The Hidden Fault Line of the Green Transition
Europe’s green and digital transformation rests on a comforting illusion: that a continent which controls none of the decisive materials for modern industry can still dictate the terms of its technological future. Rare earth elements expose that illusion. They are the silent architecture inside wind turbines, EV motors, guidance systems, microelectronics and defence platforms. Europe talks about sovereignty; China controls the bottlenecks that make sovereignty possible.
China’s dominance did not fall from the sky. It was engineered. Over three decades, Beijing built an industrial machine defined by price discipline, environmental tolerance, and political coordination. According to the IEA, China refines roughly 87% of the world’s rare earths and controls practically all separation capacity for heavy rare earths — the elements that matter most for high-performance magnets. Europe, meanwhile, outsourced processing because it was messy, polluting and politically inconvenient. Outsourcing soon became dependency. Dependency became vulnerability.
Europe’s Delusion of Preparedness
The EU’s Critical Raw Materials Act (CRMA) is an instruction manual for strategic comfort. Its 2030 goals — 10% extraction, 40% processing, 25% recycling — read like progress. The reality sits closer to 2%, 5% and 10% (estimate). Brussels measures success in targets; Beijing measures it in throughput.
Kiruna in Sweden symbolises the European dilemma. The deposit is large enough to matter, politically significant enough to promote, and bureaucratically entangled enough to be useless. Permitting cycles run for years. Environmental reviews expand faster than drilling schedules. Europe has built a regulatory culture that treats time as an infinite resource. China treats time as a weapon.
Europe’s political reflex is to moralise supply chains rather than secure them. Sustainability becomes an argument against speed, risk and scale — all the qualities required to challenge China’s industrial machinery. Brussels produces position papers. Beijing produces refineries.
Washington Acts, Brussels Interprets
The United States did something unfashionable in Europe: it re-discovered industrial strategy. Mountain Pass, once the cornerstone of America’s rare earth capacity, was revived not because the market demanded it but because the Pentagon did. Long-term offtake agreements, corporate partnerships and federal guarantees provided the scaffolding. The U.S. concluded that dependence on China was a national security risk. Europe concluded that industrial policy might violate market neutrality.
Germany illustrates the gap between rhetoric and reality. The country still imports around 98% of its rare earth compounds from China, according to Eurostat. Yet large-scale strategic intervention remains politically sensitive. The land of Realpolitik now treats its own strategic exposure as a philosophical inconvenience.
While Washington aligns economic, security and industrial interests, Europe separates them into administrative silos. The result: the U.S. constructs capacity. Europe constructs committees.
The Global Chessboard Moves South
While Europe debates definitions, the rare earth race shifts continents. Brazil and Australia are emerging as new gravitational centres of supply. In Brazil’s Poços de Caldas volcanic basin, ionic clays offer a rare combination: high potential output and relatively low environmental impact. Chinese firms have already attempted to secure long-term access, as reported by the Financial Times. It is the same playbook Beijing used in Africa, Southeast Asia and Central Asia — buy early, bind supply, and lock in downstream dependencies.
Washington reacted quickly with government-to-government engagements. Europe reacted with exploratory delegations. Brazil knows exactly what it has: a once-in-a-generation geopolitical opportunity. Its leaders now speak openly about creating a role for Brazil in critical minerals equivalent to Saudi Arabia’s position in energy. If Europe does nothing, it will simply exchange one dependency for another. The coordinates will shift from Beijing to Brasília, but the strategic asymmetry will remain.
Australia, meanwhile, accelerates its investment pipelines. Canberra understands that rare earths are no longer an industrial sector — they are a geopolitical asset class. European investors understand it too, but their governments still behave as if this is a procurement issue rather than a power issue.
A Structural Asymmetry Europe Still Refuses to See
China’s advantage is not material; it is systemic. It has a unified architecture where party control, industrial strategy, environmental tolerance and export regulation reinforce one another. Prices are not market signals; they are strategic instruments. Scarcity is not a market failure; it is a policy tool.
Europe’s system is the mirror opposite. Environmental regulation, industrial strategy and foreign policy operate in separate universes. Decision-making is fragmented. Risk appetite is low. Political incentives reward caution over capability. The result: Europe’s system is optimised to avoid mistakes, while China’s system is optimised to accumulate advantage.
The geopolitical world is no longer organised around territory but around throughput. Whoever controls the materials that enable digital infrastructure, electrification, mobility, sensors and defence platforms controls the constraints of everyone else. Rare earths are not commodities. They are the molecular code of technological power.
What Europe Must Do — Without Illusions or Delays
Europe does not lack options. It lacks realism.
- First, rare earths must be formally classified as strategic assets. Not industrial curiosities, not environmental headaches — strategic assets.
- Second, Europe needs a European Rare Earth Agency with authority over investment, permitting, and stockpiling — not another advisory forum.
- Third, the EU must negotiate long-term supply partnerships with Brazil, Australia and Canada that include public guarantees and state-to-state channels.
- Fourth, Europe needs refining and separation capacity on its own soil, even if it is uneconomic in the short term. Dependency is always more expensive than capacity.
- Fifth, raw materials policy must be integrated directly into foreign and defence strategy. Sovereignty is not a slogan. It is an input-output equation.
Europe cannot regulate its way out of structural dependency. It must build its way out. That requires political appetite, strategic clarity and a sense of urgency that Europe has not displayed in decades.
Conclusion: Dependence Is a Choice — Denial Is a Destiny
China’s dominance is not destiny; it is design. Europe’s vulnerability is not fate; it is self-inflicted. The gap between the two is measured not in geology but in willpower. If Europe wants autonomy, it must stop outsourcing the foundations of its power — and stop pretending that targets, press releases and frameworks can replace industrial capability.
Dependence is not destiny.
Denial is.