Centre for International Environmental Studies

Critical raw materials for the energy transition

Aude Pommeret, Professor of Economics at Université Savoie Mont Blanc
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Maison de la paix, room P1-847

The ECON seminars are organised by the Centre for International Environmental Studies (CIES) at the Graduate Institute in Geneva and aim to bring top scholars in Europe to present their recent work at the frontier of environmental, resource and development economic. These seminars targets economics students and faculty only.

Growing evidence of the relative intensity in critical raw materials (CRM) of low-carbon technologies, attracts attention in policy debate. Yet, integrated assessment models, currently used in policy and academic debate on climate change mitigation policies, rule out any role of CRM as inputs to specific equipment in the energy transition, hereafter dubbed green capital. This article presents a model of the energy transition, where the policy is chosen to respect a carbon budget while minimizing the cost of climate policy, with green capital either embedding scarce minerals, or based on a relatively expensive backstop technology. We find that the smaller is the available stock of CRM, the lower welfare and the slower the fossil phase-out. We also show how abstracting from the scarcity of CRM may be severely misleading in designing climate policy. Finally, we highlight the potential role of recycling CRM in easing the energy transition. We find that the lower the cost of recycling, the slower the exhaustion of the CRM.

This paper has been co-written by: Aude Pommeret, Francesco Ricci and Katheline Schubert