Authored by: Roger Ballentine, President, Green Strategies

June 11, 2012

Despite the sharply divided political rhetoric in Washington about the importance of clean technology to our economic and environmental challenges, outside the beltway there is a strong consensus among governments, the corporate sector, and financiers that clean energy and clean technology will drive economic growth.  Yet even those of us who share that optimism about “clean tech” must acknowledge that this sector faces challenges.  Well-funded incumbent industries and challenging financing hurdles are certainly drags on growth.  But another potential pitfall is one that has gotten relatively little attention.

An irony of the drive towards a cleaner, healthier environment fueled by clean technology is the necessity to mine rare earth elements to make those “clean” products. Rare earth elements (REEs) — metals, oxides, phosphors and other REE derivatives — are essential ingredients for creating the technologies that reduce American and global dependence on carbon-based energy sources. What makes REEs rare is not the relative scarcity that makes platinum or gold rare. Instead, REEs are considered rare because they occur in scattered deposits of minerals rather than concentrated ores.

REEs make critical contributions to clean technology including in solar power generation, electricity-generating wind turbines, and in batteries and electric drives for hybrid electric, plug-in hybrid electric and all electric vehicles. Wind turbines can contain 500 pounds or more of REEs, and one Toyota Prius model uses 29 pounds! Without REEs it would be impossible to manufacture the components that operate these technologies.

Unfortunately, wind turbines and electric engines both rely on the same key REEs: neodymium (Nd) and dysprosium (Dy). A recent MIT study conducted on behalf of Ford predicts global demand for these REEs outstripping supply over the medium-term if worldwide production does not increase by eight percent for Nd and 14 percent for Dy. Rare earth production currently is increasing at approximately six percent per year. The problem of future access to rare earth resources is exacerbated by China’s recent imposition of REE export quotas, which caused some users of REEs to charge REE surcharges to their customers. A shrinking supply of REEs almost ensures higher costs for industries striving to be cost-competitive and could set back solar and wind at a time when we need more energy diversity. 

A fundamental obstacle in the way of increasing REE production and processing is that over 95 percent of all REE processing occurs in China. While the United States possesses 17 percent of the world’s proven REE reserves, we have lost the industrial capacity to process mined REEs into usable forms. This means that REEs mined in the U.S. must be shipped to China for processing, further increasing REE costs which get passed down the supply chain for all REE users.

To address these problems, the U.S. needs to encourage responsible expansion of REE production.  There are a number of ways to do this, including efforts to:

• Reestablish America’s REE processing industry by developing academic and industrial research centers which will allow the U.S. to take advantage of our domestic REE resources;
• Promote and encourage the development of REE recycling methods, whether from consumer electronics or other means;
• Promote free and fair trade of rare earth materials among all producers and users of REEs so that no single nation has an unfair advantage over the rest of the world;
• Create national and international stockpiles for rare earth materials to assure a long-term supply, thereby increasing availability and opportunities for development of renewable energy products; 
• Promote domestic and international (beyond China) environmentally responsible mining and processing of rare earth materials, through expedited permitting and appropriate trade policies;
• Work with environmental stakeholders on REE mining expansion to ensure new mines are environmentally safe and to establish a clear understanding that REE mining is a necessary step to a low carbon future.

The real rarity in the rare earth community is the fact that, like it or not, every actor struggling to make REE industry gains is working toward a fairer, brighter and more energy diverse future. That is why it is vital that as many of the REE-related companies at work today survive and thrive so they can continue to supply our cleaner tomorrow.  The promise of clean technology is real.  Our job today is to address the challenges that are slowing our trip on that path to a more prosperous and cleaner future. 

Roger Ballentine is the President of Green Strategies Inc. where he advises corporate and financial sector clients on energy, clean technology and sustainability strategies.  He is also a founding Board member of the Association of Rare Earth (RARE), an industry association organized to advocate for sustainable access to REEs.