The Chinese Finger Trap

Posted by By at 19 November, at 12 : 52 PM Print

When I was a kid a friend gave me a Chinese finger trap – a woven bamboo tube that got wider when compressed and narrower when stretched. These

Scott Paterno

characteristics made it extremely easy for you to get you fingers into the trap, but very hard to get them out – similar to what we now face with the Chinese domination of rare- earth minerals.

You may not know it, but over the last few years, we have been subsidizing the growth of a Chinese monopoly over our economy, one hybrid car at a time. Underneath, the hood of your hybrid car are an battery and permanent magnets manufactured using materials known as Rare Earth Minerals.

The rare earths are made up of 17 elements, including Lanthanum and Neodymium. These two are critical in the building of hybrid cars. And 97% of the world’s production is currently in the People’s Republic of China, along with most of the known reserves.

Consider the absolutely disastrous logic behind our hybrid policies – so bad only the US government could even conceive it – and then you tell me how it makes sense.

The US Government, deeply in debt, borrows money from China in order to be able to meet its budget obligations. Inside that budget is a tax policy that gives rebates to upper, middle-class suburbanites for buying a hybrid car.

The essential technology that makes that hybrid car possible is reliant on raw materials controlled by a quasi-hostile power – a country that holds billions of dollars in US debt. So essentially we are borrowing money from China to subsidize the transition to a non-oil dependent economy – to a rare earth dependent economy?

Say what you want, but at least there is oil being developed all over the place and a global market that prevents any one player from forcing us all to dance to his tune.

But in this case we are tying our renewable dreams to one supplier. Rare earths and the use of them in batteries for solar power and windmills (each turbine uses some 2 tons of rare earths) which is at the heart of the renewable technologies.

But as we grow more dependent on these technologies we grow more dependent on China. And this leaves us vulnerable. The Chinese recently announced that they will be limiting exports over the next 4 years to levels that will be dramatically lessen than global demand.

They are, in essence, forcing companies that want to manufacture with rare earths to build their facilities in China. They intend to keep a steady supply of the products produced with rare earths headed to market, but they are going to use their strategic advantage to turbo charge their economy by forcing production – and the jobs that go with them – to stay “insourced.”

I am not faulting the Chinese for pressing this advantage. They are capitalizing on the ignorance of the American consumer as to how the hybrid works and where the money is going.

Hell, they are even banking on environmentalists not realizing the nasty stuff that happens to get the raw materials to produce these “clean and green” cars.

The fact is rare earths exist inside rock formations that contain a lot of radioactive material that has to be processed out to mine the needed elements. This process involves polluting, including generating air emissions with fluorine and sulfur, wastewater that contains excessive acid, and radioactive waste.

The only significant known U-S source of rare earths is a mine in California.

The last time it produced an ounce was 1998. There is talk of re-starting it, but in the People’s Republic of California, they want cars with pseudo “good karma” that they are “clean and green” without the messy side effects needed to create that “clean and green” car.

And even if we did start producing at maximum levels we would only reach 10% of demand in 2014 based on trend lines.

With this in mind, it is clear that for the foreseeable future, any move toward hybrids and any tax incentive to boost their purchase is a devil’s bargain.

By forcing us toward technologies dependent on resources, we do not possess we put ourselves at a tremendous strategic disadvantage. And we are subsidizing it with borrowed money.

In essence, we are borrowing against our kids from the drug dealer, buying the drug – and acting sanctimonious in the process. It doesn’t have to be that way. There is a “third way,” if you will: Natural Gas. More to come.

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This post was written by:
- who has written 77 posts for Rock The Capital
Scott Paterno is an accomplished policy analyst and political consultant based in Hershey, PA. Mr. Paterno, never one to sit still, has practiced law, run for a house seat, and worked as lobbyist in Harrisburg and Washington. Paterno is Vice Chairman of the Sustainable Energy Fund and is currently pursuing a master’s degree in Political Science. He is happily married with three children. - Email scottp

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