Beijing’s rare earth weapon: A new oil shock for the green age
.jpeg)
China’s April 2025 rare earth export restrictions on seven critical elements are disrupting global clean tech supply chains.
The curbs have increased costs and are giving Beijing significant leverage in the renewable energy sector.
This move threatens the global transition to renewable energy.
It could force countries to seek alternative sources and potentially making clean technologies less competitive with fossil fuels.
China’s April 2025 rare earth curbs tighten its grip on clean tech supply chains, driving up costs and giving Beijing unprecedented leverage in the global race to decarbonise.
China’s strategic export restrictions in April 2025 on seven critical rare earth elements are creating unprecedented supply chain disruptions that threaten to derail the global transition to renewable energy, forcing countries worldwide to scramble for alternative sources while potentially making clean technologies more expensive and less competitive with fossil fuels.
The restrictions target samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium — elements essential for manufacturing wind turbines, solar panels and electric vehicle batteries. These materials form the backbone of green energy infrastructure, particularly in producing high-strength, lightweight magnets crucial for electric vehicle motors, wind power systems and various renewable energy components requiring high torque with low-energy consumption.
China’s dominance extends far beyond raw material extraction, controlling 76 per cent of global rare earth element refining capacity, according to the International Energy Agency’s Global Critical Minerals Outlook 2025. This concentration gives Beijing unprecedented leverage over technologies crucial for the clean energy transition, as even countries with domestic rare earth reserves remain dependent on Chinese facilities to transform raw materials into usable components.
The timing poses particular challenges for renewable energy’s ambitious expansion plans. Wind power systems rely heavily on rare earth magnets for generators, while battery-powered electric vehicles depend on these materials for efficient motor operation. Solar panel manufacturers require specific rare earth elements for high-efficiency photovoltaic cells, making the entire clean energy ecosystem vulnerable to supply disruptions.
India faces immediate challenges from these restrictions, particularly in its rapidly expanding electric vehicle sector. Indian Commerce and Industry Minister Piyush Goyal characterised China's export restrictions as a “global wake-up call”, warning of short-term impacts on sectors critical to India's clean energy ambitions. The automotive industry’s response highlights the severity, with companies like Tesla facing potential production constraints that could slow clean transportation technology adoption.
The restrictions have already prompted several Indian firms to submit End User Certificates to Chinese authorities, affirming that imported magnets will not be used for defense purposes — a bureaucratic requirement underscoring the increasing politicisation of materials essential for climate action. In June 2025, India directed Indian Rare Earths Limited to halt exports of rare earth oxides to Japan under the 2012 agreement, citing the need to prioritise domestic demand for renewable energy projects.
China’s strategy represents a deliberate attempt to weaponise rare earth magnets as a geopolitical tool, similar to how Middle Eastern countries historically used oil embargoes. However, China’s motivation differs from traditional resource diplomacy aimed at revenue generation. Instead, Beijing appears to be using export restrictions to pressure countries that oppose its global ambitions, particularly regarding Taiwan, technology policies, and trade disputes with the United States.
This monopolisation stems from China's strategic foresight three decades ago when it established comprehensive rare earth supply chains while other countries remained largely inactive. Despite the name "rare earth", these elements are not actually scarce on Earth; the terminology reflects the difficult and expensive extraction and refining processes required to make them economically viable.
The broader implications extend beyond immediate supply shortages, potentially altering the economics of renewable energy deployment and making clean technologies more expensive in the short term. This price volatility threatens government incentives and private sector investments that have driven recent growth in renewable energy adoption.
India possesses substantial rare earth deposits in Odisha, Tamil Nadu, Andhra Pradesh and Kerala, according to the Geological Survey of India. However, the country currently lacks the technology for extraction and supply chains for refining, making it entirely dependent on China for rare earth magnets despite having significant domestic reserves.
The country is collaborating with Japan, the European Union and Israel to increase domestic refining capacity while discussing the establishment of a rare earth metal corridor for democratic trading of these critical materials.
The path toward supply chain independence requires coordinated international efforts combining strategic partnerships, technological development, and alternative source cultivation. Success in building resilient supply chains for critical minerals has become as essential to achieving climate goals as developing the clean technologies themselves, with the outcome significantly influencing both renewable energy deployment pace and the entire trajectory of global climate action.