The Rare Earth Paradox: America’s Clean Energy Future Hinges on China

Highlights

• Research confirms direct causality between rare earth element consumption and renewable energy production in the United States.
• China currently dominates rare earth processing, leaving the U.S. with no viable short-term alternatives for supply chain independence.
• Without significant investment in alternative supply chains and industrial strategy, the West’s renewable energy goals remain vulnerable to China’s control.

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A new study by Panagiotis Cheilas (opens in a new tab) and colleagues from the University of Piraeus, University of Athens and Hellenic Open University and the European Commission’s Joint Research Centre (JRC) explores the critical relationship between rare earth element (REE) consumption and renewable energy production in the United States. Using Granger causality tests on data spanning 1991–2023, the researchers confirm a direct causality—REE consumption drives renewable energy expansion.

No Viable Short Term Option Outside of China

This finding underscores the fundamental reality of the clean energy transition: America’s green revolution is chained to rare earths, and rare earths are chained to China. While the study makes a compelling case for supply chain diversification and strategic stockpiling, it glosses over a harsh truth—there is no viable alternative to China’s dominance in the rare earth sector, at least in the short term.

Will Recycling Work?

The study implies that the U.S. can mitigate risks through recycling and domestic mining, but the sheer cost, environmental impact, and technical hurdles of these alternatives remain daunting. Meanwhile, China’s monopolistic grip on rare earth refining and processing allows it to weaponize these materials at will, as seen with its recent export restrictions.

Economics of Rare Earths

The paper also fails to acknowledge the fundamental economic flaw in rare earth supply chains: REE prices are volatile, and mining projects in the U.S. have consistently struggled to stay afloat without government subsidies. Even if America were to ramp up domestic production, the downstream refining and separation capabilities would be nearly non-existent outside of China. However, Rare Earth Exchanges is tracking some of the upstart refining and magnet production projects.

Simply put, rare earth independence is an illusion without a multi-billion-dollar industrial push, which neither Washington nor Wall Street has seriously committed to.

What does this Mean?

The implications of this study are both urgent and unsettling. Suppose the U.S. and its allies do not rapidly invest in alternative supply chains, strategic partnerships, and next-generation material substitutes. In that case, China will continue to dictate the pace and price of the global clean energy transition. The authors call for policy action, but the reality is far starker: Without a decisive industrial strategy, the West’s renewable energy ambitions will remain at the mercy of Beijing.