This Page

has been moved to new address

On Rare Earths and Clean Energy in China

Sorry for inconvenience...

Redirection provided by Blogger to WordPress Migration Service
body { background:#aba; margin:0; padding:20px 10px; text-align:center; font:x-small/1.5em "Trebuchet MS",Verdana,Arial,Sans-serif; color:#333; font-size/* */:/**/small; font-size: /**/small; } /* Page Structure ----------------------------------------------- */ /* The images which help create rounded corners depend on the following widths and measurements. If you want to change these measurements, the images will also need to change. */ @media all { #content { width:740px; margin:0 auto; text-align:left; } #main { width:485px; float:left; background:#fff url("http://www.blogblog.com/rounders/corners_main_bot.gif") no-repeat left bottom; margin:15px 0 0; padding:0 0 10px; color:#000; font-size:97%; line-height:1.5em; } #main2 { float:left; width:100%; background:url("http://www.blogblog.com/rounders/corners_main_top.gif") no-repeat left top; padding:10px 0 0; } #main3 { background:url("http://www.blogblog.com/rounders/rails_main.gif") repeat-y; padding:0; } #sidebar { width:240px; float:right; margin:15px 0 0; font-size:97%; line-height:1.5em; } } @media handheld { #content { width:90%; } #main { width:100%; float:none; background:#fff; } #main2 { float:none; background:none; } #main3 { background:none; padding:0; } #sidebar { width:100%; float:none; } } /* Links ----------------------------------------------- */ a:link { color:#258; } a:visited { color:#666; } a:hover { color:#c63; } a img { border-width:0; } /* Blog Header ----------------------------------------------- */ @media all { #header { background:#456 url("http://www.blogblog.com/rounders/corners_cap_top.gif") no-repeat left top; margin:0 0 0; padding:8px 0 0; color:#fff; } #header div { background:url("http://www.blogblog.com/rounders/corners_cap_bot.gif") no-repeat left bottom; padding:0 15px 8px; } } @media handheld { #header { background:#456; } #header div { background:none; } } #blog-title { margin:0; padding:10px 30px 5px; font-size:200%; line-height:1.2em; } #blog-title a { text-decoration:none; color:#fff; } #description { margin:0; padding:5px 30px 10px; font-size:94%; line-height:1.5em; } /* Posts ----------------------------------------------- */ .date-header { margin:0 28px 0 43px; font-size:85%; line-height:2em; text-transform:uppercase; letter-spacing:.2em; color:#357; } .post { margin:.3em 0 25px; padding:0 13px; border:1px dotted #bbb; border-width:1px 0; } .post-title { margin:0; font-size:135%; line-height:1.5em; background:url("http://www.blogblog.com/rounders/icon_arrow.gif") no-repeat 10px .5em; display:block; border:1px dotted #bbb; border-width:0 1px 1px; padding:2px 14px 2px 29px; color:#333; } a.title-link, .post-title strong { text-decoration:none; display:block; } a.title-link:hover { background-color:#ded; color:#000; } .post-body { border:1px dotted #bbb; border-width:0 1px 1px; border-bottom-color:#fff; padding:10px 14px 1px 29px; } html>body .post-body { border-bottom-width:0; } .post p { margin:0 0 .75em; } p.post-footer { background:#ded; margin:0; padding:2px 14px 2px 29px; border:1px dotted #bbb; border-width:1px; border-bottom:1px solid #eee; font-size:100%; line-height:1.5em; color:#666; text-align:right; } html>body p.post-footer { border-bottom-color:transparent; } p.post-footer em { display:block; float:left; text-align:left; font-style:normal; } a.comment-link { /* IE5.0/Win doesn't apply padding to inline elements, so we hide these two declarations from it */ background/* */:/**/url("http://www.blogblog.com/rounders/icon_comment.gif") no-repeat 0 45%; padding-left:14px; } html>body a.comment-link { /* Respecified, for IE5/Mac's benefit */ background:url("http://www.blogblog.com/rounders/icon_comment.gif") no-repeat 