Published

2 years ago

March 6, 2024

Alice Rush

Friction from the West is Loosening China’s Grip on Rare Earths Elements

As the world grapples with the urgent need for decarbonization to combat climate change, China’s top position in the production of rare earth elements (REEs) and its growing influence in the carbon credit market have had profound implications for the global energy transition

China currently dominates the market supplying over 80% of the world’s rare earth elements. Considered a monopoly in most political circles, its prominent position has raised concerns among many nations about the vulnerability of their supply chains and the geopolitical implications. But is this tension a sign of possibile future supply limitations that pose a threat to the decarbonized future?

REEs are a set of 17 metallic elements with unique electrical and magnetic properties, playing a crucial role in the mineral supply chain market. Their applications range from magnets powering electric vehicles (EVs) and wind turbines to defense systems using precision missiles, fighter jets, and submarines, energy-efficient lighting systems etc.

All these factors come down to one thing: green energy transition, because:

China leads the production of key materials for EV batteries, refining 68% of the world’s cobalt, 65% of nickel, and 60% of lithium meeting the required grade. Additionally, it holds a significant share of ~ 75% of EV batteries, and the majority of them are manufactured in China.

China maintains its position in the rare earth industry due to its comprehensive control over the entire production chain and a substantial scale in the world economies. China’s advantages extend from mining raw materials to producing high-purity rare earths, facilitated by a cost-effective labor force.

Is this enough to sustain China’s dominance in the long run? It’s indeed a matter of concern and the answer is that there are numerous loopholes in marketing strategies, political scenarios, and supply chain management.

Interdependence of global decarbonization goals and China’s REEs

The concentration of REEs in China raise concerns worldwide. Although, the US Department of Energy once said:

“the US decarbonization goals are reliant on both Chinese firms and the Chinese government”

Yet the current geopolitical scenario is slightly different. The prime issue is that no matter where the REEs are mined, they need to undergo processing in China. This grants China substantial influence over various supply chains. But in this ESG-conscious era, investors, suppliers, and consumers must be more aware of the environmental effects of their purchases.

The extraction of rare earth minerals is a complex process and has raised serious climatic concerns. A study from the Harvard International Review stated,

“Mining to produce one ton of rare earth elements results in nearly 30 pounds of dust, 9,600-12,000 cubic meters of waste gas including substances such as hydrofluoric acid and sulfur dioxide, 75 cubic meters of wastewater, and one ton of radioactive residue—2,000 tons of toxic waste altogether.”

The report also mentioned that the world’s largest rare earth element mine, Bayan-Obo in China, produced over 70,000 tons of radioactive thorium waste which is stored in a tailing pond that has leaked into groundwater.

China, being the prime market for REEs must adopt ways to make large-scale mining more sustainable and greener. Some latest technologies include:

Electrokinetic method is used by many Chinese companies to improve the leaching process and quantity of the extracted minerals. It’s mostly suitable for heavy REE with high atomic numbers like dysprosium and terbium.
Biomining is a highly sustainable process that incorporates microbes to do the leaching process. One such species is the cyanobacteria- it produces organic acid to extract the REE from recycled e-waste, ores, and wastewater.
Agromining – the process incorporates plants that have hyperaccumulation and rapid-growth capacity on REE-rich soil. Researchers say agromining works most efficiently for nickel.

However, all the sustainable alternatives mentioned above are yet to be examined deeply considering their practical values and cost effectiveness.

We can infer that China to remain in the top position in the carbon market and REEs, must operate in socially and environmentally responsible ways. The country further needs to ensure transparent supply chains free from human rights infringement and environmental damage.

On the other hand, the West is putting serious efforts to decrease dependence on China for rare earth mineral supply. They are exploring technologies to replace REEs or use fewer REEs.

For example, Tesla recently announced plans for next-generation motors using rare earths-free magnets. There’s a mixed review of this move. While some industry pundits say it would have minimal effect on the market because they believe EVs without rare earth will have a very low success rate. While others consider this to be a revolutionary move. It is further predicted that production of EVs in the coming years won’t experience a slump if they become independent of rare earth minerals. This in turn will directly push the carbon market and mitigate carbon dioxide emissions.

These are just some of the factors responsible for REE’s geopolitical conundrum and have given rise to an important question – does a fair trade agreement exist between China and the West over rare earth elements?

