Rare Earth Elements and the Geopolitics of Green Energy Supplies

The EU and US are strategic allies with the world's largest trade and investment relationship. Concerns exist about the Inflation Reduction Act's domestic content requirements and assembly requirements that discriminate against European companies. Both sides have established a Trade and Technology Council to develop a positive, forward-looking agenda. The US recognizes European concerns but stands by that the legislation did not get it wrong. The concept of friend-shoring involves building resilience and trust in trading relationships with countries sharing values and interests. The US and EU have similar fundamentals in what they value and are trying to accomplish, creating opportunities to design systems where both markets can be joined to leverage incentives for sustainable behaviors.

China's Made in China 2025 initiative targets 10 key industries including EVs, semiconductors, and AI, with the Belt and Road Initiative supporting mining development. The US responded through the Inflation Reduction Act (IRA), Bipartisan Infrastructure Law, and Mineral Security Partnership for friendshoring. The DOE's Manufacturing and Energy Supply Chains Program oversaw billions in grants. Critical minerals supply chains require both onshoring and friendshoring because the US cannot achieve self-sufficiency alone. The 30D tax credit ($7,500 for EVs) stimulates downstream demand for battery materials, but is likely to be cut during reconciliation. Defense critical minerals (NATO's 12 materials) have materialized demand and focus on supply chain diversification from China, which uses export controls to create scarcity. Different critical minerals present varying challenges: copper is favorable as a true commodity, while graphite has opaque pricing and requires 18-month qualification processes. The US has significant domestic lithium resources in the Smackover Basin and Nevada, representing one of the few areas where the US can compete globally.

Friends-shoring represents a U.S. policy framework classifying countries as allies or adversaries regarding access to critical minerals and advanced technologies. Under this policy, friendly nations receive preferential treatment including tax incentives and trade benefits for importing strategic materials, while adversaries face restrictions. The strategy aims to reduce dependence on potentially hostile nations for materials essential to national security and economic competitiveness. Key players in the U.S. rare earth strategy include MP Materials (operating the Mountain Pass mine in California) and Lynas Rare Earths (Australia). This policy reflects broader concerns about supply chain security, particularly given tensions between major powers over access to advanced manufacturing capabilities and strategic resources.

The Biden-Harris administration has promoted friendshoring as part of its supply chain strategy since before taking office. In April 2021, one of the administration's first trade actions was to withdraw the Trump administration's decision to withdraw certain essential medicines from the WTO's Government Procurement Agreement, signaling commitment to working with allies. Supply chain resilience has been a pillar of work within the TTC, IPEF, and bilateral relationships. The administration has strong industrial policy goals to retain America's manufacturing base, viewing the transition to clean energy as an opportunity to avoid recreating energy dependencies from the 1970s-1990s. The administration reconciles friendshoring with domestic manufacturing goals through a 'muddling through' approach rather than a comprehensive framework. Examples include negotiating a critical minerals agreement with the EU for IRA preferences, adopting liberal rules for leased cars to qualify for tax incentives, and issuing Treasury guidance allowing non-U.S. firms building solar installations to qualify for bonus credits. The administration has urged Europe and other allies to enact their own industrial policies for clean energy, promoting transparency around subsidies and developing shared concepts of sectors to be covered.

A rare bipartisan consensus exists in Washington to reduce China dependence through 'friendshoring' with reliable allies. Programs like the Chips Act ($52 billion) and Inflation Reduction Act favor USMCA partners. Mexico has become a first-rank geopolitical asset. However, challenges remain: electricity infrastructure is inadequate, water scarcity in the north is growing, and regional disparities exist. Bureaucratic uncertainty and regulatory risks could deter investment if not addressed.

