We find it worth clarifying the widely stated, yet mistaken assertion that by shifting to electric vehicles and clean energy we are simply substituting one kind of foreign dependency with another—oil for rare earth elements.

As discussed in our recent post, rare earths are a collection of seventeen chemically similar metallic elements that due to their versatility have acquired high importance in key clean energy and defense technologies. Concerns over the supply of rare earths have heightened recently because approximately 97 percent of world production occurs in just one country, China. Furthermore, partly due to China’s accelerating consumption of their own rare earth resources, its government announced plans to substantially cut export quotas.

However, while current production occurs almost exclusively in China, it is important to realize that “rare earth ore deposits are geographically diverse” according to a presentation by the Government Accountability Office (GAO), with resources “identified in Australia, Greenland, Canada and the United States.” In fact, China holds only about a third of the world’s rare earth reserves according to U.S. Geological Survey data in the GAO presentation. The United States contains approximately 13 percent.

Most of the countries where rare earth deposits are found have the knowhow, technology and access to capital required to jump start production. The decision of the Chinese government to restrict supply, coupled with the rapidly rising world demand for these minerals – by around 15 percent annually for magnets and 20 percent for alloys –  pushes their price up, thus increasing the incentive to produce rare earths elsewhere. Actually, “U.S. industry previously performed all stages of the rare earth material supply chain, and the Mountain Pass mine in California produced the majority of the global supply of rare earth materials” but opted to import Chinese supplies since the 1990s due to cost. Moreover, “[a]ccording to industry, rare earth deposits in the United States, Canada, Australia and South Africa could be mined by 2014”.

It is true that recovering/developing the production capability along all the stages of the supply chain may take longer – 7 to 15 years to bring a property fully online – especially in new mining sites. However, the transition to a clean energy economy will not happen overnight, and the faster it happens, the stronger the incentive to develop these new resources will become.

Regarding the foreign dependency assertion, a subtle yet powerful difference between oil and rare earths tends to be overlooked: we need oil to run the existing economy and energy system, but we only need rare earths to build additional goods. This distinction is crucial because it means that once we have an electric vehicle fleet, solar panels or wind turbines, we are immune to the trade policies that China or others implement because we can continue to run our economy with domestically sourced energy. This is in sharp contrast to the way oil shocks can damage the U.S. economy and impact our daily lives.

In addition, rare earth elements are recyclable, though currently at relatively high cost because the amounts of rare earth used in any given product are often inconsequential. Over the longer term, however, exploitation of known deposits, discovery of new sources (e.g. Russia, Africa), and improved recycling capability will likely suffice to meet demand.

Therefore, substituting oil with other technologies that rely on foreign resources, such as rare earths, does not equivalently exchange one foreign dependency for another.

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