Will Friction from the West Loosen China’s Grip on REEs?

The US and Europe have shaken hands and signed deals without China. President Biden and his allies prioritize technology and green energy, while Global South nations, like India, push for EV adoption to boost energy independence.

One notable collaboration involves US and European rare earth companies processing monazite sands in Utah, followed by shipping rare earth carbonates to Estonia for further refinement.

In recent news, the United States Department of Defense (DoD) granted a $120 million contract to Australia’s Lynas Rare Earths to construct a heavy rare earths separation facility in Texas. Lynas USA LLC, a subsidiary of Lynas Rare Earths Ltd, will own and operate this facility. The objective of the contract is to bolster domestic industrial capacities for heavy rare earth elements (HREEs), involving metals like gadolinium, dysprosium, and ytterbium.

Japan has also fortified its rare earth supply chain by increasing investments in Lynas, securing a steady supply of heavy rare earths. According to UN Comtrade data, Japan has succeeded in this strategic move to decrease its rare earth dependence on China from over 90% to 58% within a decade.

Source: elements.visualcapitalist.com

The graph above showcases China’s share of global production of REE market is expected to go down from 92% in 2010 to 58% in 2020.

Despite the solid efforts put in by the US, Europe, and Japan, China continues to defend its monopoly. It has aggressively expanded its international market by acquiring stakes in some of the largest mining companies like MP Materials (US) and Vital’s Metals (Australia).

China’s tax system and production quota are highly meticulous. It has imposed 13% VAT on magnets, metals, and oxides. Simply put, domestic rare earth product manufacturers have a 13 % cost advantage in the supply chain over foreign competitors. Thus, if countries decide to diversify their rare earth supply chains away from China, it could result in increased costs for those nations.

Will this Geopolitical Tension be a Roadblock to the Green Energy Transition?

A survey conducted by The Oregon Group, explains that 2024 is expected to witness persistent volatility and surged prices in major commodities and rare earth minerals. Contributing factors are:

supply constraints
geopolitical tensions
long-term underinvestment

This economic contraction particularly in the US and China can potentially supress demand and supply, especially in the critical mineral sector. It’s foreseeable that in the current year and beyond, a distinct divergence in critical mineral prices between Western nations and China may not manifest. And this leads one to the conclusion that if geopolitical tensions and inefficient strategic planning persist between the leading economies of the world, then energy transition goals for sustainable low-carbon future are most likely to get hindered.

The post China’s Grip On Rare Earth Elements Loosens appeared first on Carbon Credits.

Carbon Footprint

Insetting vs Offsetting: Which Actually Counts Toward Your Scope 3 Targets

Published

2 days ago

August 12, 2026

Alice Rush

The accounting differences that decide whether your nature investment shows up in inventory, in BVCM, or nowhere at all.

The question reaches a procurement team about three weeks before the next sustainability committee meeting. Someone has read about insetting. Someone else has just signed off on an offset purchase. The CSO wants to know if the two are interchangeable. The answer is no, and the GHG Protocol Land Sector and Removals Standard is the reason why.

This article walks through what each term means at audit-grade specificity, what the standards actually say about how each gets counted, and how to decide which tool fits which target. The insetting vs offsetting question is one of the most-searched in corporate climate strategy, and one of the most poorly answered. By the end of this piece, you should be able to brief a committee on the difference without notes.

The two definitions, in plain English

Offsetting means buying carbon credits generated outside your value chain and retiring them against your residual emissions. The reduction happens somewhere else, financed by you, and the credit is the receipt.

Insetting means investing in emission reductions or removals inside your own value chain, typically with suppliers, where the reduction is directly linked to the products and services you buy. The reduction happens inside the boundary of your Scope 3 inventory, and the accounting treatment is fundamentally different.

The shorthand from the University of Oxford’s Nature-based Insetting Initiative is useful: insetting is what you do with the supply chain you have; offsetting is what you do with the supply chain you do not have.

What the GHG Protocol Land Sector Standard actually says

The GHG Protocol Land Sector and Removals Standard, finalised in 2024 after a multi-year pilot, sets the rules for how land-based emission reductions and removals enter corporate inventories. The Standard distinguishes between inventory accounting (Scope 1, 2, and 3) and project or intervention accounting (a separate methodology for crediting).

