Impact of critical mineral prices on energy transition

Luccas Assis Attílio

Applied Energy, 2025, vol. 377, issue PD, No S0306261924020713

Abstract: We analyze how the energy transition responds to changes in critical mineral prices. We define energy transition as the increase in the share of renewable energy in total energy production. We construct a GVAR model with 10 economies from July 2012 to December 2021. We incorporate major producers of critical minerals, such as Australia for lithium, Indonesia for cobalt and nickel, and China for rare earth elements. We found that critical mineral price shocks harm the energy transition (spillover effect), mainly in major producer countries. Potential transmission channels include financial markets and industrial production. We break down the index of critical mineral prices into individual prices (nickel, lithium, cobalt, and rare earth prices) and find that shocks from these prices have a minor impact, except in countries that are major producers. These results are robust to alternative specifications such as time-varying bilateral trade and the periods before and after Covid-19. Regarding policymaking, we show that a reduction in credit costs accelerates the energy transition: governments can promote the energy transition by providing subsidized credit to companies and individuals.

Keywords: Critical minerals; Energy transition; Nickel; Cobalt; Rare earth; Lithium (search for similar items in EconPapers)
JEL-codes: E00 F15 Q21 Q43 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.apenergy.2024.124688

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