Building a Sustainable and Diversified Rare Earth Elements Supply Chain

Highlights

• Study uses System Dynamics model to explore policy interventions for reducing China’s rare earth elements market dominance
• Key strategies include expanding mining capacity, improving recycling, and promoting international collaboration
• Research aims to balance economic growth, environmental sustainability, and global supply security for critical green technologies

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According to a group of scientists led by systems engineer and PhD candidate Mosaab Hamed (opens in a new tab) and colleagues at the School of Systems and Computing, University of New South Wales, Canberra, Australia, Rare Earth Elements (REEs) are indispensable to technologies like electric vehicles and wind turbines, essential for advancing global sustainability goals. However, the global supply chain is heavily reliant on China, which controls most of the production and processing capacity. This monopolistic market structure poses risks of supply disruptions, price volatility, and geopolitical tensions.

A recent study published in the peer-reviewed Resources Policy (opens in a new tab) introduces a System Dynamics (SD) model to evaluate policy measures aimed at diversifying the REEs supply chain. By simulating the effects of mining expansion, recycling, environmental regulations, and international cooperation, the model identifies strategies that could strengthen the “Rest of the World” (RoW) market share, meet growing Neodymium demand, and minimize environmental impacts.

Key Findings

1. Effective Policy Measures
   

   Direct government interventions, such as increasing mining and recycling capacities, emerged as the most effective way to boost RoW market share. Expanding mining operations could increase RoW’s market share by nearly 70% and reduce unmet Neodymium demand by 30%.

2. Environmental Trade-Offs
   

   Policies emphasizing sustainability, like stringent environmental regulations and recycling, demonstrated the ability to reduce ecological harm. However, these measures often come with trade-offs, such as slower market share growth and higher implementation costs.

3. Collaborative Strategies
   

   Combining capacity expansion, recycling, and international cooperation yielded the best results, balancing economic growth, environmental sustainability, and supply security.

4. Demand Management
   

   Encouraging the development of Neodymium substitutes and increasing recycling efficiency were highlighted as critical steps to mitigate supply risks without escalating environmental impacts.

Challenges and Recommendations

The study underscores the complexity of balancing economic, environmental, and social objectives in supply chain diversification. Policymakers face trade-offs between market growth, cost, and environmental stewardship. The following strategies are recommended:

• Capacity Expansion with Regulation: Invest in mining and recycling while enforcing regulations to minimize environmental harm.
• International Collaboration: Foster global partnerships to share resources, technology, and knowledge.
• Sustainable Practices: Implement rigorous environmental standards and promote innovations in recycling and substitution.
• Comprehensive Policy Frameworks: Address public perceptions and social factors, ensuring local communities benefit from REEs extraction projects.

Conclusion

This research highlights the potential for targeted policies to reduce dependence on China while fostering a more sustainable and resilient REEs market. By integrating economic, environmental, and social considerations, policymakers can secure critical minerals for green technologies, driving global progress toward sustainability goals.