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Macroeconomic effects of the green transition in the euro area and critical mineral bottlenecks

Author

Listed:
  • Anna Bartocci

    (Bank of Italy)

  • Alessandro Cantelmo

    (Banl of Italy)

  • Pietro Cova

    (Bank of Italy)

  • Massimiliano Pisani

    (Bank of Italy)

Abstract

As the green transition accelerates, access to critical minerals is becoming a strategic vulnerability for advanced economies. This paper examines the macroeconomic effects of international critical mineral shortages on the euro area using a New Keynesian model calibrated to the euro area, China, and the rest of the world. A supply cut from China - the leading global supplier - raises mineral prices, offsetting the boost to activity and the decline in energy inflation driven by green energy subsidies. These adverse effects are mitigated when other countries expand supply, leading to diversification, and are also mitigated in the short run if the installed capacity of green energy is sufficiently large. While the macroeconomic impact of shocks to the prices of critical minerals is smaller than that of shocks to the price of fossil fuels, this assessment could change as the green transition accelerates and the demand for minerals needed to produce energy and goods rises.

Suggested Citation

  • Anna Bartocci & Alessandro Cantelmo & Pietro Cova & Massimiliano Pisani, 2026. "Macroeconomic effects of the green transition in the euro area and critical mineral bottlenecks," Temi di discussione (Economic working papers) 1531, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1531_26
    as

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    References listed on IDEAS

    as
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    4. Adrien Concordel & Phuong Ho & Christopher R. Knittel, 2026. "The Differential Impacts of Critical Mineral Prices and Oil Prices on the Economy," NBER Working Papers 34847, National Bureau of Economic Research, Inc.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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