0 45%; padding-left:14px; } .post img { margin:0 0 5px 0; padding:4px; border:1px solid #ccc; } blockquote { margin:.75em 0; border:1px dotted #ccc; border-width:1px 0; padding:5px 15px; color:#666; } .post blockquote p { margin:.5em 0; } /* Comments ----------------------------------------------- */ #comments { margin:-25px 13px 0; border:1px dotted #ccc; border-width:0 1px 1px; padding:20px 0 15px 0; } #comments h4 { margin:0 0 10px; padding:0 14px 2px 29px; border-bottom:1px dotted #ccc; font-size:120%; line-height:1.4em; color:#333; } #comments-block { margin:0 15px 0 9px; } .comment-data { background:url("http://www.blogblog.com/rounders/icon_comment.gif") no-repeat 2px .3em; margin:.5em 0; padding:0 0 0 20px; color:#666; } .comment-poster { font-weight:bold; } .comment-body { margin:0 0 1.25em; padding:0 0 0 20px; } .comment-body p { margin:0 0 .5em; } .comment-timestamp { margin:0 0 .5em; padding:0 0 .75em 20px; color:#666; } .comment-timestamp a:link { color:#666; } .deleted-comment { font-style:italic; color:gray; } .paging-control-container { float: right; margin: 0px 6px 0px 0px; font-size: 80%; } .unneeded-paging-control { visibility: hidden; } /* Profile ----------------------------------------------- */ @media all { #profile-container { background:#cdc url("http://www.blogblog.com/rounders/corners_prof_bot.gif") no-repeat left bottom; margin:0 0 15px; padding:0 0 10px; color:#345; } #profile-container h2 { background:url("http://www.blogblog.com/rounders/corners_prof_top.gif") no-repeat left top; padding:10px 15px .2em; margin:0; border-width:0; font-size:115%; line-height:1.5em; color:#234; } } @media handheld { #profile-container { background:#cdc; } #profile-container h2 { background:none; } } .profile-datablock { margin:0 15px .5em; border-top:1px dotted #aba; padding-top:8px; } .profile-img {display:inline;} .profile-img img { float:left; margin:0 10px 5px 0; border:4px solid #fff; } .profile-data strong { display:block; } #profile-container p { margin:0 15px .5em; } #profile-container .profile-textblock { clear:left; } #profile-container a { color:#258; } .profile-link a { background:url("http://www.blogblog.com/rounders/icon_profile.gif") no-repeat 0 .1em; padding-left:15px; font-weight:bold; } ul.profile-datablock { list-style-type:none; } /* Sidebar Boxes ----------------------------------------------- */ @media all { .box { background:#fff url("http://www.blogblog.com/rounders/corners_side_top.gif") no-repeat left top; margin:0 0 15px; padding:10px 0 0; color:#666; } .box2 { background:url("http://www.blogblog.com/rounders/corners_side_bot.gif") no-repeat left bottom; padding:0 13px 8px; } } @media handheld { .box { background:#fff; } .box2 { background:none; } } .sidebar-title { margin:0; padding:0 0 .2em; border-bottom:1px dotted #9b9; font-size:115%; line-height:1.5em; color:#333; } .box ul { margin:.5em 0 1.25em; padding:0 0px; list-style:none; } .box ul li { background:url("http://www.blogblog.com/rounders/icon_arrow_sm.gif") no-repeat 2px .25em; margin:0; padding:0 0 3px 16px; margin-bottom:3px; border-bottom:1px dotted #eee; line-height:1.4em; } .box p { margin:0 0 .6em; } /* Footer ----------------------------------------------- */ #footer { clear:both; margin:0; padding:15px 0 0; } @media all { #footer div { background:#456 url("http://www.blogblog.com/rounders/corners_cap_top.gif") no-repeat left top; padding:8px 0 0; color:#fff; } #footer div div { background:url("http://www.blogblog.com/rounders/corners_cap_bot.gif") no-repeat left bottom; padding:0 15px 8px; } } @media handheld { #footer div { background:#456; } #footer div div { background:none; } } #footer hr {display:none;} #footer p {margin:0;} #footer a {color:#fff;} /* Feeds ----------------------------------------------- */ #blogfeeds { } #postfeeds { padding:0 15px 0; }

