Greening commodity markets: How the inflation reduction act reshapes interdependencies across energy, metals, and agriculture

Nader Naifar; Nader Naifar

doi:10.3934/GF.2026012

Green Finance

2026, Volume 8, Issue 2: 326-350. doi: 10.3934/GF.2026012

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Research article

Greening commodity markets: How the inflation reduction act reshapes interdependencies across energy, metals, and agriculture

Nader Naifar ^,

Department of Finance, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh, 11432, Saudi Arabia

Received: 08 November 2025 Revised: 31 March 2026 Accepted: 30 April 2026 Published: 15 May 2026
JEL Codes: C32, G15, Q02, Q42, Q48

This study investigated how the Inflation Reduction Act (IRA), a landmark U.S. policy promoting clean energy and decarbonization, has restructured commodity market interdependencies across agriculture, industrial metals, and traditional energy sectors. Using a time-varying parameter vector autoregression (TVP-VAR)-based decomposed and partial connectedness framework, the analysis distinguishes between internal (within-group) and external (between-group) spillovers, as well as inclusive and exclusive transmission channels across commodity groups. The findings demonstrate a shift toward sector-driven dynamics: industrial metals exhibit strengthened internal cohesion, while cross-sector spillovers significantly weaken. Copper emerges as the dominant net transmitter before and after the IRA, reinforcing its critical role in electrification and clean energy infrastructure. In contrast, crude oil and natural gas remain persistent net receivers, indicating the diminishing systemic influence of fossil fuels. The total connectedness index also declines post-IRA, indicating lower overall market contagion. These results emphasize that the IRA has accelerated a structural realignment in commodity markets, positioning industrial metals at the core of the energy transition. As renewable energy adoption advances, strategic investment and risk management strategies must increasingly account for the rising centrality of critical minerals and the fading dominance of traditional energy commodities.
- inflation reduction act,
- green policy shocks,
- commodity markets,
- renewable energy,
- partial connectedness
Citation: Nader Naifar. Greening commodity markets: How the inflation reduction act reshapes interdependencies across energy, metals, and agriculture[J]. Green Finance, 2026, 8(2): 326-350. doi: 10.3934/GF.2026012

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Abstract

This study investigated how the Inflation Reduction Act (IRA), a landmark U.S. policy promoting clean energy and decarbonization, has restructured commodity market interdependencies across agriculture, industrial metals, and traditional energy sectors. Using a time-varying parameter vector autoregression (TVP-VAR)-based decomposed and partial connectedness framework, the analysis distinguishes between internal (within-group) and external (between-group) spillovers, as well as inclusive and exclusive transmission channels across commodity groups. The findings demonstrate a shift toward sector-driven dynamics: industrial metals exhibit strengthened internal cohesion, while cross-sector spillovers significantly weaken. Copper emerges as the dominant net transmitter before and after the IRA, reinforcing its critical role in electrification and clean energy infrastructure. In contrast, crude oil and natural gas remain persistent net receivers, indicating the diminishing systemic influence of fossil fuels. The total connectedness index also declines post-IRA, indicating lower overall market contagion. These results emphasize that the IRA has accelerated a structural realignment in commodity markets, positioning industrial metals at the core of the energy transition. As renewable energy adoption advances, strategic investment and risk management strategies must increasingly account for the rising centrality of critical minerals and the fading dominance of traditional energy commodities.

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