Trésor-Info - Publications de la direction générale du Trésor - European-Union

Minerals in the Energy Transition

2024-10-24T00:00:00+02:00

The energy transition is expected to involve use of mineral-intensive technologies, with high demand for certain so-called “critical” or “strategic” minerals such as lithium, graphite, nickel, manganese, silicon, rare-earth elements and copper.

In the short term, the global supply of critical minerals appears to be sufficient to meet the new uses related to the energy transition. Lithium and nickel prices have been falling since early 2023 against the backdrop of a sharp uptick in Chinese production and slowdown in global demand. Production nevertheless remains highly geographically concentrated, with a handful of countries holding a monopoly over the extraction of key critical minerals, and China now dominating refining and processing for the majority of these minerals.

Global demand could more than triple between now and 2050 in order to meet international and domestic environmental targets (see Chart below), with this spike in demand far exceeding current production levels for lithium, graphite and cobalt. Although many mineral-producing countries are eager to capitalise on their resources, the possibility of shortages cannot be ruled out – not least because the current low-price environment is weighing on the anticipated profitability of investments and new production sites, potentially leading to projects being postponed.

Many governments have responded to these risks, and to mounting geopolitical tensions, by introducing policies to secure and diversify supplies of critical minerals. At the same time, recent years have seen a sharp increase in trade barriers affecting these minerals, largely as a result of positioning strategies further down the value chain.

The Impact of Brexit on the United Kingdom's Economy

2024-04-30T00:00:00+02:00

The United Kingdom’s withdrawal from the European Union (EU), which was voted for by referendum in June 2016, became effective on 31 January 2020. After a transition period, the UK left the single market on 1 January 2021. Brexit has had an impact on the United Kingdom’s economy and has dampened its growth potential through three main channels.

Firstly, owing to the reintroduction of non-tariff barriers, the UK’s trade in goods with the EU fell in 2021 to a greater extent than trade with non-EU countries, although the impact only seems to have been temporary. On the other hand, trade in services with the EU has been more lastingly affected, especially for financial and transportation services.

Secondly, business investment in most sectors has stalled since the 2016 referendum following a period of strong growth. Due to the effects of both Brexit and the COVID-19 pandemic, in Q2 2023, it was more than 20% below the level that it would have reached had it maintained the momentum seen between Q1 2010 and Q2 2016 (see Chart).

Lastly, restrictions on the employment of EU nationals have reduced the labour supply at a time when the UK’s labour market is under great strain. Employment of EU workers has levelled off since 2016 whereas it had rocketed during the years prior to the referendum. This has forced British employers to have greater recourse to non-European labour.

Barriers to Migration in the European Union: Does Joining the Union Lead to Lower Barriers?

2024-02-27T00:00:00+01:00

The Working Papers series presents work carried out within DG Treasury, distributed with the aim of enlightening and stimulating public debate. The authors are solely responsible for their work.

This working paper looks at the effect of joining the European Union on openness to migrants, both European and non-European. It replicates and extends Head & Mayer's (2021) gravity model-based analyses of barriers to migration within European countries. Using an event analysis, we show in addition that EU membership is responsible for a reduction in barriers to migration, of over 25% compared to their level 5 years prior to EU entry, for EU migrants.

The Market for Safe Assets

2023-08-29T00:00:00+02:00

The holding of so-called “safe” assets, and the market for these securities more broadly, play a key role in maintaining financial stability. Yet there is no consensus as to how these assets are defined because the “safety” of a security depends on a number of different characteristics such as its stability, counter-cyclicality and liquidity, how transparently it is valued, and how solid its fundamentals are. The relative importance of these aspects varies according to investor preferences and financial-market conditions.

By examining how different asset classes perform against different safety criteria, it is possible to identify a universe of assets that can be considered “safe”, and to analyse developments in the market for these assets over the past two decades.

The supply of safe assets grew sharply in the 2010s, owing in part to sovereign bond issues. However, these assets became less readily available as central banks, especially in Europe, embarked on bond-buying programmes as part of a broader package of unconventional monetary policy measures. Despite increased supply, safe assets remained hard to come by throughout this period, as demand surged in both Europe and the United States, owing largely to the introduction of tighter prudential requirements in the wake of the 2008 financial crisis.

Globally, the market imbalance caused by these opposing forces has been partly redressed since the COVID-19 crisis of 2020, owing in large part to sovereign debt issues intended to fund pandemic support packages, which have had the effect of bringing the supply of safe assets into closer alignment with demand.

Looking ahead, the market could be affected by a number of major structural trends. Factors that could impact supply include the reshaping of the safe assets landscape amid the green transition, debt sustainability issues, rating downgrades and reform of the international monetary system. Meanwhile, demand could be influenced by developments such as the roll-back of unconventional monetary policy measures and changes to regulatory standards, especially those relating to non-bank financial institutions (NBFIs).