China is planning to ban exports of technology for refining rare earth minerals. Such a move, if taken, is likely to backfire even more spectacularly than its previous attempts to weaponize the trade in rare earths itself.
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]
In 2010, a dispute between China and Japan over which country owns a group of islands off the northeast coast of Taiwan caused Beijing to impose export restrictions on all 17 rare earths. That was a problem for Japan, which depends on elements like neodymium, dysprosium and terbium as essential components of equipment such as motors, LEDs, lasers and fuel cells. At the time, China had a near monopoly of the world’s production of the metals. Without alternative sources of supply, Japan’s hi-tech industry would be crippled.
There was a big lesson from that crisis: Given Beijing’s willingness to use rare earths as a geopolitical weapon, source diversification was an absolute necessity.
Japan Oil, Gas and Metals National Corp. or Jogmec, a state-owned enterprise set up to guarantee the country’s access to essential materials, funded Australian producer Lynas Rare Earths Ltd. at well below market rates to encourage the creation of a non-Chinese supply chain.
Thanks to that investment, Lynas now produces nearly 20,000 metric tonnes a year of rare earth oxides from its Mount Weld mine in Australia and processing plant in Malaysia, more than enough to meet all of America’s demand let alone the 500 tonnes or so needed for defence-critical applications.
Last month, it signed a contract to build a new facility processing 5,000 tonnes a year of rare earths in Texas, jointly funded with the US Department of Defense. The Pentagon also last year helped fund a series of other projects to guarantee more processing in the US, including from the large Mountain Pass mine in the Mojave Desert where listed MP Materials Corp. operates.
The result of all this has been dramatic. From 98% of global mined production in 2010, China’s market share had fallen to 58% by 2020. Mount Weld and Mountain Pass alone now account for nearly a quarter of global rare earths supply.
Meanwhile, the US Pentagon also set up a government stockpile of rare-earth elements analogous to the US strategic petroleum reserve, and announced plans to buy about 5,000 tonnes last year. Separately, major importers brought and won a case against China at the World Trade Organization over rare earths, as well as tungsten and molybdenum, two other elements where it had an outsize share of supply.
Occasional sabre-rattling over the past year has already driven up the valuations of non-Chinese producers, making it even easier for them to fund expansions of mining and processing capacity. Lynas last August raised $335 million, selling new shares to pay for a processing facility in Australia and upgrades at its Malaysian plant. The market capitalization of MP has surged more than tenfold since it went public via a SPAC deal last July.
Nothing about this turn of events should surprise anyone.
When Arab countries used their dominance of oil exports to push up the price of crude oil in the 1970s, the outcome was not a permanent Gulf stranglehold on energy, but a rush to diversify. Rich countries retired their oil-fired power stations and built coal and nuclear generators instead, while new wells were tapped in the North Sea, Siberia, Mexico and Texas.
When former US President Richard Nixon imposed an export embargo on soybeans shortly before the 1973 Arab oil embargo to help rein in galloping domestic inflation in the US, there was a similar outcome. Japan, which depended on America for about 92% of its soybean supply, helped establish a Brazilian industry to diversify its import base. It’s now the bigger global producer of such oilseeds.
The world depends on sprawling supply chains of scarce materials for a range of essential products, from electric vehicle (EV) batteries to fertilizer and MRI scanners. Most of the time, we pay little attention to the interdependency that’s built into these trade networks, because no player is reckless enough to damage its own position in the market by using it as geopolitical leverage.
As China itself is striving to demonstrate in the far more technically complex market for semiconductors, though, political restrictions on exports will only cause major importers to re-configure their supply chains to be more resilient. Beijing’s control of rare earths is as much of a paper tiger as it ever was.
Receive Daily Updates
Recent Posts
- Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition, a collective of the United States, United Kingdom and Norway governments, came up with a $1 billion fund.
- LEAF is supported by transnational corporations (TNCs) like Unilever plc, Amazon.com, Inc, Nestle, Airbnb, Inc as well as Emergent, a US-based non-profit.
- The world lost more than 10 million hectares of primary tropical forest cover last year, an area roughly the size of Switzerland.
- Ending tropical and subtropical forest loss by 2030 is a crucial part of meeting global climate, biodiversity and sustainable development goals. Protecting tropical forests offers one of the biggest opportunities for climate action in the coming decade.
- Tropical forests are massive carbon sinks and by investing in their protection, public and private players are likely to stock up on their carbon credits.
- The LEAF coalition initiative is a step towards concretising the aims and objectives of the Reducing Emissions from Deforestation and Forest Degradation (REDD+) mechanism.
- REDD+ was created by the United Nations Framework Convention on Climate Change (UNFCCC). It monetised the value of carbon locked up in the tropical forests of most developing countries, thereby propelling these countries to help mitigate climate change.
