Ensuring the security of the clean energy transition: Examining the impact of geopolitical risk on the price of critical minerals

Jamel Saadaoui, Russell Smyth and Joaquin Vespignani

No 2024-19, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: Ensuring a stable supply of critical minerals at reasonable prices is essential for the clean energy transition. The security of supply of critical minerals is particularly susceptible to geopolitical risk. In this paper, we use constant and time-varying parameter local projection (TVP-LP) regression models to examine the effect of geopolitical risk on prices of six critical minerals: aluminium, copper, nickel, platinum, tin and zinc. We propose a conceptual framework in which we make two predictions. The first is that the responsiveness of prices for critical minerals to geopolitical risk will depend on the non-technical risk associated with procuring each critical mineral, which will be reflected in the elasticity of supply. The second is that geopolitical threats will have a bigger effect on critical mineral prices than geopolitical acts. With the exception of platinum prices, which have suffered a downward structural demand side shock associated with the growth of the electric vehicle market, we find empirical support for the first prediction. Our results are also consistent with the second prediction. We find considerable evidence that the effect of geopolitical risk on the prices of critical minerals are time varying with time-varying effects of geopolitical shocks observed during the Gulf War, following the 9/11 terrorist attacks and during the COVID-19 pandemic with the time varying effects generally being stronger for geopolitical threats than geopolitical acts.

Keywords: Critical Minerals; Energy Security; Geopolitical Risk (search for similar items in EconPapers)
JEL-codes: C14 Q20 Q41 Q43 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Ensuring the security of the clean energy transition: Examining the impact of geopolitical risk on the price of critical minerals (2025)
Working Paper: Ensuring the Security of the Clean Energy Transition: Examining the Impact of Geopolitical Risk on the Price of Critical Minerals (2024)
Working Paper: Ensuring the security of the clean energy transition: Examining the impact of geopolitical risk on the price of critical minerals (2024)
Working Paper: Ensuring the security of the clean energy transition: Examining the impact of geopolitical risk on the price of critical minerals (2024)
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