Rare earth elements and the US renewable economy: A causality exploration between critical materials and clean energy

Abstract

Rare Earth Elements (REE) are central to the shift towards a green economy because of their unique physicochemical characteristics. These critical materials are both strategic materials that are utilised in wind turbines, solar panels, and electric vehicles among others. Globally, as renewable energy sources are used more frequently, the demand for REEs increases, posing various challenges, especially since China dominates most of the supply chain. This paper examines the REEs and renewable energy consumption in the United States of America (USA), an economic superpower, for the period 1991–2023, using Granger causality tests and other relevant time series techniques. The empirical findings of this paper demonstrate that consumption of REEs causes renewable energy generation, which supports the notion of the centrality of REEs in the development of green energy. Such outcomes underscore the importance of supply chain diversification, the holding of strategic reserves, and the promotion of recycling technologies in order to minimise the risks of supply and ensure a stable transition to clean technologies. These findings can help policymakers design policies for the acquisition of strategic materials and the fostering of sustainable growth of clean energy industries.