The Environmental Conundrum of Rare Earth Elements

Rui Wan () and Jean-Francois Wen
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Rui Wan: Nanjing University

Environmental & Resource Economics, 2017, vol. 67, issue 1, No 7, 157-180

Abstract: Abstract Clean technologies, such as solar panels and wind turbines, help to curb global emissions, but they require dirty inputs for their production—i.e., mining rare earth elements (REEs) pollutes local environments. REEs are also the object of rent-shifting strategic trade policies, as highlighted by a recent WTO ruling against China’s quotas and tariffs on exports of REEs. We construct a three-country trade model with an environmental damage function, in order to examine the effects of three policies with different implications for the equilibrium quantities of dirty inputs and clean technologies: a downstream subsidy, an upstream export tariff, and an upstream pollution tax. We relate the welfare implications of the policies to the parameters of the damage function and to the number of downstream competitors. The effects of a unilateral policy switch from an export tariff to a domestic pollution tax, as suggested by China’s reaction to the WTO challenge, are also examined.

Keywords: Pollution; Strategic trade policy; Vertical markets (search for similar items in EconPapers)
JEL-codes: F12 F18 Q56 Q58 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s10640-015-9980-3

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