Critical raw materials and the renewable energy transition: The role of domestic supply

Technological innovation and industrial development are increasingly dependent on advanced and specialized materials. This paper introduces the concept of material-based technological regime and emphasizes the importance of supply chain stability for key materials in bolstering technology and industry development. We focus on the case of the renewable energy (RE) industry which depends on critical raw materials (CRMs) – including some rare metals and rare earth elements. Recent debates emphasize the need to de-risk supply chains through diversification and domestic production. This study examines whether domestic CRM production mitigates global supply shocks and enhances RE industrial competitiveness and innovation. Empirically, we focus on two core RE sectors: wind and solar energy. Analysing data from a panel of 128 countries from 2007 to 2016, we examine the impact of domestic CRM supply capacity on the overall competitiveness of the RE sectors. The results show that domestic CRM production significantly increases RE product exports and patent output, shielding RE development from global material supply shocks.