Saturday, September 11, 2010

On Rare Earths and Clean Energy in China

In June of this year, China announced restrictions on the exports of rare earths from the country. China introduced quotas and taxes of up to 25% on the exports of rare earths – a group of 17 chemically similar metallic elements which are used in a range of industries including in the production of electric car batteries, solar panels and wind turbines. While the country cited environmental concerns as the reasoning behind the restrictions, these export barriers also help keep the prices of rare earths in China low as there is a constant oversupply. On the other hand, foreign producers who require rare earths will face increasing costs as supply is constricted – after all, China has 97% of the world’s rare earths. The imposition of rare earth export restrictions is one way in which China is seeking to extend its domination in the international clean-energy market.

The oversupply caused by the export restrictions will only be exacerbated by news earlier this week (9/9/10) that the state is planning to consolidate the country’s currently fragmented rare earth industry – a structural change that will involve the industry being led by several big firms. The government plans to reduce the number of firms in the industry from 90 to 20 by 2015 through a series of mergers and acquisitions. Presumably, the move will allow the industry to benefit from greater economies of scale, resulting is lower costs which ultimately aid clean-energy industries. On the graph below, this consolidation represents a movement along the ATC curve to a greater level of output, resulting in lower average costs.

On top of creating an oversupply of rare earths, the Chinese government is also taking steps to increase the external economies of scale that the industry gains from. One example of this is the government’s announcement of a new, high-speed railway route linking Nanchang, the capital of inland Jiangxi province, with the industrial coastal regions. The new route will cut down travel distances for the transportation of resources by 200km and will cut costs by US$4.20 per tonne. Hence, this railway, due to be completed in 2013, will be a boon especially for the manufacturers of wind turbines and electric car batteries, as Jiangxi province’s potential for the exploitation of rare earths is 16 times the national average.

While this article has focussed on rare earths, rock-bottom interest rates, bargain deals for land and government intervention of US$1 billion every day to artificially keep the value of the yuan low have all contributed to the remarkable rise in competitiveness of Chinese producers of clean energy and ‘green’ goods. China’s efforts have certainly made clean energy more affordable – over the past two years, solar panel prices have halved and wind turbine prices have dropped by a quarter, largely due to the massive economies of scale (both internal and external) experienced by the sector. The graph below shows the rapid increase in scale of wind turbine manufacturers in China – indeed, China is set to make about half of the world’s wind turbines and half of the world’s solar panels this year.

While some may laud China for embracing cleaner fuels and weaning its manufacturers off dirty fuels, this protectionism clearly violates World Trade Organisation rules. While I am in favour of government subsidies in ‘green’ sectors of the economy, it is unfair for China to support firms which export clean energy – doing so cripples foreign producers who are unable to benefit from such large government subsidies, cheap labour etc.

In order to prevent the world from becoming over-dependent on China for alternate energy as oil and gas reserves are depleted, China should increase its relatively meagre subsidies for the domestic consumption of clean energy and withdraw the export restrictions on rare earths. Doing so would allow its clean energy industry to continue to flourish on the back of rising domestic demand, as well as permit other countries to develop their alternate energy sectors.

4 Comments:

At September 11, 2010 at 6:56 AM , Anonymous Anonymous said...

very well written deep. i am your biggest fan

Edwin

 
At September 11, 2010 at 5:58 PM , Blogger Deep Vaze said...

thanks Edwin.

 
At September 11, 2010 at 7:28 PM , Anonymous Anonymous said...

Very well written indeed. Your statement 'government intervention of US$1 billion every day to artificially keep the value of the yuan low' - could you explain how this works? How do they keep the yuan low? Thanks.

 
At September 11, 2010 at 10:12 PM , Blogger Deep Vaze said...

The Chinese government purchases US dollars, Japanese yen and the currencies of its other trading partners. Doing so raises the demand for those currencies - hence increasing their price. Increasing the value of foreign currencies like the dollar makes the yuan relatively cheap.
The '$1 billion a day' estimate I got from a New York Times article and is basically the amount the Chinese devote to the practice described above.
Hope this helps.

 

Post a Comment

Subscribe to Post Comments [Atom]

<< Home