Macroeconomic effects of the green transition in the euro area and critical mineral bottlenecks

Anna Bartocci (), Alessandro Cantelmo (), Pietro Cova () and Massimiliano Pisani
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Anna Bartocci: Bank of Italy
Alessandro Cantelmo: Banl of Italy
Pietro Cova: Bank of Italy

No 1531, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: As the green transition accelerates, access to critical minerals is becoming a strategic vulnerability for advanced economies. This paper examines the macroeconomic effects of international critical mineral shortages on the euro area using a New Keynesian model calibrated to the euro area, China, and the rest of the world. A supply cut from China - the leading global supplier - raises mineral prices, offsetting the boost to activity and the decline in energy inflation driven by green energy subsidies. These adverse effects are mitigated when other countries expand supply, leading to diversification, and are also mitigated in the short run if the installed capacity of green energy is sufficiently large. While the macroeconomic impact of shocks to the prices of critical minerals is smaller than that of shocks to the price of fossil fuels, this assessment could change as the green transition accelerates and the demand for minerals needed to produce energy and goods rises.

Keywords: critical minerals; energy policies; dynamic general equilibrium model; monetary policy; euro area (search for similar items in EconPapers)
JEL-codes: D58 E52 Q43 (search for similar items in EconPapers)
Date: 2026-04
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