Resources Shortage for the Sustainable Economy

Most users of a Toyota Prius hybrid car, or "green" electricity produced by windmills do not know that fast expansion of "green energy" depends on very rare and costly metals and minerals. Their Prius or other hybrid car, and near-term future electric cars, and the giant high-technology wind turbines on the skyline, or even their high-efficiency light bulbs, portable computers and cellphones, and many other basic good and equipment for the Sustainable Economy depend on rare and expensive resources.

In particular this resource shortage concerns the light metal lithium, for hybrid and electric car batteries, and the rare earth elements or REE, which are widely used in new energy equipment like windmills. Looking further, we find that supply shortage of several other rare and costly metals and minerals could also threaten long-term growth of the Sustainable Economy.

The REE are also called the 'transition elements', a special group of very rare metals with strange names that until recently only science students have to learn. The rare light metal lithium, needed for electric car batteries, is another key strategic metal in short supply. World production of all 15 of the REE, mostly in China, is about 100 000 tons a year and world output of lithium, mostly from Chile and Argentina is about 20 000 tons a year. World iron and steel production was about 1.22

billion tons in 2009.

Most of the REE are already in short supply and very high value. The rarest of the REE like terbium for high efficiency light bulbs, or dysprosium which is used with neodymium and other REE for the field magnets of high tech windmills and the electric motors of Prius cars, command a market price ranging from about USD 150 to 500 a kilogram. This is far behind prices of the precious metals like gold and platinum, but much higher than current prices paid for uranium fuel used in nuclear reactors, of about USD 90 a kilogram. Current lithium metal prices are around USD 45 a kilogram. At current crude oil prices, the value for oil is about USD 0.60 a kilogram.

More worrying for rapid increase of production for the new equipment needed by the Sustainable Economy, prices for the REE and lithium are growing, and are dramatically higher than they were even 5 years ago. Due to strong demand and limited supply, intensified by China's decision to reduce REE exports by about 35% to supply its own "green energy" industries, prices of these rare metals could easily grow even faster than lithium prices, and explode in the next 5 years.

Until the boom in alternate energy equipment and other new energy efficient technologies, like high power permanent magnets for windmills and electric cars, and high efficiency fluorescent light bulbs, the role of the REE was very low or almost absent. World production of the REE was small, but demand was tiny. Supply - almost exclusively from China - was ample for the limited and specialized demand. This situation also applied to the very limited production and supply of lithium, almost exclusively from Chile and Argentina and mainly used for portable computer and cellphone batteries, but both situations have dramatically changed in the last 5 years.

While the lithium metal needed for a portable computer battery is a few grams, several kilograms are needed for the battery of one electric or hybrid car. REE needs in highly specialized scientific and technical applications, and in homely but small scale applications like cigarette lighter flints was also measured in grams, but one high-tech 1.5 MW windmill can utilise 600 kilograms of neodymium and other REE.

Most financial analysts and economic advisers to major corporations and governments agree that future shortage of the REE and lithium is a major challenge, at least equal in severity to potential oil shortage for continued growth of the global economy. Mitsubishi Motors Corporation, for example, forecasts that electric and hybrid car production in the next 10 years could increase

demand for REE, and lithium for batteries, by 7 times or 600% compared with today's production and demand. Other forecasts for demand growth are also very large.

The threat of supply shortage, intensified by industrial and transport problems, environmental constraints, and geopolitical tensions linked to reserves and supply of the REE and lithium, prices could increase so fast that further increase in global production of new energy equipment, electric cars and energy saving household goods could be severely limited. This in turn would cause big problems for the forecast boom in "green energy", already affected by the declining conviction of OECD political leaders, media and public opinion that fighting climate change needs accelerated change away from fossil energy and intensified energy saving.

The prospect of physical resource shortage also creates a challenge for developing the new mass market for items like electric cars, although this is not yet appreciated by politicians and the consumer public. Supply of the rare metals and lithium, which are very difficult to substitute, are now treated as a major strategic challenge by Japan and other import dependent nations like the USA. Official high level task forces are studying all options, but one strategy will clearly emerge - of better resource and energy efficiency across the economy. The present plans of developing the high-tech "green future", that most G20 leaders have publicly welcomed in many speeches and policy statements, may soon change to more rational and realistic targets, already reflected by declining investor support to the Sustainable Economy.

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