Green Industrial Policy in the Age of Rare Metals: Trans-regional Comparison of Growth Strategies in Rare Earths Mining (Action No. 950056)

Our new global political economy is increasingly defined by ‘critical raw materials’ – of which rare earths elements (or ‘rare earths’) are the most significant. These seventeen chemically similar metals – with special properties of ferromagnetism, superconductivity, and luminescence – play a vital role in the production of advanced manufacturing and low-carbon technology.

Two important trends underline the urgency of this research. Firstly, low and middle-income countries joining the race for industrialisation are increasing demands for high-tech goods ranging from computers, mobile phones, and flat screens, as well as for low-carbon consumer products, such as energy-efficient cars, solar panels, wind turbines, and even lights – all of which constitute further pressures to accelerate the pace and breadth of natural resource exploitation. Secondly, growing demands for rare earths are currently suffering from a supply constraint given that China – the dominant market player in rare earths mining – has begun to impose export restrictions and reorient its mining policy to support domestic industrialisation. The impending resource crunch creates incentives for mineral states to gain strategic and economic advantage.

GRIP-ARM is a trans-regional comparison encompassing both (1) resource-producing countries that deploy various industrial strategies to (re)shape world supply and production; and (2) resource-importing countries and manufacturing firms that seek to reduce supply vulnerability while also reducing socio-environmental costs of rare earth extraction. The research programme is one of the first systematic, comparative study on rare earths mining and economic development, which brings political science perspectives in conversation with natural resource geography and international political economy. GRIP-ARM maps out the distinctive industrial strategies towards rare earth mining in China, Brazil and Kazakhstan and analyses the responses of resource importing countries to the changes in the mineral value chain. The project adopts a qualitative research design using multiple data collection-techniques, involving semi-structured interviews with key informants, policy and media analysis, archival research, and site-intensive methods (SIM).

Thinking about Mining and Industrialization

Rare earths are by no means geologically scarce; some of these seventeen metals are abundant on the Earth’s crust. However, the difficulty stems from obtaining high-quality ores in concentrated amounts; they are also mined together with hazardous elements like uranium, thorium, and other heavy metals, raising their socio-environmental impacts. China’s position as the world supplier was thus borne out of the externalization of socio-environmental costs associated with rare earth production.

Not only do we know so little about the social science perspectives on rare earths, most scholars have often studied rare metals either from a critical geography or narrow geopolitical security perspectives (often based on assumptions that we can understand Chinese policies by deriving them solely from geopolitical calculus). My work will examine the place of rare earths in the articulation of industrial ambitions and nation-building. Unlike oil, gas and mining, the extraction of rare earths and critical raw materials have multiple linkages to various end-user applications, including the production of permanent magnets, phosphors, catalysts to defence, missile systems, and low-carbon energy technologies. Rare earth producers have various possibilities to choose which rare elements can be strategically controlled and which industries can be transformed into ‘winning’ sectors for high-end manufacturing. In other words, the case of rare earth elements-based industrialization might be the most important test to challenge our established wisdom that mining cannot match the potential multiplier effects we associate with the manufacturing sector.

This leads me to the next big political economy question: why are some countries more successful than others in mobilizing domestic resources and even foreign capital to support their industrialization, and others less so? Using the rare earths mining as a focal point of analysis of the mining-industrialization nexus, GRIP-ARM provides empirical evidence to evaluate the extent to which emerging markets like China and Brazil have successfully used ‘positive’ industrial policy instruments to maximize the impacts of rare earths production. For example, local government mandates to use electric buses in major cities have pushed Chinese electric vehicles producers at the frontier of international competition. The research contributes to the growing intellectual rethinking on the role of industrial policy in the twenty-first century.

Finally, we need to think about planetary solutions to the impending resource crunch as more countries enter their intensive phases of industrialisation. Here, I turn to the demand side of the supply chain. By analysing new initiatives of rare earth importers–notably recycling of secondary materials and creating alternative supply chains through joint ventures on exploration projects outside China–GRIP-ARM provides original insights on how we construct planetary solutions to the worsening demand-supply imbalance on critical raw materials. We now know that renewable energy and the transition to a green economy is costly, and it would require more extraction in terms of quantity and types of minerals. The construction of electric vehicles, solar panels, and modern technology will require more elements in the periodic table. Therefore, ‘sustainable mining’ (which for some is an oxymoron!) is a central agenda in the future of advanced industrialised countries which are leading the world towards a green future.

Resource Producers

The empirical anchor of the project is organised around country cases through which three distinctive patterns can be observed: (1) China’s policies towards incorporating mineral extraction, processing and research with regional military, heavy machinery and high technology industries in the context of the New Silk Road Campaign; (2) Brazil’s untapped resource potential is being used in support of domestic industrial development consistent with its history of resource nationalism and state capitalism; and (3) Kazakhstan’s geopolitical importance as a resource producer is being recast through the SARECO (Summit Atom Rare Earth Company) joint venture with Japanese capital aimed at building a vertically-integrated supply chain.

Resource Importers

Rare earths mining enter into the domestic market as intermediate and final products, which are often used as inputs for industrial production in wind turbine, manufacture of transport equipment, computer, optical products, and electrical equipment to name a few. This Work Package examines the demand side of the value chain, exploring how European and Japanese firms have reorganised their business strategies in response to the 2010 crisis and China’s restrictive policies on rare earths.

Global Value Chains of Rare Earths Mining

The global value chains of rare metals is rapidly changing due to the pull and push factors in the supply chain. The work package will analyse how industrial policy through rare earths are carried out in the three countries and the dynamic feedback loops created by efforts of high-tech firms and EU/Japanese governments to reduce their long-term supply risk and promote ‘greener’ forms of extraction.

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