IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v55y2018icp31-48.html
   My bibliography  Save this article

Simulating producer responses to selected chinese rare earth policies

Author

Listed:
  • Brown, Maxwell
  • Eggert, Roderick

Abstract

This study explores the effects of Chinese rare earth stockpiling, environmental taxation, and improvements in recovery rates on rare earth markets. It uses a Stackelberg model with a leading producer (legal Chinese producers) and two sequential followers (illegal Chinese producers and the Mount Weld mine in Australia), each producing multiple rare earths. The model is parameterized for the production and prices of separated rare earth oxides (REOs) from ore. Counterfactuals involving Chinese policies are compared to the no-policy, business-as-usual (BAU) scenario. The five counterfactuals are: (1) further Chinese State Reserve Bureau (SRB) stockpiling of neodymium, (2) further SRB stockpiling of dysprosium, (3) an environmental tax on the production of legal Chinese rare earths, (4) increased recovery rates of neodymium at legal Chinese operations, and (5) increased recovery rates of dysprosium also at legal Chinese operations. The BAU scenario and five counterfactuals are run with (a) four different levels of reference illegal Chinese production and (b) with and without the Chinese production quota, yielding 48 total outcomes (6×4×2). The first finding is that any SRB stockpile purchase increases the price of the stockpiled REO and increases legal Chinese ore production. However, given co-production, increased ore production involves more production of all REOs, and the prices of non-stockpiled REOs decrease. Thus if the stockpiled REO represents a large (small) portion of illegal Chinese and Mount Weld revenue, then illegal Chinese producers and the Mount Weld mine will increase (decrease) their production. An environmental tax decreases legal Chinese production, increases production by illegal Chinese producers and Mount Weld, and increases prices of all REOs. Increased legal Chinese recovery rates lead to increased legal Chinese production, decreased production by illegal Chinese producers and Mount Weld, and decreased REO prices. Increased levels of reference illegal Chinese production (a) exacerbate the policy-driven production increases or dampen production reductions of illegal producers and (b) conversely, for legal Chinese producers, reduce policy-driven production increases and further increase production reductions.

