Washington Must Take Action To Secure Domestic Rare Earth Magnet Production in 2024
March, 2024
Washington Must Take Action To Secure Domestic Rare Earth Magnet Production in 2024
In the rapidly evolving global trade and geopolitical landscapes, expanding rare earth magnet production and securing a reliable and independent supply chain are crucial. Given our nation's growing reliance on clean energy, the importance of rare earth magnets — and the rare earth elements used to produce them — cannot be overstated.
The global push toward electrification and clean energy has caused demand for rare earth magnets to skyrocket, with industry experts expecting global demand to outpace supply by 2025. Meanwhile, over the last three decades, China has significantly increased its manufacturing capacity and dominance, controlling 92% of global rare earth magnet production or greater, and leaving the U.S. particularly vulnerable to supply shortages.
To effectively meet the demands of an electric future, lawmakers must prioritize policy initiatives that aim to re-shore and expand this critical manufacturing capability — all of which can be done while simultaneously promoting sustainability, driving economic growth, and bolstering national security.
Supporting A Domestic Magnet Industry: The Rare Earth Magnet Tax Credit Act
In 2023, Senators Markwayne Mullin and Catherine Cortez Masto introduced the Rare Earth Magnet Manufacturing Tax Credit Act, a bipartisan bill that aims to fortify and expand the domestic rare earth magnet supply chain by providing tax credits to American manufacturers.
Specifically, the bill would provide a $20 per kilogram production tax credit for magnets that are manufactured in the U.S. and increase the credit to $30 per kilogram for magnets manufactured in the U.S. whose components are produced, recycled, or reclaimed domestically.
Following the passage of the Inflation Reduction Act (IRA) in 2022 — the largest clean energy investment in global history — the Rare Earth Magnet Manufacturing Tax Credit Act marks an essential next step in achieving a clean energy future. Rare earth magnets power virtually all renewable energy sources and electric technologies, including wind turbines and EVs. Without a robust domestic supply of these critical building blocks, previous efforts by Washington to accelerate a low-carbon future will risk falling short.
Sustainable Solutions: Incentivizing End-of-Life Magnet Recycling
Currently, less than 1% of the world’s rare earth elements are ever recovered or recycled. Hundreds of thousands of tons of end-of-life NdFeB rare earth magnets are scrapped and sit idle in our landfills or are exported overseas to China and other less developed economies.
By implementing incentives such as grants, loans, and tax credits that encourage the recovery and reutilization of rare earth materials from discarded products, Washington can establish reverse supply chains for end-of-life systems that contain a significant amount of recoverable rare earth materials, such as wind turbines, EV/HEV traction motors, and data storage systems, to name a few. And it’s not just America’s burgeoning rare earth magnet manufacturing industry that will benefit from the establishment of reverse supply chains for recoverable end-of-life rare earth materials: companies such as data storage providers, wind turbine manufacturers, and EV manufacturers would benefit tremendously from incentives to recycle end-of-life magnets.
Establishing a circular economy for rare earth magnetic material will not only help offset foreign demand, but also help combat the environmental impact of traditional rare earth mining — an energy-intensive and environmentally toxic process that has long been considered an inevitable trade-off in the transition to clean energy and low-carbon electric technologies.
As companies like ours continue to develop new manufacturing and recycling technologies, we no longer have to accept the burden that mining and refining places on the environment. By providing incentives for recycling initiatives, the government can encourage sustainability within the rare earth industry, ensuring that these critical materials are used efficiently and responsibly.
The Future: Rare Earth Magnets Made in America
Incentives to re-shore and expand rare earth magnet manufacturing in the U.S. and establish a circular economy for end-of-life systems will also help to fuel economic growth and bring good-paying, high-skilled manufacturing jobs back to our communities. By prioritizing domestic rare earth magnet manufacturing capability, Washington can ensure a stable supply of rare earth magnets for various applications, from consumer electronics to EV’s and renewable energy, while simultaneously creating a more favorable environment for high-tech manufacturing broadly.
That’s why Washington must take decisive action this year to increase support for domestic rare earth magnet manufacturing and recycling. These actions would help the U.S. ensure its global leadership in the rare earth industry. Together, government and industry collaboration can pave the way for a resilient, secure, and sustainable future.