Energy-Saving Rare Earth Magnets: political leadership needed

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

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Rare earth supply chains are the linchpin that completes the EU’s ambition for energy transition, as permanent magnets yield energy savings in technology applications used in European automotive, wind, and industrial pump manufacturing sectors. The rare earths industry and its downstream customer industries are coming together for grassroots, industry-led effort to ensure essential public policy alignment via the Innovation Fund, as part of the ETS reform.

Nabeel Mancheri is the Secretary General of the Brussels-based global Rare Earth Industry Association (REIA).

Across Europe, an increasingly broad range of stakeholders are coalescing around the conviction that Europe’s continued economic success will be driven by the creation of green and secure value and supply chains.

With a war on our doorstep that has dramatically realigned European security considerations, one question looms: how can we foster an EU-domestic industrial ecosystem that is more resilient to international crises and drives forward the green transition in Europe and beyond?

Our answer is centred around three core principles: 1) re-calibrating critical dependencies on foreign suppliers by establishing European strategic autonomy; 2) re-industrialization that champions nascent green value chains, protecting both current European manufacturing jobs and generating employment in new STEM competencies; 3) fast-tracking the decarbonization of our economies.

We believe that the linchpin to this industrial policy conundrum is the introduction of one simple modification to the existing legislative framework: increase the funding opportunities for innovative rare earths projects in the Innovation Fund. Either by increasing the scope for rare earths in future calls or with a dedicated call.

This could pave the way to developing an emerging and critical value chain in Europe. Moreover, it would better equip Europe’s response to future supply chain crises, our ability to attract new innovative industries, create jobs and provide the critical materials needed for energy-saving applications – particularly for the growth of electric vehicles, wind power, and high-efficiency industrial pumps.

Both the COVID pandemic and the ongoing war are exerting enormous pressure on Europe’s economy and political stability, culminating in rising energy prices, uncertainty surrounding gas deliveries, and broader disruption to global supply chains.

As was put forward in an interesting article published by the European Council on Foreign Relations ­– co-signed by DG CLIMA’s Director General Mauro Petriccione – the climate-security nexus is now a reality that creates frictions both at the domestic and international level.

A carbon-neutrality objective by 2050 requires a deep renewables-based electrification of our energy demand (e.g., electric vehicles), and renewable hydrogen where direct electrification is not possible (e.g., steel industry). This means that Europe needs to establish domestic supply chains for critical materials that will help deliver its climate ambitions.

The rare earths industry and its downstream customer industries have teamed up to bring forward part of the solution. We firmly believe – and the energy-saving data of permanent magnet applications proves this – that by investing in the development of EU rare earths supply chains we can meet these objectives.

However, to mobilise the necessary private investment in the rare earth sector, EU Member States require a financing tool that supports innovation in rare earths and can create a level-playing field. The Innovation Fund is a unique policy instrument for this particular challenge; it is the fastest solution to an urgent problem and remains very inclusive for business cases in any EU member state.

Rare earth permanent magnets offer the most energy-efficient solution for EV motors, reducing battery size by 10-30% per given range and alleviating the already strained gap between supply and demand of lithium, cobalt and nickel.

They are also crucial for wind turbines – over 70% of offshore wind turbines require permanent magnets. They improve by up to 20% the efficiency of both industrial pumps and water circulation pumps in residential applications – resulting energy savings equating to the power generation capacity of two nuclear plants.

Negotiations around the Fit for 55 (to which the EU ETS is central) come at a decisive moment, as the RePower EU Plan maps out a less dependent Europe. This package of measures is key to lift the barriers to the deployment of incorporating more renewables into our energy mix and creating new investment opportunities; the Innovation Fund can provide the suitable framework for a less fragmented EU approach.

In the context of the current debate around the review of the EU ETS, including rare earths and permanent magnets in the scope of the Innovation Fund – without requiring an overhaul of the legislative framework – is crucial.

This one measure has the potential to kick-start the development of a rare earth supply chain in Europe, consequentially reinforcing the EU’s decarbonisation and re-industrialization efforts, whilst also attracting new innovative industries to the region and bolstering the EU’s strategic autonomy.

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