Foreign direct investments and energy transition critical minerals

Abstract

The aim of this paper is to investigate the links between energy transition critical minerals - which are crucial to the deployment of low-carbon technologies - and foreign direct investments. To this end, we consider the production of 8 energy transition critical minerals over the 1997–2020 period as an explanatory variable for FDI inflows, by using an original, complete, and precise database. Implementing a battery of panel data estimations to ensure the robustness of our results, we find that there is no FDI- resource curse for the energy transition critical minerals production. Unlike oil, energy transition critical minerals do generally attract foreign capital inflows, the positive attraction effect on resource seeker FDI likely dominates the negative eviction effect on non-resource seeker FDI; the minerals with the strongest FDI attraction effect being cobalt, lithium, and rare earth elements. These results confirm the important economic and strategic motivations of investing countries and companies, but also represent risks and opportunities for the host mining countries.