Researchers are developing alternative magnet materials to reduce dependence on rare earth elements. Professor Jian-Ping Wang at the University of Minnesota has spent 20 years researching iron nitride magnets, which use abundant iron and nitrogen instead of rare earth metals. Creating stable iron nitride structures proved notoriously difficult, requiring specialized manufacturing processes. Niron Magnetics, founded based on this research, developed a nanoparticle approach starting with iron oxide nanoparticles that transform into iron nitride through precise processing. The particles align into chains or needles to achieve optimal crystalline structure for finished magnets. Despite challenges, the company secured over $100 million in funding and raised $30 million from automotive manufacturers GM and Stellantis for EV applications. However, iron nitride magnets have moderate coercivity, meaning they lose magnetism when exposed to other magnetic fields—a limitation acceptable for static applications like speakers but problematic for dynamic motor applications.

In the 1960s, scientists at Wright-Patterson Air Force Base discovered the first big rare earth magnet—a combination of samarium with the transition metal cobalt. Samarium cobalt magnets dominated the market for several decades until political unrest in the Democratic Republic of the Congo disrupted global cobalt supplies in the late 1970s. Researchers then looked for cobalt-free alternatives, discovering the neodymium iron boron magnet independently in 1983 by Sumitomo, later Hitachi Metals, and General Motors. This magnet saw better commercial adoption because it was stronger and neodymium and iron are far more plentiful than samarium and cobalt.

Some companies are turning to recycling while others are redesigning electric motors to use fewer rare earths or none at all. BMW and Renault have developed electric vehicles that rely on externally excited motors rather than permanent magnet designs. These motors are larger and more complex but avoid the need for rare earth magnets. German auto parts manufacturer ZF Group has developed a magnet-free motor that matches the size and performance of traditional EV designs, and several automakers are now exploring its use. Startups are also experimenting with new materials—tetra-taenite, a rare iron-nickel alloy once found only in meteorites, can now be synthesized in the lab. A U.S.-based firm is developing magnets made from iron and nitrogen—both abundant and inexpensive materials.

Tesla's next-generation electric motors aim to eliminate rare earth metals by using iron nitride magnets, which offer 15-30% greater strength than neodymium magnets while being cheaper and more sustainable. Iron nitride magnets are made from iron (the fourth most abundant element in Earth's crust) and nitrogen (78% of Earth's atmosphere), providing a nearly endless supply of powerful magnets. These magnets have a theoretical maximum energy product of over 1,000 kJ/m³, nearly three times higher than the best neodymium magnets, and can withstand higher temperatures (Curie temperature around 1,300 Kelvin) without demagnetizing. This breakthrough could significantly reduce the cost and complexity of electric vehicle powertrains while decreasing dependency on China for rare earth materials.

Tesla's next-generation rare earth-free motor is likely to use ferrite magnets rather than Niron's Iron Nitride technology because ferrite magnets offer a 33% cost reduction per unit of performance, have an abundant and easily scalable supply chain, and can achieve 93% efficiency with 90% of the torque of neodymium motors—sufficient for compact budget vehicles where cost and scalability matter more than peak performance, whereas Iron Nitride magnets (targeting 30 MGOe by 2025) face significant commercialization delays and technical challenges including lower coercivity that would require extensive motor redesign.

Deep sea mining targets three mineral types: polymetallic nodules (manganese/iron rocks with nickel, copper, zinc, cobalt), polymetallic sulfides (copper, zinc, lead, gold, silver), and cobalt-rich ferromanganese crusts (containing platinum, rare earths). UNCLOS divides oceans into national jurisdictions (territorial sea, EEZ, continental shelf) with sovereign rights, and 'the Area' beyond national jurisdiction governed by Part XI as common heritage of mankind. The International Seabed Authority has issued exploration regulations since 2001 with 31 contracts, but exploitation regulations remain unapproved after 2014 negotiations. Draft regulations include provisions requiring scientific evidence of environmental safety before commencement. Environmental controversies persist, with calls for moratoriums from companies concerned about seabed ecosystem disruption. Space mining offers vast resources: platinum group metals, rare earth elements, nickel/cobalt for batteries, and precious metals. Asteroid Psyche contains metals valued at $10,000 quadrillion. Transitioning to 100% renewable energy by 2050 would require 4x cobalt reserves, 3x lithium reserves—space mining could alleviate terrestrial supply constraints. The 1967 Outer Space Treaty provides foundational principles but lacks binding provisions. Article I designates space as province of all mankind; Article II prohibits national appropriation. Interpretations diverge: some permit commercial extraction, others prohibit private ownership. The US, Luxembourg, and UAE have passed domestic laws granting proprietary rights, creating fragmented space law. The Artemis Accords establish bilateral principles for space resource governance among space-faring nations.

