China’s Rare Earth Complex: Environmental Costs as a Function of Production to Global Consumption

Highlights

• A 2022 study reveals that China bears a disproportionate environmental burden from global rare earth element production, with 74% of environmental costs attributed to exports.
• Environmental costs from rare earth production ranged from $7.4 billion in 2010 to $7.2 billion in 2015, with per-kilogram costs decreasing due to improved efficiencies.
• The research highlights the need for international cooperation to balance the economic benefits of rare earth elements with environmental responsibilities.

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What are the environmental costs of China’s rare earth element (REE) production, given their near monopolization of production worldwide?  A paper from 2022 looked at this question, hypothesizing that a significant portion of the environmental costs associated with China’s REE production, in fact, is driven by foreign demand via international trade. The paper’s Sino-American authors sought to quantitatively trace how REE-related environmental costs are transferred globally via trade, highlighting the imbalance between economic benefits and environmental burdens. Some key factors were excluded, potentially distorting the actual benefits accruing to China, over environmental costs.

The study employs an environmentally extended input-output model (EEIO) tailored with rare earth industry-specific input-output (IO) tables. These tables were developed using detailed life cycle inventory (LCI) data specific to RE production.

Then, the team used existing IO tables,  decomposed to isolate RE-specific sectors (e.g., RE mining, dressing, smelting, and pressing) from broader metals categories. This enabled the team to perform an environmental cost calculation. Meaning the quantification of direct and indirect environmental costs (e.g. air pollutants, wastewater, and waste residues) from China’s REE sector.

However, given the comprehensive aim, the analysis needed more inputs, such as the allocation of environmental costs to domestic consumption and exports, focusing on contributions by country and sector. Thereafter, an examination of trends from 2010 to 2015 was undertaken, with the aim of assessing changes in environmental costs along with the economic benefits.

Summary of Findings

China’s economic power in REE comes with externalities and environmental costs. The world’s second-largest economy’s REE production generated $7.4 billion in environmental costs in 2010, decreasing to $6 billion in 2012 due to stricter mining quotas but rising again to $7.2 billion in 2015 as production expanded.

Environmental costs per kilogram of REE oxides (REO) decreased from $83 (2010) to $63 (2015), reflecting improved efficiencies.

What about export-driven environmental costs? According to the analysis, over 65% of environmental costs in 2010 and 74% in 2015 were attributed to REE exports. Major contributors included East Asia (Japan and South Korea, 27–37%), North America (20–27%), and other Asia-Pacific countries (16–23%).

The authors also calculated cost by product type. For example, REE raw materials accounted for 60% of export-induced environmental costs, with high-value-added REE products contributing 22% to these costs.

According to this analysis, the economic benefits of RE exports were overshadowed by the environmental burden, underscoring the need for cost rationalization.

Paper’s Limitations

Despite disaggregation efforts, some uncertainties persist due to assumptions about pollutant intensities within sectors. These may distort the actual quantitative output. Also, the analysis is confined to 2010–2015 and may not reflect recent shifts in technology or policy.  The role of REE recycling and its potential to reduce environmental costs was not explored in detail, which could be a game-changing factor in this analysis.

Finally, these findings rely on the accuracy of input-output and LCI datasets, which may have inherent biases or gaps.

Rare Earth Exchanges found other challenges, such as a static technology assumption, which is not realistic.  The study assumes consistent pollutant intensities for certain sectors over time, potentially overlooking technological advancements.

Plus, the disproportionate focus on China’s environmental costs may underemphasize shared global responsibilities for RE demand and pollution.

Finally, the study primarily considers direct environmental costs without fully exploring social and economic externalities.

Conclusion

This paper provides a comprehensive quantitative analysis of how China bears the environmental costs of meeting global RE demand. It highlights the disproportionate burden placed on China due to foreign consumption and calls for international cooperation to address the imbalance. Mitigation strategies, such as cost-sharing mechanisms, stricter environmental regulations, and incentives for sustainable practices, are essential for achieving global sustainability.

While the methodology is robust, the study could be enhanced by extending its temporal scope, incorporating recent technological advances, and exploring alternative mitigation strategies like recycling and policy reforms.  Inserting such factors could dramatically change the outcomes.  Regardless, the findings point to the need for a balanced approach that aligns economic benefits with global environmental responsibilities.

The authors include Tingting Zhang, Pengfei Zhang, Kun Peng, Ning Zhang, Jiashuo Li: Institute of Blue and Green Development, Shandong University, (opens in a new tab) Weihai, China; Kuishuang Feng: Joint appointment with Shandong University and the Department of Geographical Sciences, University of Maryland, USA; Pei Fang: SDU-ANU Joint Science College, Shandong University, China and Weiqiang Chen and Peng Wang, Key Lab of Urban Environment and Health, Chinese Academy of Sciences, China.