Evaluation of Externalities Associated with Rare Earth Exploitation at Bayan Obo

"Rare earth elements (REEs) are a kind of new materials which have excellent optical, electrical and magnetic properties, and they play an important role in the development of high technology and green energy industries. With abundant reserves and a wide range of REE type, rare earth industry has a rapid development in China in recent years. However, environmental issues associated with REE exploitation have severely restricted the sustainable development of rare earth industry in China. At present, literatures on the externalities of REE exploitation are very limited, especially in China. This paper builds an evaluation model based on life cycle evaluation to estimate the external costs of REE exploitation at Bayan Obo. The results show that the external costs for producing one metric tonne of rare earth oxides (REO) in Bayan Obo was CNY 34739 in 2013, the external costs of waste gas, waste water, radioactive substance, REE resource depletion, and land occupation are CNY 14945, 12515, 1400, 3199, and 2680, respectively. Waste gas and water constitute about 79% of the total external costs. The internalization of the external costs would reduce the financial profit of Northern Rare Earth (Group) by 18%. This study has taken into account only those externalities whose market values can be estimated, and therefore the external costs of REE exploitation in Bayan Obo is likely to be underestimated. The results fill the gap in literature and provide further understanding on the external cost of REE exploitation.Introduction / Background Along with increasing concern about environmental pollution problems caused by the usage of fossil fuel and the shortage of fossil energy, a transition has occurred where development has moved toward green and renewable energy sources with less pollutant emissions (Stegen 2015). Rare earth elements (REE) are a group of important raw materials for these trends since they have unique magnetic, electronic and optical properties, and thus make them widely used in making high-performance magnets and energy saving lamps (U.S. DOE 2010). In addition, REE are crucial for manufacturing of widespread high-tech applications in medical, defense and electronic industries. Many countries have made medium-term and long-term plans for the development of their REE industries, and the annual growth rate of global REE demand is expected to increase by 6% by 2020, and reach about 170,000 metric tons of rare earth oxides (REO) by 2020 (Rollat et al 2016)."