Paris Climate Agreement Will Fuel Demand Growth for Rare Earth Elements

Feb. 14, 2016

Goal to establish legally-binding agreement to reduce GHG emissions

In December 2015 representatives from 196 nations gathered in France for The Paris Conference of the Parties (“COP21”) – a climate-focused conference that builds on over 20 years of national and international commitments following the founding of the United Nations Framework Convention on Climate Change (“UNFCC”) in Rio de Janeiro in 1992.

The primary aim of COP21 was to establish a legally binding global agreement among nations to reduce anthropogenic greenhouse gas (“GHG”) emissions as a means of limiting global warming to 2°C or less above pre-industrial levels – a threshold scientists believe will prevent melting of the Greenlandic ice sheet and other polar ice beds.

The agreement born out of COP21 (“Paris Agreement”) is based on nationally determined contributions – as defined in ‘‘Intended Nationally Determined Contributions” (“INDCs”) submitted by each nation.

For the Paris Agreement to become legally binding it will need to be signed and ratified by at least 55 nations collectively representing at least 55 percent of global GHG emissions between April 22, 2016 and April 21, 2017.

 

Among the INDCs put forward by the world’s largest GHG emitters:

  • China has committed to reaching peak carbon output by 2030 – a landmark target in its own right given the nation’s previous resistance to place an absolute limit on GHG emissions.
  • The U.S. has committed to cutting its 2025 GHG emissions by 26% to 28% over 2005 levels.
  • The E.U. has committed to cutting its 2030 GHG emissions by 40% over 1990 levels.
  • India has committed to reducing emissions intensity per unit of GDP by 33% to 35% in 2030 over 2005 levels.

Although the specifics of some nation’s INDCs are murky, and the treaty as a whole is not yet legally binding, the Paris Agreement is nevertheless a landmark covenant that will accelerate global adoption of renewable energy sources and energy efficient technologies in the decades to come – energy sources and technologies that will drive growing demand for certain rare earth elements.

Countries will pursue emissions reductions through greater adoption of renewable energy:

According to the World Resources Institute, if the U.S., China, E.U., and five other largest GHG emitting nations globally deliver on the 2030 targets set out in their INDCs, their collective renewable energy production would more than double in 2030 over 2012 levels – from 8,900 terawatt hours per year to 19,900 terawatt hours per year.

If wind power makes up just 35% of the renewable energy sources adopted by the aforementioned nations – a proportion that is on the conservative side of the International Energy Agency’s long-term forecasts – and just 50% of all wind power generators installed utilize rare earth permanent magnets, the shift would translate to roughly 366,000 tonnes of NdFeB demand creation, equal to approximately 92,700 tonnes of neodymium oxide, 32,000 tonnes of praseodymium oxide, and 4,400 tonnes of dysprosium oxide demand creation, over the next 15 years.

Countries will pursue emissions reductions through greater adoption of energy efficient technologies:

Taking into account the INDCs put forward by individual nations, the International Energy Agency conservatively forecasts that global spending on clean technologies will reach $7.4 trillion by 2040.

A major portion of this investment will be geared towards the aforementioned renewable energy infrastructure, and an equally staggering amount will be directed towards energy efficient technologies for the built and urban environments.

In the built environment, investment in clean technologies will support strong demand growth for energy efficient lamps, appliances, connected devices, and heating, ventilation, and air conditioning (HVAC) systems – all of which utilize rare earth elements in one form or another.

Energy efficient lamps, such as light-emitting diodes (LEDs) and fluorescent lamps, utilize REE-bearing phosphors; energy efficient appliances and HVAC systems utilize permanent magnet motors and variable speed drives; and connected devices, such as tablets and touchscreens utilize both REE-containing phosphors and magnets.

Similarly, in the urban environment investment in clean technologies will sustain strong demand growth for energy efficient lamps, connected infrastructure, electric transportation, and grid storage systems – all of which utilize rare earth elements – be it phosphors in LED street lamps and accent lighting; permanent magnets in hybrid electric vehicle powertrain motors and ubiquitous sensors throughout future cityscapes; or rare earth containing batteries used to store renewable power and balance grid load.

Countries will pursue emissions reductions through greater adoption and enforced use of emissions reduction catalysts:

As middle-class populations in China, India, Brazil, Russia, and other emerging economies continue to grow in the coming decades, the world will see a growing number of fossil fuel powered vehicles on roadways, necessitating greater use of emissions reduction catalysts to manage, mitigate, and reduce global GHG emissions.

Cerium-bearing catalytic converters and fuel-borne catalyst systems found on the majority of gasoline- and diesel-powered vehicles today will be essential to managing this growth going forward.

Page 1 Created with Sketch. Back to overview