The potential macroeconomic relevance of critical materials: some preliminary evidence

Marco Taboga ()
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Marco Taboga: Bank of Italy

No 897, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The demand for key critical materials is expanding rapidly due to the growing adoption of renewable energy technologies. We explore whether the markets for these materials have reached, or will soon reach, an economic significance that would justify monitoring by central banks (e.g. for inflation forecasting purposes). Our findings indicate that the total value of critical materials produced globally remains relatively small, especially for those used in green technologies. However, in scenarios involving rapid progress towards net-zero emissions and strong demand pressures, the market for critical materials could reach a size comparable to that of the natural gas market. We discuss how, in such scenarios, characteristics of energy-critical materials such as substitution potential, price volatility, degree of criticality and demand elasticity will contribute to determine their macroeconomic relevance.

Keywords: critical materials; critical minerals; energy markets; clean energy (search for similar items in EconPapers)
JEL-codes: E3 E5 Q3 Q4 (search for similar items in EconPapers)
Date: 2024-12
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