Evaluation of Externalities Associated with Rare Earth Exploitation at Bayan Obo

Rare earth elements (REEs) are a kind of new materials which have excellent optical, electrical and magnetic properties, and they play an important role in the development of high technology and green energy industries. With abundant reserves and a wide range of REE type, rare earth industry has a rapid development in China in recent years. However, environmental issues associated with REE exploitation have severely restricted the sustainable development of rare earth industry in China. At present, literatures on the externalities of REE exploitation are very limited, especially in China. This paper builds an evaluation model based on life cycle evaluation to estimate the external costs of REE exploitation at Bayan Obo. The results show that the external costs for producing one metric tonne of rare earth oxides (REO) in Bayan Obo was CNY 34739 in 2013, the external costs of waste gas, waste water, radioactive substance, REE resource depletion, and land occupation are CNY 14945, 12515, 1400, 3199, and 2680, respectively. Waste gas and water constitute about 79% of the total external costs. The internalization of the external costs would reduce the financial profit of Northern Rare Earth (Group) by 18%. This study has taken into account only those externalities whose market values can be estimated, and therefore the external costs of REE exploitation in Bayan Obo is likely to be underestimated. The results fill the gap in literature and provide further understanding on the external cost of REE exploitation.