Mineral import demand-driven solar energy generation in China: A threshold estimation using the counterfactual shock approach

The global shift towards clean energy sources necessitates a substantial supply of critical minerals to drive renewable energy technologies such as concentrating solar-thermal power (CSP) and solar photovoltaics (PV). This growing demand for mineral resources underscores the need to examine the import-demand function of minerals in relation to solar energy generation in China, spanning the period from 1996 to 2019. By employing both conventional autoregressive distributed lag (ARDL) and dynamic ARDL (DARDL) simulation methods, our study reveals a positive and significant long-term relationship between mineral import demand and installed solar capacity. Furthermore, our analysis demonstrates that the average mineral price elasticity adheres to the Marshallian demand premise, while the substitution effect between mineral prices and oil prices contradicts this premise. Conversely, the impact of exchange rates on mineral import demand is found to be negligible. However, our findings indicate that long-term economic growth fosters mineral import demand. To ensure the robustness of our results, we conduct a dynamic ARDL simulation-based counterfactual analysis to measure the threshold level of mineral response to (±) shocks in the regressors, including oil and mineral prices, exchange rates, and GDP growth. These findings provide valuable insights for policy recommendations in China, emphasizing the importance of maximizing mineral resources to augment solar power production and achieve the global objective of a carbon-neutral landscape in the twenty-first century.