Clean Energy Could Lead to U.S. Dependence on China


The mine in Mountain Pass, California, contains a rare-earth ore that yields neodymium, the pixie dust of green tech -- necessary for the lightweight permanent magnets that make Prius motors zoom and for the generators that give wind turbines their electrical buzz. In fact, if we are going to make even a few million of the hybrid and electric cars that are supposed to help rescue the planet from global warming, we will need to double production of neodymium in short order, says the Atlantic. However:

--In 2006, nearly all the world's roughly 137,000-ton supply of rare-earth oxides came from China.

--And over the past few years, China has cut exports to nurture its own permanent-magnet industry, sending the price of neodymium oxide to a high of $60 a kilo in 2007.

This worries analysts like Irving Mintzer, a senior adviser to the Potomac Energy Fund who sees shortages stifling clean-tech industry, and worse. "If we don't think this through, we could be trading a troubling dependence on Middle Eastern oil for a troubling dependence on Chinese neodymium."

Rare earths are actually fairly common. What's rare is finding deposits that can be mined profitably, in part because most contain radioactive thorium, says the Atlantic:

--Relatively speaking, Mountain Pass -- whose rare-earth deposits were discovered in 1949 -- is not too radioactive, and through the 1950s the ore was mostly used to make flints for lighters.

--In the 1960s, the pit grew deeper as demand increased for the rare-earth element europium, which was used to create the red tones in color TVs.

--In fact, until 1989, the expanding pit at Mountain Pass supplied most of the world's rare earths.

But in the early 1990s, cheaper Chinese rare earths began eating into the mine's market share. Deng Xiaoping famously compared China's abundance of rare earths to the Middle East's huge oil reserves:

--As Chinese ore came onto the market, the price fell from $11,700 a ton in 1992 to $7,430 a ton by 1996 (in constant dollars).

--Amassing strategic supplies suddenly seemed old-fashioned, and the U.S. government began selling off its stocks of minerals.

As green nationalism's potent mix of idealism and fear changes the kinds of cars we drive, it also promises to change the course of globalization, says the Atlantic.

Source: Lisa Margonelli, "Clean Energy's Dirty Little Secret," The Atlantic, May 2009.

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