As Australia looks to become a responsible supplier of rare earths as an alternative to China, the matter of whether buyers will share the cost of minimizing the industry's significant environmental impact remains an open question.

A planned mine by Arafura Rare Earths in Australia's Northern Territory holds ore containing the rare earths neodymium and praseodymium, but also radioactive elements such as uranium.

Processing involves dissolving the ore with acid and treating the resulting solution to extract the rare earths. This step produces waste liquid containing toxic metals.

According to Harvard University, producing 1 metric ton of rare earths yields 1 ton of radioactive residue, 9,600 to 12,000 cubic meters of waste gas and 75 cu. meters of wastewater. A total of 2,000 tons of toxic waste is generated.

Many rare earths, including neodymium and praseodymium, can be found around the world. "The 'rare' in 'rare earths' doesn't refer to a lack of reserves, but to the small number of countries that can bear the societal costs of extracting and mining them," said Toru Okabe, a professor of materials process engineering at the University of Tokyo's Institute of Industrial Science.

Stewart Forrest, Northern Territory manager at Arafura, says that all radioactive material at the company's mine will be stored on-site in structures designed to avoid leaks. There are plans to use the phosphoric acid produced as a processing byproduct for fertilizer.

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Consumers want ethically sourced products, Forrest said.

Differing environmental standards have been cited alongside volume as a factor in the low prices of Chinese rare earth products.

"China has lax environmental regulations, and can dispose of waste at next to no cost," Okabe said.

"The cost of [complying with] environmental measures in Japan or the U.S. is high, so they can't compete on price," he added. "Australia is most likely the same."

Until the early 1980s, the U.S. was the world's top producer of rare earths. But as the country grew more environmentally conscious, rising costs spurred many companies to exit the field. China leveraged its lower costs, including for labor, to seize market share from the late 1980s onward.

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The critical minerals strategy released by Australia in 2023 called for "strong ESG practices that enable access to global markets." The country plans public financing for projects that meet environmental standards and tax breaks to cover costs for less harmful processing methods.
Rare-earth development has been responsible for pollution in a number of countries.

In the rare-earth hub of Baotou in China's Inner Mongolia, for example, research has shown groundwater contaminated by wastewater causing health problems among residents. A 2018 paper by researchers from the Inner Mongolia University of Science and Technology and other institutions found that the urine of children from the area contained higher concentrations of rare earths.

In the 1980s, residents near a rare-earth refinery in Bukit Merah in northern Malaysia run by Japan's Mitsubishi Chemical pushed for its closure following a string of leukemia cases. The facility was shuttered and the soil was decontaminated by Malaysian authorities.

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Japan plans to recover rare earths from the seabed off the coast of the island of Minamitorishima. A sample retrieved in February had almost no radioactive or other harmful substances. But deep-sea rare-earth extraction is costly.

Companies in Australia have built refining facilities in countries such as Malaysia where regulations are less strict, but moving intermediate processes overseas does not solve the problem. Balancing environmental concerns and costs remains a challenge for would-be rare-earth producers.