapped during crises such as in the first Gulf War.
Government sources said they are aware of the risks and are seeking to find a solution. In addition to stockpiling, Britain may also be able to produce some of its own rare earth elements. For example, there are large untapped lithium deposits under Cornwall which could one day be mined.
Sam Armstrong of the Henry Jackson Society, a foreign policy thinktank, said: “The pandemic has proved that supply chains are far more vulnerable than we had assumed.
"If the UK is to have a green future without handing China the power to literally switch off the lights then both stockpiling critical minerals and encouraging new allied suppliers will become an essential strand of our national security strategy."
The IEA is just the latest to highlight the risks.
Two months ago Benchmark Mineral Intelligence predicted that demand for power packs for cars will increase at 40pc a year until at least 2025 in Europe alone, creating an arms race among manufacturers to secure lithium.
In the autumn, analysis by the European Union warned that lithium supplies will need to increase almost 20-fold and there must be a fivefold rise in cobalt production by 2030 if the block is to hit its targets.
It said supplies of lithium will need to rise almost 20 times and five times for cobalt by 2030 for Europe to meet targets for electric vehicle batteries and energy storage. This warning came before recent announcements by car-makers that they were phasing out internal combustion engine cars and going electric.
The potential crisis in rare earth metals mirrors a current shortage of microchips which is holding back car production worldwide. A host of firms have already been forced to temporarily halt or reduce work at their factories as a result.
In its first-quarter results, Vauxhall owner Stellantis said the problem had cut the number of cars made by 11pc or almost 190,000 vehicles. The company said the shortage is likely get worse in the second quarter before beginning to ease later in the year.
The shortage has been caused by car companies slashing their orders as the pandemic hit, leaving firms at the back of the queue as they ramped up production again when restrictions eased.
Data company IHS Markit estimates the crisis meant 1.3m fewer vehicles were made in the first quarter of 2021. It predicts 1.2m vehicles in the second quarter are also in jeopardy.
EU industry commissioner Thierry Breton warned on Wednesday that Europe was “naive” to rely on other regions for semiconductor manufacturer and supply.
Speaking as he announced plans to double the region’s production of chips by 2030 to 30pc of the global supply, he said: “We want to come back to our former market share of production for the needs of our industry.”
A BEIS spokesperson said: “We are committed to making the UK a world leader in battery technology. This includes exploring opportunities around domestic extraction and processing of critical rare earth elements.
“We are investing in two research centres to promote innovation in rare metals, and supporting projects exploring the recovery and recycling of rare earth elements through an £80 million investment in electrification technologies.”