The potential macroeconomic relevance of critical materials: some preliminary evidence

The demand for key critical materials is expanding rapidly due to the growing adoption of renewable energy technologies. We explore whether the markets for these materials have reached, or will soon reach, an economic significance that would justify monitoring by central banks (e.g. for inflation forecasting purposes). Our findings indicate that the total value of critical materials produced globally remains relatively small, especially for those used in green technologies. However, in scenarios involving rapid progress towards net-zero emissions and strong demand pressures, the market for critical materials could reach a size comparable to that of the natural gas market. We discuss how, in such scenarios, characteristics of energy-critical materials such as substitution potential, price volatility, degree of criticality and demand elasticity will contribute to determine their macroeconomic relevance.