Rare earth elements will be crucial to achieving a low-carbon future. But the world is facing mounting challenges in securing a stable, sustainable supply, according to Rare Earth Minerals and Their Role in the Energy Transition, a new report by Deloitte.
Used in everything from electric vehicle (EV) motors to wind turbines and high-performance electronics, rare earths are in soaring demand.
Deloitte estimates that clean energy technologies alone could drive a 300-700% surge in demand by 2040.
Yet the report also warns of growing vulnerabilities, particularly around supply concentration: China currently processes 90% of the global rare earth supply and accounts for 60% of extraction.
This concentration raises geopolitical risks.
With China expanding its influence over global supply chains, other regions [especially the United States, Europe, and the Middle East] are stepping up efforts to diversify sourcing, invest in recycling technologies, and explore alternative materials.
Regional focus
The Middle East, led by Saudi Arabia, is positioning itself as a future rare earth hub.
Its investments support Vision 2030’s ambition to move away from fossil fuels, but projects in desert environments will face hurdles such as high energy needs and water scarcity.
The report also highlights the environmental cost of rare earth mining and processing.
If poorly managed, these operations can cause land degradation, toxic waste, and water contamination, outcomes that clash with the very sustainability goals the energy transition seeks to achieve.
To address this, Deloitte calls on policymakers to develop robust regulatory frameworks that support responsible extraction, incentivise innovation, and build confidence across the supply chain.
At the same time, industry players are exploring ways to reduce their reliance on rare earths. Some automakers, including Tesla, are moving towards technologies like externally excited synchronous motors that avoid rare earth magnets altogether, potentially mitigating future supply risks while supporting greener manufacturing.
“Rare earth minerals are central to the energy transition but the environmental impact of extraction and processing needs to be carefully considered,” said Alexios Zachariadis, partner at Deloitte Middle East.
“The rising demand for these materials underscores the need for global collaboration to ensure reliable, sustainable supply chains. Governments and industries must move quickly to secure investment in diverse supply sources, pursue technological solutions, and uphold environmental safeguards. This is critical not just for decarbonization, but for maintaining energy security and geopolitical stability.”
“As the energy transition accelerates, the importance of rare earth sustainability will only grow,” added Zachariadis. “Stakeholders must address the dual imperatives of reducing environmental impact and securing long-term supply. Innovations in recycling, advanced extraction methods, and alternative materials will be vital in ensuring the energy transition is both equitable and environmentally sustainable.”
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Report highlights critical minerals risks in clean energy transition
The Middle East, led by Saudi Arabia, is positioning itself as a future rare earth hub