For insetting, the practical implication is that supplier-level interventions, when properly measured and attributed, can reduce your Scope 3 category 1 (purchased goods and services) emissions in your inventory. The reduction is not a credit retired against the inventory; it is a lower inventory number, period.

For offsetting, the credit is retired separately. It can be reported as a contribution toward a net-zero claim under the SBTi Beyond Value Chain Mitigation framework or as part of a VCMI Carbon Integrity claim, but it does not lower the inventory number.

A practical consequence: if your Science Based Target requires a 50% absolute reduction in Scope 3 emissions by 2030, insetting moves you toward the target. Offsetting does not. This single point of difference reshapes the procurement decision.

When insetting counts toward Scope 3 (and when it does not)

Insetting counts toward Scope 3 only when several conditions are met:

The intervention must occur with an entity in your value chain.
The emissions reduction or removal must be measured against a defensible baseline.
The reduction must be attributed to your share of that supplier’s output, not double-counted with other buyers.
It must follow the inventory accounting rules in the GHG Protocol Land Sector Standard, not the project accounting rules used to generate credits.

The most common failure mode is double counting. If your supplier sells the same reduction as a credit on the voluntary market and also reports it to you as a Scope 3 reduction, the math breaks. The Standard requires you to address this risk, typically by purchasing and retiring the supplier-issued credit as part of your inventory or by contractual provisions that prevent the supplier from selling the reduction twice.

When insetting does not count toward Scope 3: when the intervention sits with a supplier you do not buy from, when the baseline is not defensible, when the attribution is unclear, or when the documentation does not survive audit. Those cases default to Beyond Value Chain Mitigation, which is still useful but operates on a different ledger.

The procurement and supplier engagement question

Insetting is harder than offsetting. That is the unfashionable truth most buyers eventually confront. Offsetting is a transaction; insetting is a relationship.

To run an insetting program, you need supplier mapping precise enough to know which farms or facilities sit at which Scope 3 boundary. You need an engagement model that gets suppliers to participate, which usually requires multi-year commitments and shared economics. You need an MRV architecture that measures the right things and produces audit-ready documentation. And you need a contractual structure that prevents double counting and protects both sides.

The trade-off you receive in return is significant. Reductions count against your inventory rather than your residual. Supplier relationships deepen, which protects sourcing continuity. Yield and quality improvements often follow regenerative interventions, which reduces your input cost over time. And the regulatory file, under CSRD, CSDDD, EUDR, and the SBTi FLAG Guidance, is materially stronger.

Choosing the right tool for the right target

A practical decision rule. If your target is a science-based Scope 3 reduction and you operate in a FLAG sector or source FLAG commodities, insetting is the structurally correct tool. If your target is a net-zero claim that includes neutralising hard-to-abate residual emissions outside your value chain, BVCM via high-integrity offsets is the structurally correct tool. Most companies with material Scope 3 exposure need both, in different proportions, sequenced over time.

The sequencing matters. Insetting takes longer to stand up but produces a permanent reduction in the inventory. Offsetting can be transacted faster but does not change the inventory and now sits under tighter claim restrictions. Treat them as complementary tools with different jobs, not as substitutes. The Accountability Framework Initiative and the IUCN Global Standard for Nature-based Solutions both provide useful guardrails for the insetting side, with biodiversity, human rights, and benefit-sharing requirements that go beyond carbon math.

If you are mapping a Scope 3 reduction roadmap and need to scope which interventions count toward your inventory versus which sit in Beyond Value Chain Mitigation, the carbon and sustainability experts at Carbon Credit Capital can help you structure a nature-based supply chain investment program that fits your FLAG exposure, your target architecture, and your audit horizon. Schedule a consultation.

Carbon Footprint

Net zero needs nature: a carbon credit guide

Published

3 days ago

August 11, 2026

Alice Rush

Net zero is often described as a balancing act: cut what you can, account for the rest, and reach zero on the ledger. That framing is useful, but it leaves something out. It treats every tonne of carbon as interchangeable and every route to zero as equally sound, while the science tells a more specific story.

Carbon Footprint

Deforestation in Malawi: causes and solutions

Published

4 days ago

August 10, 2026

Alice Rush

Malawi has lost a striking share of its forests over the past three decades. Woodlands that once covered well over a third of the country now cover less than a quarter, and the pressure on what remains is increasing. Behind those figures sit two practical questions: what is driving the loss, and what reverses it?