How Green is Their Valley?

As we gyrate through a crushing economy, exacerbated by what the U.S. government (NOAA) has called the worst year for the number of weather-related (read: global climate change?) natural disasters (from hurricanes and tornadoes mostly), we are still struggling with how to modify global warming, decrease reliance on increasingly-expensive fossil fuels and introduce “green” energy into a world that is terrified of nuclear power plants today (thank you Fukushima), building more coal plants than ever (one a week in China) and selling more cars to emerging nations than in the Western World. It seems an impossible task, but what are the alternatives?

The mildly good news is that the Peoples Republic of China seems to have realized that its current growth policies have provided insufficient pollution control systems, seriously compromising the quality of health and life in significant areas all across China and pushing air quality standards in the mega-cities down to remain among the worst on earth. This nascent movement in the PRC will result in more jobs being created (where?) in water filtration, electrostatic precipitators (“smokestack cleaners”), automotive pollution controls and, most of all, the development and implementation of green energy. There are a few negatives, however.

Just as there is an issue with the high cost of oil – and the fact that the United States is a very larger net importer – there are concomitant issues with the development of green technology that relies heavily on the use of minerals ranging from silicon (solar panels) to any storage of electricity in relatively efficient (not really) lithium ion batteries. I’ve blogged before on how many of these minerals, many of which (not silicon!) can be classified as scarce “rare earths,” are controlled in less than US-friendly nations on earth. For example, while lithium reserves exist within Canada, Australia and part of southern Africa, larger resources are concentrated in less-than-buddy nations in South America (like Bolivia), Russia and China. While we have limited resources in the Western States, the United States clearly is reliant on global supplies for this precious substance.

China has adopted a new policy of conserving its rare earth minerals, severely limiting (or even eliminating) exports of these precious materials. You may have noticed that the price of the new, mandated compact fluorescent bulbs has begun to skyrocket. The reason is very simple: China’s export policy as one essential rare earth – europium oxide – is an essential component in such bulbs: “By closing or nationalizing dozens of the producers of rare earth metals — which are used in energy-efficient bulbs and many other green-energy products — China is temporarily shutting down most of the industry and crimping the global supply of the vital resources.

“China produces nearly 95 percent of the world’s rare earth materials, and it is taking the steps to improve pollution controls in a notoriously toxic mining and processing industry. But the moves also have potential international trade implications and have started yet another round of price increases for rare earths, which are vital for green-energy products including giant wind turbines, hybrid gasoline-electric cars and compact fluorescent bulbs… General Electric, facing complaints in the United States about rising prices for its compact fluorescent bulbs, recently noted in a statement that if the rate of inflation over the last 12 months on the rare earth element europium oxide had been applied to a $2 cup of coffee, that coffee would now cost $24.55… A pack of three 11-watt G.E. compact fluorescent bulbs — each the lighting equivalent of a 40-watt incandescent bulb — was priced on [September 15^th] at $15.88 on Wal-Mart’s Web site for pickup in a Nashville, Ark., store. The average price for fluorescent bulbs has risen 37 percent this year, according to the National Electrical Manufacturers Association.” New York Times, September 15^th.

China has argued that it is shutting down plants primarily to retrofit mines and processing plants to make them safer and cleaner, which has impacted supply. “Chinese officials … said the government was worried about polluted water, polluted air and radioactive residues from the rare earth industry, particularly among many small and private companies, some of which operate without the proper licenses. While rare earths themselves are not radioactive, they are always found in ore containing radioactive thorium and require careful handling and processing to avoid contaminating the environment…

“[But note that:] In July, the European Union said in a statement on rare earth policy that the organization supported efforts to protect the environment, but that discrimination against foreign buyers of rare earths was not allowed under World Trade Organization rules… China has been imposing tariffs and quotas on its rare earth exports for several years, curtailing global supplies and forcing prices to rise eightfold to fortyfold during that period for the various 17 rare earth elements.” NY Times. As Japan and the Western World grapple with contracting lifestyles from a denigrated economy, these upward pressures on what are becoming basics in alternative energy are most troubling.

Back home, one exceptionally bad federal stimulus investment in now bankrupt California-based solar panel maker Solyndra (initiated during the Bush administration and closed under Obama, costing about half a billion dollars) has resulted in a new targeted focus on cutting all Department of Energy programs in this alternative energy field, despite the fact that this segment remains among the most successful applications of government money, creating over 39 thousand jobs along the way. Some of DOE’s most important efforts are directed at funding alternative energy projects that don’t rely on rare earths: “The problem is that China has the majority of the supply, and it has used that leverage to slow exports and raise prices. The U.S. is working on building up rare earth production sites, but the Department of Energy is sinking millions of dollars into an alternative: rare earth alternatives.

“The DOE announced $156 million in clean energy technology funding this week, including 15 research projects that focus on what the organization calls Rare Earth Alternatives in Critical Technologies for Energy (REACT). The projects include electric vehicle motors containing little or no rare earth metals, a manganese-based replacement for rare earth magnets found in wind turbines and electric vehicles, a cerium-based replacement for rare earth magnets, and a carbide-based composite replacement for rare earth magnets…Why so many magnet replacements? Small, light, and powerful rare earth magnets are found in most audio speakers, computer hard drives, wind turbine generators, electric cars, and even self-powered flashlights. In other words, if our supply of rare earth elements gets cut off, we're in trouble.” FastCompany.com, September 30^th.

In the end, failure to support alternative energy research and implementation of new green companies will simply put us at the mercy of outside suppliers who definitely do not prioritize American interests over their own. You can pay it now… or pay a multiple later. Once again, overreaction and a failure to think issues through may keep stupid sloganeering politicians in office, but in the end, such short-sighted polices will crush American growth.

I’m Peter Dekom, and wouldn’t be nice if absolutely everything worked as planned?