Rare earths should demand subsidy parity to fossil fuels, biofuels from governments
While rare earths companies target the capital markets for raising finances they are being ignored by governments. There is much to learn from the liquid fuel industry, particularly the ethanol, biodiesel and crude oil industry. Brazilian ethanol industry, the most successful biofuel program in the world.
In the United States ethanol producers and biodiesel producers receive direct subsidies at $0.45 and $1.00 per gallon, respectively, whereas in Canada ethanol and biodiesel producers enjoy $0.10 and $0.26 per liter, respectively.
Get our daily investorintel update
The Iraq war, like any strategic conflict where energy security is implicated, is also a subsidy to the oil industry, a contribution that is justified by the need to protect the global oil infrastructure in order to support global economic growth. It cost roughly $200 M per day to support to support the Iraq war, which secures roughly 4 million barrels of oil per day, de facto creating an incentive of $50 per barrel of oil. Globally, we consume roughly 90 million barrels of oil per day. Hence a 4 million barrel supply disruption could have significant impact on the price point of fossil fuel products.
Deeper yet, the cost of carbon emissions, which through its effect on climatic change causes significant damages to our economies by cataclysmic weather events, drought and flooding and which affect our global food supply is an indirect subsidy to emitters. Let’s assume here that carbon is worth $10/tonne, for argument’s sake.
This table shows the subsidies of ethanol, biodiesel and crude oil (producer subsidies, war effort in Iraq and the cost of carbon emissions at $10/tonne). Interestingly when gallons and litres are converted to one common energy unit such as a kWhr, the combined subsidies are more or less equivalent, with an average of $0.0296/kWh.
Rare earth elements have many uses, some of which enter directly into application that produce energy to displace fossil fuels. For example, a 1-megawatt wind turbine uses 200 kg of Neodymium, one of the 17 rare earth elements. Assuming twenty percent efficiency over twenty years, one such turbine will generate 35,040 MWh of electricity. A subsidy to Neodymium producers, at parity with the fuels industry, would then translate as $1,051,000 per turbine over its lifetime or $5,256,000 per tonne of Neodymium. Admittedly, there are some subsidies to wind developers but the emphasis of this article is that these subsidies should be targeted at the producers themselves to support their growth. Given that China interests control the lion’s share of the rare earth markets, government need to target producers.
Not unlike wind turbines other applications of rare earth metals in energy conservation would create a compelling set of metrics to support the contention that governments should support the rare earth industry by incentivizing producers.
The ethanol industry in Brazil is more than 30 year-old and even though it is no longer subsidized, production and use of ethanol was stimulated through a number of initiatives which can be easily adapted to rare earth producers: 1. Providing, low-interest loans for the construction of refining plants. 2. Tax incentives to stimulate the purchase of hybrid vehicles. 3. Establishment of a research and technology transfer center toward improving exploration, extraction, purification techniques and applied development. Perhaps a more significant initiative would be to create an industry association for a unified front when approaching governments.
Dr. Luc C. Duchesne is a Speaker and Author with a PhD in Biochemistry. With three decades of scientific and business experience, he has published ... <Read more about Dr. Luc Duchesne>