{
  "title": "Soaring Metal Prices May Delay Energy Transition",
  "publication": "IMF Blog, November 10, 2021",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2021/11/10/soaring-metal-prices-may-delay-energy-transition",
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  "summary": "Authors: Lukas Boer, Andrea Pescatori, Martin Stuermer, Nico Valckx",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Authors: Lukas Boer, Andrea Pescatori, Martin Stuermer, Nico Valckx\n- Publication date: November 10, 2021\n- Central finding: Clean energy needs may cause years of high prices for copper, nickel, cobalt, and lithium under a net-zero emissions by 2050 scenario, potentially reaching historical peaks for an unprecedented length of time and even delaying the energy transition itself."
    },
    {
      "heading": "Net-zero scenario and demand projections",
      "content": "- Scenario focus: limiting global temperature increases to 1.5 degrees Celsius, using the International Energy Agency's (IEA) Net Zero by 2050 Roadmap as the reference.\n- Projected demand changes under the roadmap’s ambitious scenario:\n  - Lithium and cobalt consumption jumps more than sixfold.\n  - Copper use would double.\n  - Nickel use would quadruple (this includes meeting needs unrelated to clean energy).\n- Timing: The demand surge is frontloaded because renewable energy components such as wind turbines or batteries need metals upfront."
    },
    {
      "heading": "Metal prices and supply dynamics",
      "content": "- Price example for lithium: rise from its 2020 level around $6,000 a metric ton to about $15,000 late this decade—and stay elevated through most of the 2030s.\n- General price outlook:\n  - Cobalt, lithium, and nickel prices would rise several hundred percent from 2020 levels and peak around 2030.\n  - Copper is less of a bottleneck; prices are estimated to peak as in 2011, though be elevated for longer.\n- Supply response characteristics:\n  - Copper, nickel, and cobalt largely come from mines, which require intensive investment and take on average more than a decade from discovery to production according to the IEA.\n  - Lithium extraction from mineral springs and brine shortens lead times for new production to average roughly five years.\n  - Supply trends also influenced by extraction technology innovation, market concentration, and environmental regulations.\n- Market dynamics: Soaring demand combined with slower supply changes can spur prices to climb, and only eventually ease market tightness after 2030 as new production comes online."
    },
    {
      "heading": "Macro-relevancy and economic impacts",
      "content": "- Aggregate production value: Under a net-zero emissions scenario, booming demand for the four energy transition metals alone would boost their production value sixfold to $12.9 trillion over two decades.\n- Comparative statement: This could rival the roughly estimated value of oil production in a net-zero scenario over that period.\n- Distributional effects:\n  - Concentrated supply implies some top producers may benefit; countries with the largest output often have the greatest reserves and would be major prospective producers.\n  - Example: The Democratic Republic of the Congo accounts for about 70 percent of global cobalt output and half of reserves.\n  - Other notable producers: Australia (lithium, cobalt, and nickel); Chile (copper and lithium); Peru, Russia, Indonesia and South Africa.\n- Macro effects on growth and fiscal balances:\n  - A persistent 10 percent rise in the IMF metal price index adds an extra two-thirds of a percentage point to the pace of economic growth experienced by metals exporting countries relative to importing ones.\n  - Exporters would see a similar magnitude of improvement for government fiscal balances from royalties or tax revenues."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Key caveat: High uncertainty surrounding demand scenarios due to unpredictable technological change and the speed and direction of the energy transition; such ambiguity may hinder mining investment and raise the odds that high metal prices derail or delay the energy transition.\n- Recommended policy actions:\n  - Establish a credible, globally coordinated climate policy.\n  - Enforce high environmental, social, labor, and governance standards.\n  - Reduce trade barriers and export restrictions to allow markets to operate efficiently and direct investment to expand metal supply.\n- Institutional proposal: An international body with a mandate covering metals—analogous to the IEA for energy or the UN Food and Agriculture Organization—could play a key role in data dissemination and analysis, setting industry standards, and fostering global cooperation.\n\nSource: Soaring Metal Prices May Delay Energy Transition, Lukas Boer, Andrea Pescatori, Martin Stuermer, Nico Valckx; November 10, 2021.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- wrote\n- October World Economic Outlook\n- IMF staff paper\n- IMF metal price index\n\nSource: https://www.imf.org/en/blogs/articles/2021/11/10/soaring-metal-prices-may-delay-energy-transition"
    }
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    "Authors: Lukas Boer, Andrea Pescatori, Martin Stuermer, Nico Valckx",
    "Published: November 10, 2021",
    "Authors: Lukas Boer, Andrea Pescatori, Martin Stuermer, Nico Valckx",
    "Publication date: November 10, 2021",
    "Central finding: Clean energy needs may cause years of high prices for copper, nickel, cobalt, and lithium under a net-zero emissions by 2050 scenario, potentially reaching historical peaks for an unprecedented length of time and even delaying the energy transition itself.",
    "Scenario focus: limiting global temperature increases to 1.5 degrees Celsius, using the International Energy Agency's (IEA) Net Zero by 2050 Roadmap as the reference.",
    "Projected demand changes under the roadmap’s ambitious scenario:",
    "Timing: The demand surge is frontloaded because renewable energy components such as wind turbines or batteries need metals upfront.",
    "Price example for lithium: rise from its 2020 level around $6,000 a metric ton to about $15,000 late this decade—and stay elevated through most of the 2030s.",
    "General price outlook:",
    "Supply response characteristics:",
    "Market dynamics: Soaring demand combined with slower supply changes can spur prices to climb, and only eventually ease market tightness after 2030 as new production comes online.",
    "Aggregate production value: Under a net-zero emissions scenario, booming demand for the four energy transition metals alone would boost their production value sixfold to $12.9 trillion over two decades.",
    "Comparative statement: This could rival the roughly estimated value of oil production in a net-zero scenario over that period.",
    "Distributional effects:",
    "Macro effects on growth and fiscal balances:",
    "Key caveat: High uncertainty surrounding demand scenarios due to unpredictable technological change and the speed and direction of the energy transition; such ambiguity may hinder mining investment and raise the odds that high metal prices derail or delay the energy transition.",
    "Recommended policy actions:",
    "Institutional proposal: An international body with a mandate covering metals—analogous to the IEA for energy or the UN Food and Agriculture Organization—could play a key role in data dissemination and analysis, setting industry standards, and fostering global cooperation.",
    "**Working Paper**",
    "[wrote](https://blogs.imf.org/2021/06/08/four-factors-behind-the-metals-price-rally/)",
    "[October World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021)",
    "[IMF staff paper](https://www.imf.org/en/Publications/WP/Issues/2021/10/12/Energy-Transition-Metals-465899)",
    "[IMF metal price index](https://www.imf.org/en/Research/commodity-prices)"
  ],
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