Critical raw materials for the energy transition

Abstract

Low carbon technologies for renewable energy are relatively intensive in critical raw materials (CRM). We investigate how this fact impacts the timing of the energy transition, when a very costly backstop technology also exists. The size of CRM reserves affects the investment in the equipment for renewable energy generation and the time when fossils are abandoned. In addition, we consider politica_Aude Pommeret (IREGE, Université de Savoie Mont-Blanc)_l economy constraints, such as the acceptability of carbon taxes or imperfect information on the side of the regulator. We show how abstracting from the scarcity of CRM, or tightly linking carbon tax revenue and subsidies for renewables, may be severely misleading in designing climate policy. We also study how recycling may effectively be used to release the stress imposed by CRM on the energy transition. We obtain that recycling does reduce the cost of this transition and it also calls for having a large stock of recyclable materials at the time of the switch to the backstop, hence for delaying investment in renewable infrastructure. (Joint with Aude Pommeret (IREGE, Université de Savoie Mont-Blanc) ; Katheline Schubert (PSE, Université Paris 1 Panthéon Sorbonne)