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"The shift to sustainable mining is no longer optional. It’s an economic and environmental imperative."
Rare earth elements (REEs) are vital to the green energy revolution. From neodymium in turbine magnets to dysprosium in EV motors, these 17 metals power decarbonization. Yet their supply chain often leaves a heavy environmental footprint. Mining and processing REEs can emit significant carbon and produce toxic waste. To meet climate goals, industries and governments must adopt cleaner technologies, enforce standards, and use carbon credits to offset emissions.
Over the past decade, calls for sustainable rare earth production have intensified—especially in China, which leads the global supply. China’s recent policies and market actions have heavily influenced the industry’s sustainability path, spurring responses from the U.S. and other G7 nations. Meanwhile, select companies are emerging as climate leaders, adopting strategies like renewable-powered processing and carbon offsetting.
In this article, we compare China’s rare earth dominance with Western efforts, highlight sustainability leaders, and examine how carbon trading and offsets are reshaping the industry.
China dominates the rare earth market, accounting for 70% of global mining and 90% of refining as of 2023. This grip stems from decades of state-backed strategy—integrating every link of the supply chain from mine to magnet. Early advantages like cheap labor and weak environmental rules helped China cement its lead.
In contrast, G7 countries lag far behind. The U.S. operates a single major mine—Mountain Pass in California—supplying just 12% of global demand. Europe, meanwhile, produces virtually no rare earths and relies on imports for 98% of its needs. This imbalance raises major geopolitical and environmental concerns.
China’s near-monopoly also concentrated the environmental costs. In the 2000s, rare earth mining in China became infamous for its pollution—each ton of REEs created up to 2,000 tons of toxic waste, including radioactive sludge and harmful gases. Today, China and the West are exploring cleaner solutions, from renewables to carbon credits.
Bayan Obo, the world’s largest rare earth mine in Inner Mongolia, reportedly generated over 70,000 tons of radioactive thorium waste, leaking into groundwater. This stark example highlights a key issue: clean energy technologies aren’t truly green if their materials cause significant environmental harm.
Around 2010, China began enforcing stricter environmental controls on rare earth producers. By 2011, new pollution standards for air and water led to the closure of nearly 90% of heavy rare earth mines unable to comply. These reforms aimed to reduce the sector’s environmental toll.
By the mid-2010s, environmental compliance—not just output quotas—became the main limit on China’s REE production. Tighter enforcement helped curb harmful practices, signaling a shift toward more sustainable resource management.
In 2021, China formed the state-owned China Rare Earth Group, merging key firms to streamline production and enforce sustainability standards. The move reflects a broader effort to align industrial growth with climate goals in the global green energy supply chain.
China’s pledge to go carbon neutral by 2060 is already reshaping its high-emission sectors. Its national emissions trading system (ETS), launched in 2021, is now the largest in the world. By 2023, it covered over 5 billion tonnes of CO₂—about 40% of national emissions—and is expanding to heavy industries like steel, cement, and aluminum. Though rare earth mining isn’t directly in the ETS, it’s feeling the impact through rising electricity prices—since power is included in the system. To adapt, Chinese firms are piloting greener extraction methods. These include electrokinetic mining, which reduces chemical leaching, and biomining, which uses bacteria or plants to extract REEs. While early-stage, such innovations show industry recognition of environmental responsibilities.
In response, G7 nations are fast-tracking rare earth projects that meet higher environmental standards. The U.S. Department of Defense awarded $120M to Australia’s Lynas in 2024 to build a Texas processing plant, aiming for a secure, non-Chinese source of heavy REEs. Japan has also moved decisively—slashing its dependence on Chinese rare earths from 90% to 58% by 2020 by backing producers like Lynas.
the EU’s 2024 Critical Raw Materials Act aims to boost domestic mining and recycling—but with a sustainability lens. The goal isn’t just supply security, but ensuring extraction is both responsible and climate-aligned.
A global sustainability standoff is underway. China dominates rare earth supply but faces pressure to cut emissions. Meanwhile, Western countries are racing to build rare earth industries that are not only reliable, but greener and more ethical.
The key question has shifted—from quantity to quality. It’s no longer about who produces the most, but who can do so with the lowest environmental and social cost. The next sections spotlight leading companies tackling this challenge and the climate tools they use.
Several companies around the world have positioned themselves as climate and sustainability leaders in rare earth mining and processing. Below, we highlight three notable examples, examining their strategies to combat climate change.
Lynas Rare Earths, an Australian company with processing operations in Malaysia, is often cited as the only significant rare earth producer outside China. As such, Lynas has faced intense scrutiny over its environmental practices – and in recent years it has taken steps to brand itself as an “ethical and responsible” producer.
In 2023, Lynas updated its Climate Change Policy to target net-zero carbon emissions by 2050. The company is developing science-aligned emissions reduction targets and acknowledges the need to limit warming in line with global climate goals. In practice, Lynas has focused on improving its processing methods and waste management. It is building a new cracking and leaching plant in Kalgoorlie, Western Australia, which will incorporate enhanced radiation controls and waste handling, addressing community concerns that arose at its Malaysian facility. Lynas also touts that it meets strict regulatory standards in Malaysia, though NGOs have accused it of “greenwashing” at times, indicating room for more transparency.
On the climate side, Lynas’s carbon footprint data shows total emissions of about 126,000 tonnes CO₂e in 2023 (Scopes 1 and 2 combined). This actually represented a slight reduction from 2022, partly due to operational changes. However, Lynas has not yet publicly detailed how it will achieve deep emissions cuts; its near-term carbon reduction initiatives remain unspecified as of 2024.