Suggested Citation

  • Brown, Maxwell & Eggert, Roderick, 2018. "Simulating producer responses to selected chinese rare earth policies," Resources Policy, Elsevier, vol. 55(C), pages 31-48.
    • Handle: RePEc:eee:jrpoli:v:55:y:2018:i:c:p:31-48
    DOI: 10.1016/j.resourpol.2017.10.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420717301289
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2017.10.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mancheri, Nabeel A., 2015. "World trade in rare earths, Chinese export restrictions, and implications," Resources Policy, Elsevier, vol. 46(P2), pages 262-271.
    2. Han, Aiping & Ge, Jianping & Lei, Yalin, 2016. "Vertical vs. horizontal integration: Game analysis for the rare earth industrial integration in China," Resources Policy, Elsevier, vol. 50(C), pages 149-159.
    3. Wan, Rui & Boyce, John R., 2014. "Non-renewable resource Stackelberg games," Resource and Energy Economics, Elsevier, vol. 37(C), pages 102-121.
    4. Massari, Stefania & Ruberti, Marcello, 2013. "Rare earth elements as critical raw materials: Focus on international markets and future strategies," Resources Policy, Elsevier, vol. 38(1), pages 36-43.
    5. Packey, Daniel J. & Kingsnorth, Dudley, 2016. "The impact of unregulated ionic clay rare earth mining in China," Resources Policy, Elsevier, vol. 48(C), pages 112-116.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lee, Yurim & Dacass, Tennecia, 2022. "Reducing the United States’ risks of dependency on China in the rare earth market," Resources Policy, Elsevier, vol. 77(C).
    2. Jianyun Chen & Wenxing Zhu & Xianping Luo, 2022. "Government Reserve of Rare Earths under Total Quota Management: An Interactive Game between Government and Rare-Earth Firms," Sustainability, MDPI, vol. 14(22), pages 1-19, November.
    3. Xiao, Shijiang & Geng, Yong & Rui, Xue & Su, Chang & Yao, Tianli, 2022. "Behind of the criticality for rare earth elements: Surplus of China’s yttrium," Resources Policy, Elsevier, vol. 76(C).
    4. Yufeng Chen & Biao Zheng, 2019. "What Happens after the Rare Earth Crisis: A Systematic Literature Review," Sustainability, MDPI, vol. 11(5), pages 1-26, March.
    5. Becker, Jonathon M., 2021. "General equilibrium impacts on the U.S. economy of a disruption to Chinese cobalt supply," Resources Policy, Elsevier, vol. 71(C).
    6. Ge, Jianping & Lei, Yalin, 2018. "Resource tax on rare earths in China: Policy evolution and market responses," Resources Policy, Elsevier, vol. 59(C), pages 291-297.
    7. Xia, Qifan & Du, Debin & Cao, Wanpeng & Li, Xiya, 2023. "Who is the core? Reveal the heterogeneity of global rare earth trade structure from the perspective of industrial chain," Resources Policy, Elsevier, vol. 82(C).
    8. Zhou, Mei-Jing & Huang, Jian-Bai & Chen, Jin-Yu, 2022. "Time and frequency spillovers between political risk and the stock returns of China's rare earths," Resources Policy, Elsevier, vol. 75(C).
    9. Chai, Song & Zhang, Zhicong & Ge, Jianping, 2020. "Evolution of environmental policy for China's rare earths: Comparing central and local government policies," Resources Policy, Elsevier, vol. 68(C).
    10. Seiler, Volker, 2021. "China-to-FOB price transmission in the rare earth elements market and the end of Chinese export restrictions," Energy Economics, Elsevier, vol. 102(C).
    11. Yanjing Jia & Chao Ding & Zhiliang Dong, 2021. "Transmission Mechanism of Stock Price Fluctuation in the Rare Earth Industry Chain," Sustainability, MDPI, vol. 13(22), pages 1-21, November.
    12. Hau, Liya & Zhu, Huiming & Yu, Yang & Yu, Dongwei, 2022. "Time-frequency coherence and quantile causality between trade policy uncertainty and rare earth prices: Evidence from China and the US," Resources Policy, Elsevier, vol. 75(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yi, Jiahui & Dai, Sheng & Cheng, Jinhua & Wu, Qiaosheng & Liu, Kailei, 2021. "Production quota policy in China: Implications for sustainable supply capacity of critical minerals," Resources Policy, Elsevier, vol. 72(C).
    2. Ge, Jianping & Lei, Yalin, 2018. "Resource tax on rare earths in China: Policy evolution and market responses," Resources Policy, Elsevier, vol. 59(C), pages 291-297.
    3. Yufeng Chen & Biao Zheng, 2019. "What Happens after the Rare Earth Crisis: A Systematic Literature Review," Sustainability, MDPI, vol. 11(5), pages 1-26, March.
    4. Behnaz Minooei Fard & Willi Semmler & Giovanni Di Bartolomeo, 2023. "Rare Earth Elements: A game between China and the rest of the world," Working Papers in Public Economics 235, University of Rome La Sapienza, Department of Economics and Law.
    5. Paulick, Holger & Machacek, Erika, 2017. "The global rare earth element exploration boom: An analysis of resources outside of China and discussion of development perspectives," Resources Policy, Elsevier, vol. 52(C), pages 134-153.
    6. Schmid, Marc, 2019. "Mitigating supply risks through involvement in rare earth projects: Japan's strategies and what the US can learn," Resources Policy, Elsevier, vol. 63(C), pages 1-1.
    7. Hau, Liya & Zhu, Huiming & Yu, Yang & Yu, Dongwei, 2022. "Time-frequency coherence and quantile causality between trade policy uncertainty and rare earth prices: Evidence from China and the US," Resources Policy, Elsevier, vol. 75(C).
    8. Luisito Bertinelli & Stéphane Poncin & Benteng Zou, 2019. "The War of Rare Earth Elements: A Dynamic Game Approach," DEM Discussion Paper Series 19-11, Department of Economics at the University of Luxembourg.
    9. Vanessa Bach & Markus Berger & Natalia Finogenova & Matthias Finkbeiner, 2019. "Analyzing Changes in Supply Risks for Abiotic Resources over Time with the ESSENZ Method—A Data Update and Critical Reflection," Resources, MDPI, vol. 8(2), pages 1-16, April.
    10. Stanley Udochukwu Ofoegbu, 2019. "Technological Challenges of Phosphorus Removal in High-Phosphorus Ores: Sustainability Implications and Possibilities for Greener Ore Processing," Sustainability, MDPI, vol. 11(23), pages 1-38, November.
    11. Ba, Bocar Samba & Combes-Motel, Pascale & Schwartz, Sonia, 2020. "Challenging pollution and the balance problem from rare earth extraction: how recycling and environmental taxation matter," Environment and Development Economics, Cambridge University Press, vol. 25(6), pages 634-656, December.
    12. Lee, Yurim & Dacass, Tennecia, 2022. "Reducing the United States’ risks of dependency on China in the rare earth market," Resources Policy, Elsevier, vol. 77(C).
    13. Ajay B. Patil & Rudolf P. W. J. Struis & Christian Ludwig, 2023. "Opportunities in Critical Rare Earth Metal Recycling Value Chains for Economic Growth with Sustainable Technological Innovations," Circular Economy and Sustainability,, Springer.
    14. Fernandez, Viviana, 2017. "Rare-earth elements market: A historical and financial perspective," Resources Policy, Elsevier, vol. 53(C), pages 26-45.
    15. Waldemar Marz, 2019. "Complex dimensions of climate policy: the role of political economy, capital markets, and urban form," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 85.
    16. Machacek, Erika & Kalvig, Per, 2016. "Assessing advanced rare earth element-bearing deposits for industrial demand in the EU," Resources Policy, Elsevier, vol. 49(C), pages 186-203.
    17. Imholte, D.D. & Nguyen, R.T. & Vedantam, A. & Brown, M. & Iyer, A. & Smith, B.J. & Collins, J.W. & Anderson, C.G. & O’Kelley, B., 2018. "An assessment of U.S. rare earth availability for supporting U.S. wind energy growth targets," Energy Policy, Elsevier, vol. 113(C), pages 294-305.
    18. Zuo, Zhili & Cheng, Jinhua & Guo, Haixiang & McLellan, Benjamin Craig, 2021. "Catastrophe progression method - path (CPM-PATH) early warning analysis of Chinese rare earths industry security," Resources Policy, Elsevier, vol. 73(C).
    19. Shuai, Jing & Peng, Xinjie & Zhao, Yujia & Wang, Yilan & Xu, Wei & Cheng, Jinhua & Lu, Yang & Wang, Jingjin, 2022. "A dynamic evaluation on the international competitiveness of China's rare earth products: An industrial chain and tech-innovation perspective," Resources Policy, Elsevier, vol. 75(C).
    20. Yuzhou Shen & Ruthann Moomy & Roderick G. Eggert, 2020. "China’s public policies toward rare earths, 1975–2018," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 33(1), pages 127-151, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:55:y:2018:i:c:p:31-48. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.