For the second time since 2020, the USA is turning its back on the Paris Climate Agreement. What could this step mean for climate protection and the expansion of renewable energies? What effects can be expected on the demand for strategic raw materials? Our market commentary sheds light on the possible consequences.
Just a few hours after taking office, the new US President Donald Trump by decree has initiated the withdrawal from the Paris Climate Agreement. This is the second time this has happened: in 2020, under the same president, the country withdrew from the 2015 agreement to curb climate change. The reasons given for the move then and now were unfair burdens and potential damage to the domestic economy.
Only a few countries are not participating in the climate agreement
The Paris Climate Agreement is considered a milestone in the fight against global warming. In it, 195 countries have committed to the goal of limiting the global rise in temperature and reducing emissions. Greenhouse gas neutrality in the second half of the 21st century is also envisaged. In addition, there is a climate fund into which industrialised countries pay in order to support poorer countries in coping with and combating global warming. If the USA were to withdraw again, it would be the fourth country not to participate in this agreement, alongside Iran, Yemen and Libya.
Symbolic or practical: what are the possible consequences of leaving?
The resignation, which according to the Articles of Association year becomes effectiveraises the question of whether the climate protection efforts to date have not been at least partially in vain. On the one hand, the climate fund will be deprived of crucial financial support as the USA will no longer be a major donor. However, the symbolic effect of the largest Western economic power changing course in favour of fossil fuels is likely to be more important. "Drill baby drill!" - i.e. the expansion of oil production - was one of Trump's election campaign slogans. He has also set his sights on subsidies for electromobility and the expansion of wind power, two cornerstones in the fight against global warming. Meanwhile, there are no government plans for photovoltaics in the USA that could limit or accelerate its progress.
Wind energy under fire, but resistance is emerging
Also through a Executive OrderIn January, the issuing of licences for the construction of wind turbines on federal territory, including coastal regions, was halted by a binding presidential order. However, it currently seems unlikely that the expansion of wind power will be stopped completely. After the first withdrawal from the climate agreement five years ago, 24 of the 50 US states had already committed to continuing the Paris Agreement and expanding renewable energies on their territory. This promise was renewed on the day of the most recent decree. It is also worth mentioning that it is precisely the Republican states - i.e. Trump's voter base - that have seen the greatest growth in wind energy in recent years. This form of renewable energy has now developed into a significant job engine - in Texas alone, the leading location for wind power, over 27,000 people are employed in the sector. In total, more than 300,000 jobs in the USA depend on wind energy. In addition, the wind farms generate tax revenue for the municipalities.
If the Trump administration prevails despite the expected resistance and stops the expansion of wind power, this will also have an impact on the demand for raw materials. This applies in particular to Rare earths like Neodymium, Praseodymium or Terbium. In the form of permanent magnets, they are involved in converting the rotational energy of the rotor blades into electricity and are therefore of central importance. Systems with rare earth magnets made of neodymium-iron-boron (NdFeB) are particularly popular on the coast or at sea, as they show less wear than other types and therefore require less maintenance. According to analysts, however, offshore and onshore energy generation from wind is still in its infancy in the United States. the great potential may remain unutilised under the current government. The demand for NdFeB magnets would then be significantly lower. However, it is uncertain for how long, as executive orders are only in force as long as they are not revoked or declared invalid by the successor in office or by the courts.
What is the threat to electromobility in the USA?
In addition to wind power, Trump's presidency is also likely to have an impact on electromobility. At his inauguration, he revoked several measures taken by the previous government to promote zero-emission vehicles, including the target of a 50 per cent share of sales by 2030 and the expansion of the charging infrastructure. He also announced a review and possible abolition of tax benefits for the purchase of e-cars, which are included in the subsidy programme. Inflation Reduction Act (IRA) are planned. Should the President be successful with this - because in addition to legal hurdles a cancellation of the IRA, which is a driver of investment and jobs, would probably be accompanied by protests - this would have consequences for the demand for raw materials. US demand for electric vehicles could be dampened according to analystsand thus also reduce the demand for rare earths. In addition to wind turbines, electric motors are a key area of application for rare earth magnets.
Demand for raw materials will grow, but in a more differentiated way
The emerging reorientation of energy and mobility policy could therefore have an impact on the demand for certain raw materials. However, the extent of a possible decline depends on whether other areas of application have a compensatory effect. With regard to rare earths, for example, industrial robots or the defence sector are likely to see an increase in demand, as electric motors, pumps and other important components often contain permanent magnets, especially when space is limited and high performance is required in a small space. Rare earths such as cerium or lanthanum, which are used as catalysts in the petrochemical industry, would also benefit from an expansion in oil production. These two elements already account for almost three quarters of the current demand for rare earths in the USA.
If, on the other hand, nuclear energy gains in importance at the expense of wind power, more Dysprosiumerbium, gadolinium, holmium and samarium. These representatives of the rare earths are used for control rods or the lining of reactors. used. Even if the pendulum of electric cars were to swing back in favour of combustion engines, the element group would not disappear from the radar, as it is essential for electronics and in certain production processes. conventional vehicles is relevant. Plug-in hybrids, which many consumers in the USA see as a kind of transitional technology, and they currently have over battery electric cars also have electric motors with rare earth magnets.
The Managing Director of TRADIUM, Matthias Rüth, is certain that raw materials will continue to be in demand and that demand for them will continue to rise.
"One thing remains certain: strategic raw materials such as rare earths and technology metals will remain relevant, but shifts in demand are conceivable. While demand for individual areas of application could fall, it will be compensated for or even exceeded by others."
Rare earths remain in demand
Meanwhile, the importance that the Trump administration attaches to rare earths and other critical raw materials is not only demonstrated by the very clearly communicated Interest in Greenland's mineral resourcesthe Rare earth deposits in Ukrainebut also the announced expansion of domestic production. From a global perspective, however, the expansion of renewable energies cannot be halted even after the USA's withdrawal from the Paris Agreement. In China alone, the signs point to a massive expansion of wind energyThe People's Republic is setting new records every year and needs vast quantities of critical raw materials to do so. The same applies to electromobility in the People's Republic.
