Critical minerals volatility under ESG uncertainty: Implications for the clean energy transition

Abstract

Critical minerals are essential to the clean energy transition as key inputs for renewable energy technologies. However, growing uncertainty in environmental, social, and governance (ESG) factors has introduced significant volatility into critical mineral markets, with implications for energy security and sustainability. This study investigates the impact of ESG uncertainty (ESGU) on the volatility of critical minerals using global monthly data from November 2002 to September 2024 and applying quantile-on-quantile regression (QQR) techniques. The results reveal heterogeneous relationships across the distributions: ESGU is negatively associated with critical mineral volatility at lower ESGU quantiles and higher mineral quantiles (except platinum); neutral associations emerge at mid-quantiles; and strong positive associations are observed when both ESGU and mineral volatility are high. These findings highlight how ESG-related risks add layers of unpredictability to mineral markets, potentially affecting clean energy production costs, investment flows, and long-term supply chain resilience. Policymakers should mitigate these risks by diversifying supply chains through domestic exploration, international partnerships, and strategic stockpiling to ensure stable access to critical raw materials for the clean energy sector.