Energy Transition Metals: Bottleneck for Net-Zero Emissions?

Abstract

The energy transition requires substantial amounts of metals, including copper, nickel, cobalt, and lithium. Are these metals a bottleneck? We identify metal-specific demand shocks, estimate supply elasticities, and study the price impact of the transition in a structural scenario analysis. Prices of these four metals would reach previous historical peaks but for an unprecedented, sustained period in a net-zero emissions scenario, potentially derailing the energy transition. Their production value would rise nearly four-fold to USD 11 trillion for the period 2021 to 2040. These four metals markets alone could become as important to the global economy as the oil market.

Not All Energy Transitions Are Alike: Disentangling the Effects of Demand and Supply-Side Policies on Future Oil Prices

“…Our paper also contributes to the literature of conditional forecasting and counterfactual analysis with vector autoregressive models (VARs) (see Waggoner and Zha, 1999, Antolín-Díaz et al, 2021and Wolf and McKay, 2023 as well as oil price forecasts and (e.g., Alquist et al, 2013, Baumeister and Kilian, 2014b and scenarios (e.g., Baumeister and Kilian, 2014a, Kilian and Lewis, 2011, Kilian, 2017and Kilian and Zhou, 2020. Similar to Boer et al (2023), we show how to use structural time series models to produce scenarios for the clean energy transition. We illustrate that structural scenario analysis can become an important tool when thinking about scenarios for the medium to longer time horizon.…”

“…We extend the three variables model by global inventories which allows us to differentiate between contemporaneous and expectational demand components. 19 We identify two types of oil-specific demand shocks, a contemporaneous one and an expectational one, using sign restrictions as shown in table 3 following the approach in Boer et al (2023). Both shocks are assumed to increase oil production and prices, while decreasing economic activity as a result of a positive price shock in the first month.…”

Mining in space could spur sustainable growth

“…Table 1 shows which minerals are required for each clean energy technology (( 21 )). Prices of metals such as copper, lithium, nickel, and cobalt could reach previous historical peaks but for an unprecedented, sustained time period in a net-zero emission scenario, potentially delaying the clean energy transition ( 6 ).…”

“…While this trend could be weakened by recycling and a more efficient use of materials, the clean energy transition requires a strong increase in the use and production of critical metals such as copper, cobalt, and nickel ( 2 – 5 ). This could lead to upward pressures on prices, potentially delaying the clean energy transition ( 6 ).…”