Metals Derivatives Markets and the Energy Transition

Abstract

Despite their escalating importance, thus far, there has been minimal legal scholarship on metals derivatives markets. Given the key role of these markets in the transition to a clean energy future, increased focus on them is imperative. Hence, it is not surprising that the agendas for the last four meetings of the Commodity Futures Trading Commission’s Energy and Environmental Markets Advisory Committee each dedicated a significant portion of the meeting to metals derivatives markets and their role in the transition to a clean energy future.

Fundamentally, the United States and the world are moving from their long-term dependence on the fossil fuels that built the modern world, to dependence on new commodities such as copper and lithium. Coal and then natural gas made the modern economy possible by providing heat, power, and electricity to growing industries and populations in the world’s growing urban centers. Then oil made globalization possible by powering international sea and air travel as well as overland vehicles. As electric vehicles increasingly displace fossil fuel vehicles and renewable energy sources increasingly replace fuels in heating and industry, the economic and geopolitical stakes of metals markets will grow higher and higher. The criticality of metals derivatives markets, such as the dysfunctional market for nickel, will also escalate as governments, businesses, and others seek to hedge risks related to the increasing global dependency on metals.

Our article makes at least two contributions. First, it expands the minimal analysis of metals derivatives markets in the legal scholarship. Indeed, to the best of the authors’ knowledge, this is the first law review article to focus primarily on these markets. Second, it explores the role of metals derivatives in preparing for the transition to a clean energy future. We provide a brief overview of metals derivatives, including new markets in development, and their regulation in Parts I and II, respectively. In Part III, we explore the central role of metals derivatives markets in securing a clean energy future.

Keywords: Metals derivatives markets, Minerals markets, Energy transition, Commodity futures, Clean energy future, United States, Market fluctuations, Supply chains, Regulation, Global economy

JEL Classification: K23, K32, Q42, Q47, Q48, G15, G18