The Stumbling Block in ‘the Race of our Lives’: Transition-Critical Materials, Financial Risks and the NGFS Climate Scenarios

Hugh Miller, Simon Dikau, Romain Svartzman and Stephane Dees

Abstract: Several ‘critical’ raw materials, including metals, minerals and Rare Earth Elements (REEs), play a central role in the low-carbon transition and are needed to expand the deployment of low-carbon technologies. The reliable and affordable supply of these resources is subject to supply-side risks and demand-induced pressures. This paper empirically estimates the material demand requirements for ‘Transition-Critical Materials’ (TCMs) implied under two NGFS Climate Scenarios, namely the ‘Net Zero by 2050’ and ‘Delayed Transition’ scenarios. We apply material intensity estimates to the underlying assumptions (e.g. with regard to technological innovation) on the deployment of low-carbon technologies to determine the implied material demand between 2021 and 2040 for nine TCMs. We find several materials to be subject to significant demand-induced pressures under both scenarios. Subsequently, the paper examines the possible emergence of material bottlenecks for three materials, namely copper, lithium and nickel. The results indicate possible substantial mismatches between supply (accounting for variables such as existing reserves, technological deployment and recycling rates) and demand, which would be further exacerbated if the transition is delayed rather than realised immediately. We discuss these findings in the context of different possible transmission channels through which these bottlenecks could affect financial and price stability, and propose avenues for future research.

Keywords: Low-Carbon Transition; Commodities; Critical Raw Materials; Scenario Analysis; Financial Risk; Price Stability; Geopolitics of the Energy Transition (search for similar items in EconPapers)
JEL-codes: E31 E44 F5 G10 L72 Q02 Q42 Q5 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2023
New Economics Papers: this item is included in nep-ene and nep-env
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Related works:
Working Paper: The stumbling block in ‘the race of our lives’: transition-critical materials, financial risks and the NGFS climate scenarios (2023)
Working Paper: The stumbling block in ‘the race of our lives’: transition-critical materials, financial risks and the NGFS climate scenarios (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:907

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