This segment covers deep sea mining: extracting minerals from ocean floors beyond 200 meters, including polymetallic nodules (manganese, nickel, copper, cobalt), cobalt-rich crusts, and seafloor massive sulfides (copper, gold, silver, zinc) crucial for batteries and electronics. The International Seabed Authority (ISA), established under UNCLOS 1982 with operational status in 1996, regulates these activities. Currently, 31 exploration contracts exist, including two for India. A major international dispute exists: the US pressures for quick regulations, while 36 countries including Chile want a moratorium until environmental impacts are understood. This represents a significant debate between resource development and environmental conservation.

Deep sea mining is the process of retrieving mineral deposits from the deep sea bed (ocean below 200 meters), including manganese nodules, copper, and cobalt nodules found throughout ocean floors. The International Seabed Authority (ISA), established in 1994 under UNCLOS, monitors the seabed outside national jurisdiction. Environmental concerns include sediment plumes causing loss to marine biodiversity, noise pollution disturbing aquatic creatures, light pollution confusing marine life, and oil spills. The USA is not a member of the ISA and has not ratified UNCLOS, which affects international regulation effectiveness. Scientists have signed a global pause petition with 600+ scientists warning that scientific research should be conducted before mining operations begin. In April 2025, the US government released permits for deep sea mining, arguing it is needed for green energy transition requiring critical minerals.

The International Seabed Authority (ISA), established under UNCLOS, has 168 member countries and regulates deep sea mining activities. The ISA has issued approximately 30 exploration licenses for the Pacific, Atlantic, and Indian Oceans. China has received 5 exploration licenses from the ISA, making it the country with the most licenses globally. The ISA's Secretary-General stated that unilateral actions could destroy the global ocean governance system. Under UNCLOS, minerals in the deep sea beyond any country's territorial waters are considered the common heritage of mankind, meaning they belong to all humanity rather than any single nation. Environmental concerns include potential harm to marine ecosystems, sediment plumes that can spread up to 100 kilometers, and disruption of habitats for marine life. Scientists discovered polymetallic nodules (containing manganese, copper, cobalt, and nickel) on the ocean floor in the late 19th century. In 1965, John McPhee wrote 'The Mineral Resources of the Sea,' analyzing the potential of deep sea resources. The first successful deep sea mining experiment was conducted by the US company Deep Sea Ventures in July 1970, off the coast of South Africa, where they discovered cobalt-nickel-manganese nodules. In 2022, approximately 50 years later, robots were sent to survey the ocean floor and discovered tracks from mining operations, showing long, straight lines extending in various directions. The survey found no new nodules and no fish or biodiversity along the mined areas, demonstrating long-term environmental impacts.

Deep-sea mining creates significant environmental risks through sediment plumes that can block light and prevent photosynthesis in deep-sea organisms. The process also disrupts the ocean floor's role as a carbon sink, potentially releasing stored carbon back into the atmosphere and accelerating climate change. Mining leaves behind soft sediment layers that prevent species from recolonizing, and removes hard surfaces that supported unique ecosystems like glass sponges. Scientists estimate recovery could take millions of years or never occur, raising questions about what humanity will lose by destroying these fragile deep-sea environments.