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An economic framework for producing critical minerals as joint products

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  • Fikru, Mahelet G.
  • Awuah-Offei, Kwame

Abstract

The topic of economics of critical minerals production has received little attention in the economics literature. This study presents a two-stage optimization model to frame the economics of critical minerals. In the first-stage, firms minimize cost to choose input levels, including the extraction of a common ore to produce a critical mineral with or after the production of a main mineral. We examine the impact of geological, cost, and technology parameters on the level of input use and the decision to further process for critical minerals. We characterize the marginal cost of producing critical minerals, which is used in the second stage to determine production decisions. Results suggest that (1) production of critical minerals could be expanded by investing in technically efficient technologies and technologies with increasing returns to scale, (2) prescriptive mandates requiring firms to process a given percentage of geological input to recover critical minerals would have unintended consequences such as increasing the marginal cost of producing main minerals, and (3) the supply elasticity of critical minerals depends on returns to scale of production.

Suggested Citation

  • Fikru, Mahelet G. & Awuah-Offei, Kwame, 2022. "An economic framework for producing critical minerals as joint products," Resources Policy, Elsevier, vol. 77(C).
  • Handle: RePEc:eee:jrpoli:v:77:y:2022:i:c:s030142072200201x
    DOI: 10.1016/j.resourpol.2022.102753
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    References listed on IDEAS

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    More about this item

    Keywords

    Ore; Returns to scale; Geological input; Mineral recovery; Mineral policy; USGS; Rare earth elements;
    All these keywords.

    JEL classification:

    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • D2 - Microeconomics - - Production and Organizations

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