- It is a unique initiative as it seeks to help developing countries in battling the double-edged sword of development versus ecological commitment.
- The initiative comes at a crucial time. The tropics have lost close to 12.2 million hectares (mha) of tree cover last year according to global estimates released by Global Forest Watch.
- Of this, a loss of 4.2 mha occurred within humid tropical primary forests alone. It should come as no surprise that most of these lost forests were located in the developing countries of Latin America, Africa and South Asia.
- Brazil has fared dismally on the parameter of ‘annual primary forest loss’ among all countries. It has lost 1.7 mha of primary forests that are rich storehouse of carbon. India’s estimated loss in 2020 stands at 20.8 kilo hectares.
- Between 2002-2020, Brazil’s total area of humid primary forest reduced by 7.7 per cent while India’s reduced by 3.4 per cent.
- Although the loss in India is not as drastic as in Brazil, its position is nevertheless precarious. For India, this loss is equivalent to 951 metric tonnes worth carbon dioxide emissions released in the atmosphere.
- It is important to draw comparisons between Brazil and India as both countries have adopted a rather lackadaisical attitude towards deforestation-induced climate change. The Brazilian government hardly did anything to control the massive fires that gutted the Amazon rainforest in 2019.
- It is mostly around May that forest fires peak in India. However, this year India, witnessed massive forest fires in early March in states like Odisha, Uttarakhand, Madhya Pradesh and Mizoram among others.
- The European Union’s Copernicus Atmospheric Monitoring Service claimed that 0.2 metric tonnes of carbon was emitted in the Uttarakhand forest fires.
- Implementation of the LEAF Coalition plan will help pump in fresh rigour among developing countries like India, that are reluctant to recognise the contributions of their forest dwelling populations in mitigating climate change.
- With the deadline for proposal submission fast approaching, India needs to act swiftly on a revised strategy.
- Although India has pledged to carry out its REDD+ commitments, it is impossible to do so without seeking knowledge from its forest dwelling population.
Context:-
At the recently concluded Leaders’ Summit on Climate in April 2021, Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition, a collective of the United States, United Kingdom and Norway governments, came up with a $1 billion fund plan that shall be offered to countries committed to arrest the decline of their tropical forests by 2030.
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]What is LEAF Coalition?
Why LEAF Coalition?
Brazil & India
According to the UN-REDD programme, after the energy sector, deforestation accounts for massive carbon emissions — close to 11 per cent — in the atmosphere. Rapid urbanisation and commercialisation of forest produce are the main causes behind rampant deforestation across tropical forests.
Tribes, Forests and Government
Disregarding climate change as a valid excuse for the fires, Indian government officials were quick to lay the blame for deforestation on activities of forest dwellers and even labelled them “mischievous elements” and “unwanted elements”.
Policy makers around the world have emphasised the role of indigenous tribes and local communities in checking deforestation. These communities depend on forests for their survival as well as livelihood. Hence, they understand the need to protect forests. However, by posing legitimate environmental concerns as obstacles to real development, governments of developing countries swiftly avoid protection of forests and rights of forest dwellers.
For instance, the Government of India has not been forthcoming in recognising the socio-economic, civil, political or even cultural rights of forest dwellers. According to data from the Union Ministry of Tribal Affairs in December, 2020 over 55 per cent of this population has still not been granted either individual or community ownership of their lands.
To make matters worse, the government has undertaken systematic and sustained measures to render the landmark Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 ineffective in its implementation. The Act had sought to legitimise claims of forest dwellers on occupied forest land.
Various government decisions have seriously undermined the position of indigenous people within India. These include proposing amendments to the obsolete Indian Forest Act, 1927 that give forest officials the power to take away forest dwellers’ rights and to even use firearms with impunity.
There is also the Supreme Court’s order of February, 2019 directing state governments to evict illegal encroachers of forest land or millions of forest dwellers inhabiting forests since generations as a measure to conserve wildlife. Finally, there is the lack of data on novel coronavirus disease (COVID-19) deaths among the forest dwelling population;
Tardy administration, insufficient supervision, apathetic attitude and a lack of political intent defeat the cause of forest dwelling populations in India, thereby directly affecting efforts at arresting deforestation.
Way Forward
Tuntiak Katan, a global indigenous leader from Ecuador and general coordinator of the Global Alliance of Territorial Communities, aptly indicated the next steps at the Climate Summit:
“The first step is recognition of land rights. The second step is the recognition of the contributions of local communities and indigenous communities, meaning the contributions of indigenous peoples.We also need recognition of traditional knowledge practices in order to fight climate change”
Perhaps India can begin by taking the first step.