A zero-sum race for rare earth metals will only set back the shift towards renewable energy
- The US leads a group of major economies now determined to break China’s grip on resources vital to a green transition
- While efforts to diversify the supply chain are understandable, without cooperation, the battle for control may lead to unfair and unsustainable practices
Although some of these metals, which are also crucial for hi-tech manufacturing, are known to be abundant globally, the establishment of new mines and mineral extraction is itself a carbon-intensive process.
Against this background, countries are faced with the challenge of ensuring energy security amid a green transition, that is, ensuring a reliable energy supply at an affordable cost with minimal environmental impact.
In such a scenario, countries would agree to promote global knowledge-sharing around affordable green technologies, sustainable environmental and ethical standards in the mining and processing of green metals, global resource governance, and sharing of geoscience data.
Unfortunately, the Ukraine war and heightened US-China tensions appear to have made this option unworkable for the near term.
Stating these facts is not meant to place the blame on China for heightened tensions with the US. A parallel can be drawn with the US dollar, as Washington has been known to weaponise the dollar payment system. Neither country is an innocent victim in the great-power blame game.
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In the case of the clean energy transition, given the growing geopolitical risks, many countries have chosen to reduce their metals import dependency on China by diversifying supply chains to ensure greater energy resilience. For instance, after the shock of the curtailment of rare earth metals imports from China in 2010, Japan worked with Australia and Vietnam to improve the extraction and processing of these metals.
The concern with such unilateral strategies is the inefficiency associated with competitive subsidies to make domestic production more attractive. Such beggar-thy-neighbour subsidy policies also fuel accusations of unfair trade practices and could prompt retaliation from other countries.
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This scenario of a decoupling of supply chains – with China on one hand, and the US and its allies on the other – may not be a bad outcome in and of itself. It could enhance energy security for other countries by providing multiple sources of renewables and also if it raises the global supply of these metals.
However, in a world of bifurcated energy supply chains, if environmental, social and governance (ESG) standards vary considerably, with lax environmental regulations in some countries, this could give rise to further tensions and accusations of unfair practices.
Amid this ongoing global resource battle, there are many concerns as we for a shift in dependency from fossil fuels to green metals and minerals. Thus, countries should pursue their growth strategies in such a way as to reduce their planetary footprint by taking energy efficiency, circularity and recycling much more seriously.
Ramkishen S. Rajan is Yong Pung How Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore
Bhavya Gupta is a PhD candidate at the Lee Kuan Yew School of Public Policy, National University of Singapore, and a Fox International Fellow at Yale University