A Review of Carbon Pricing Mechanisms and Risk Management for Raw Materials in Low-Carbon Energy Systems

Hongbo Sun, Xinting Zhang and Cuicui Luo ()
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Hongbo Sun: School of Mathematical Sciences, University of Chinese Academy of Sciences, Beijing 100049, China
Xinting Zhang: University of Chinese Academy of Sciences, Beijing 100049, China
Cuicui Luo: University of Chinese Academy of Sciences, Beijing 100049, China

Energies, 2025, vol. 18, issue 13, 1-17

Abstract: The global shift to low-carbon energy systems has significantly increased demand for critical raw materials like lithium, cobalt, nickel, rare earth elements, and copper. These materials are essential for renewable technologies and energy storage. However, their extraction and processing produce significant carbon emissions and face challenges from supply chain vulnerabilities and price volatility. This review examines the complex relationship between carbon pricing mechanisms—such as carbon markets and taxes—and raw material markets. It explores the strategic importance of these materials, recent policy developments, and the transmission of carbon pricing impacts through supply chains. The review also analyzes the systemic risks created by carbon pricing, including regulatory uncertainty, market volatility, and geopolitical tensions. We then discuss financial tools and corporate strategies for managing these risks, such as carbon-linked derivatives and supply chain diversification. Finally, this review identifies key challenges and suggests future research to improve the resilience and sustainability of raw material supply chains. Here, resilience is defined as the capacity to adapt to carbon pricing volatility, geopolitical disruptions, and regulatory shocks, while maintaining operations. The paper concludes that coordinated policies and flexible risk management are urgently needed to support a reliable and sustainable energy transition.

Keywords: carbon pricing; low-carbon energy systems; raw materials; supply chain; risk management (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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