China Cuts Back on Rare Earth Exports, Jeopardizing Wind and Solar Power

Published December 22, 2010

China is substantially cutting back its rare-earth export quotas to Western nations, a move that will drive up prices and further reduce the feasibility of renewable energy production in the United States. 

Long known to geologists for their unique properties, rare earths, unevenly deposited around the world, have become essential to today’s high-tech industries. The minerals are a group of 17 metals vital to the production of certain high-technology electronics that have become indispensable to the renewable-energy industry, where they are used to make wind turbines and solar panels.

China Flexes Its Muscles
In slowing down its exports of rare earths, China is both flexing its economic muscles to the rest of the world and ensuring its own booming economy retains an adequate supply of the precious metals.

China currently produces 97 percent of the world’s rare earths, even though the country has only 37 percent of known global reserves of the metals. With its low wages, minimal environmental regulations, and keen understanding of the vital role natural resources play in its quest to become a great power, China has obtained a near monopoly on rare earths. 

The geopolitical implications of Beijing’s aggressive pursuit of dominance in rare earth production are only now being fully appreciated.

United States on Sidelines
The United States was once the world’s top producer of rare earths, with California’s Mountain Pass Mine leading the way. But an industrial accident at the mine, coupled with years of low prices for rare earths, caused the facility to close in 2002. For all practical purposes the United States has not been an active player in the rare-earths production game for nearly a decade. 

Twenty percent of the world’s known commercially available non-Chinese rare-earth reserves are concentrated in the United States. Although the Chinese decision to cut back its exports has other nations scrambling to increase their domestic production, it will likely take years before the requisite infrastructure is in place for U.S. rare earths to reach their true potential. Even then, prices will rise as inexpensive Chinese rare earths are replaced by more costly ones produced in the United States

In the interim, the United States will remain heavily dependent on a Chinese supplier primarily interested in meeting its own domestic needs. Russia is the world’s second-largest supply of rare earths, with about 19 percent of known global reserves. But political experts point out there are sound strategic reasons for not becoming too dependent on that country for anything as crucial as rare earths.

Obama Still Pushing Wind Power
The Obama administration has continued to promote wind and solar energy despite the rare earth problem. On Nov. 23, Interior Secretary Ken Salazar unveiled a scheme, called “Smart From the Start,” that will identify sites along the Atlantic Outer Continental Shelf considered suitable for offshore wind farms. The goal is to speed up the approval process for ocean-borne wind projects and avoid the delays that have plagued the Cape Wind project in Nantucket Sound.

The hundreds or thousands of offshore wind turbines that may result from the initiative will put further strains on the nation’s supply of rare earths.     

“Rare-earth elements have rare electrical and chemical properties that enhance the operation of special magnets and batteries used in many high-tech pieces of equipment,” explained Jay Lehr, Ph. D., science director at the Chicago-based Heartland Institute, which publishes Environment and Climate News. “While they are not uncommon in the earth’s crust, they rarely occur in large concentrations, and only the Chinese were smart enough to develop major mining operations that would place them in a controlling position as technology advanced around the world.”

This has enabled the Chinese to become “the largest supplier of wind turbines in the world, even though these turbines produce little or no useful energy, as they must be backed up with near 100 percent spinning reserve for when the wind does not blow,” Lehr noted.

Bonner R. Cohen, Ph. D. ([email protected]) is a senior fellow at the National Center for Public Policy Research in Washington. D.C.