In the United States, MP Materials has become synonymous with the revival of domestic rare earth production. MP Materials owns the Mountain Pass mine in California, which was once a world-leading REE source before Chinese competition shuttered it in the early 2000s. Since acquiring Mountain Pass, MP Materials has emphasized sustainable practices and closed-loop operations as key differentiators. The company proudly states that Mountain Pass is “the world’s cleanest and most environmentally sustainable rare earth production site”.
Marketing hyperbole aside, they have implemented tangible green measures:
Mountain Pass integrates mining, beneficiation, and refining on-site, eliminating the need to ship ore overseas—previously to China. This reduces transport emissions and energy use. Its high-grade ore also requires less processing, further cutting the carbon footprint.
MP Materials uses dry stacking—uncommon in rare earth mining—filtering water from waste and stacking it dry. This saves water, cuts energy use, and nearly eliminates groundwater contamination risks.
As a near net-zero-discharge site, MP recycles about 95% of its processing water. This closed-loop system reduces fresh water needs and prevents polluted runoff in drought-prone California.
While not fully decarbonized, MP is exploring solar and has upgraded its fleet to Tier 4 emissions standards. Industry reports suggest a goal of sourcing 80% renewable electricity by 2030.
MP is building an energy-efficient magnet plant in Texas to shorten the supply chain and use cleaner U.S. energy. It’s also investing in magnet recycling to cut emissions and reduce raw material demand.
MP has focused on operational decarbonization over offsets, and has not publicly announced a net-zero-by-year target yet, but has issued a Green Financing Framework to fund its projects, indicating it tracks sustainability metrics like GHG emissions closely. We may infer they might consider carbon credits down the line to neutralize hard-to-abate emissions (for example, process emissions or remaining diesel use).
A different approach to rare earth sustainability comes from Rainbow Rare Earths, a smaller player with projects in Africa (South Africa and previously Burundi). Rainbow is not yet a large producer, but it exemplifies innovation by literally mining the waste instead of the earth. The company’s flagship Phalaborwa Project in South Africa involves extracting rare earth elements from phosphogypsum tailings – essentially the leftover waste stacks of a decades-old phosphate fertilizer plant. These gypsum stacks contain significant REE concentrations.
By recovering rare earths from this mining waste, Rainbow avoids the most carbon-intensive steps of a typical mining operation: no need for new ore mining, drilling, or rock crushing. The energy and carbon savings are huge, since crushing and milling rock is normally one of the largest sources of emissions in mining. Rainbow touts that this approach will eliminate many emissions and environmental impacts associated with greenfield mining. Additionally, they plan to remediate the waste site as they extract REEs, effectively recycling an environmental liability into a resource. Rainbow Rare Earths is aiming for high sustainability performance from the outset. The company’s leadership has highlighted efforts to reduce the project’s carbon footprint by exploring renewable energy options for powering operations. Given South Africa’s coal-heavy grid, Rainbow’s plan to use on-site solar or other renewables could significantly cut Scope 2 emissions during refining. Operating in a jurisdiction with strong environmental regulations also positions the company as a leader in low-impact rare earth production.
Rainbow’s carbon strategy is promising. If its methods avoid substantial emissions compared to conventional mining, the company could claim carbon benefits—perhaps through credits tied to avoided methane or by marketing its rare earth oxides as low-carbon and premium-grade. While Rainbow hasn’t entered carbon trading yet, likely due to being in development, its low-emissions approach may reduce the need for offsets. It could even pursue carbon-neutral certification or explore selling credits for environmental cleanup.
More broadly, Rainbow shows how circular economy practices—like using secondary sources—can shrink rare earths’ climate footprint at the root, reducing reliance on offsets altogether.
Climate-leading rare earth companies follow a core principle: reduce emissions where possible, offset the rest. Lynas and MP Materials focus on improving operations, viewing carbon credits as a backup. Rainbow Rare Earths, by contrast, minimizes emissions from the start through a different resource model.
Companies like Lynas, MP Materials, and Rainbow Rare Earths offer glimpses of how the industry can reconcile the demand for critical minerals with the need to combat climate change. Carbon credits are an essential solution for hard-to-decarbonize processes like ore roasting or fossil-powered operations, while verified offsets, such as reforestation or renewable energy projects, can help companies claim progress toward net-zero goals.
As carbon markets mature, rare earth producers may begin offering “carbon-neutral oxides” backed by verified credits—appealing to EV and wind turbine manufacturers seeking low-carbon inputs. The rare earth sector is at a climate and geopolitical crossroads. China’s dominance is easing slightly, while newer players adopt cleaner, more innovative practices that break from the industry’s polluting past. The urgency that competitiveness drives creates an opportunity for sustainability as an advantage and while there is much work ahead, demand for rare earths will undoubtedly boom as we accelerate the green transition.
China will remain a key supplier and its actions on environmental regulation and carbon pricing will heavily influence global outcomes. The West will push the envelope on innovation and stricter standards, but will also rely on policies like carbon pricing and CBAM to nudge the playing field toward greener outcomes.
In this dynamic context, carbon credits and markets will serve as important tools – a way to bridge gaps and finance emission reductions, but only when ensuring that any offsets used are high-quality and part of a credible path to net-zero.
For industry executives, policymakers, and investors reading this, we at CarbonCreditCapital.com are ready to assist. If your company wants to lead on sustainability, whether through developing a carbon reduction strategy, purchasing verified carbon credits to offset emissions, or collaborating on innovative climate projects, reach out to us now for expert consultation, quality carbon credit purchases, and partnership opportunities. Let’s make the rare earth supply chains of tomorrow something we can all be proud of today.
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