A ‘Forgotten Child’ in the European Wind Industry: Managing Geoeconomic Risk in the Dysprosium Supply Chain

Article / By

Introduction

The European Green Deal, in its robust response to the triple planetary crises, prioritizes simultaneously decarbonisation and energy security. A vital component of this policy is the augmentation of offshore wind energy, crucial for achieving the European Union’s renewable energy targets. Offshore wind farms benefit from stronger, more consistent winds, leading to higher electricity generation capacity1. The European Commission has unveiled a comprehensive action plan to support the wind power industry’s growth, addressing challenges like insufficient demand, slow permitting processes, raw material access, and international competition. The EU aims for at least 42.5% renewable energy by 2030, with a target of 45%, requiring a considerable increase in wind capacity from 204 GW in 2022 to over 500 GW by 20302. Offshore wind is necessary for meeting climate and energy goals, with an average installation of almost 12 GW/year needed to bridge the gap between current capacity and the 2030 target3.

However, this ambitious expansion faces a significant challenge due to the European Union’s heavy reliance on rare earth elements (REEs), particularly dysprosium (Dy), which are essential for the production of high-performance magnets used in wind turbines. China, which dominates the global supply chain of these critical minerals, has a history of leveraging its position to influence international markets. In early 2025, China expanded its export controls on critical raw materials, including certain rare earth elements. In February 2025, China announced that it would require export licenses for 20 products related to tungsten, tellurium, bismuth, indium, and molybdenum, citing national security interests4. These metals are essential in various industries, including defence and clean energy.

These measures build upon earlier actions, such as the December 2023 ban on exporting technology used to manufacture rare earth magnets and the October 2023 imposition of export permit requirements for certain graphite products, a material crucial for electric vehicle batteries5. In 2010, during a territorial dispute with Japan, China temporarily reduced its export quotas of REEs by 37%, causing global prices to skyrocket and highlighting the vulnerability of countries dependent on these materials6. These developments underscore China’s strategic use of export controls on critical raw materials, particularly rare earth elements, which has significant implications for global industries reliant on these resources. These actions underscore the geopolitical risks associated with the EU’s dependence on Chinese REEs and the potential for supply disruptions that could impede the development of its offshore wind energy sector.

Dysprosium’s Role in Wind Energy

The role of dysprosium (Dy) in the development of rare-earth-based permanent magnets, mainly NdFeB magnets, is fundamental for attaining global climate targets and the global shift towards clean energy technologies. Dy enhances the magnetic properties of these magnets at high temperatures, making them indispensable for wind turbines and electric vehicles (EVs). The increasing demand for these technologies has significantly raised the need for Dy. Projections indicate that the Chinese demand for Dy could increase by 5-10 times from current levels by 2050, driven largely by the rise in EVs and wind energy installations, with wind energy accounting for only 18%−24% of the total cumulative Dy demand7.

Geoeconomics: China’s Strategic Leverage

China’s domestic supply of Dy, regulated by a production quota policy, will only meet a fraction of its future demand, necessitating substantial imports7. At present, the global extractable reserves of Dy are primarily concentrated in China, but rising demand could deplete these reserves by 20458. Recycling and material substitution strategies could mitigate some of the supply constraints, but a Dy shortage is anticipated in the short to medium term9. The contribution of Dy to the efficiency and durability of wind turbines and EVs underscores its critical importance in the transition to a low-carbon future 2,10.

Sourcing Dy is entangled in geopolitical webs, with China and Myanmar as chief suppliers. China, driven by its aspirations for an ecological civilization and a dual circulation economic model, could monopolize Dy to fulfil its soaring domestic needs. Concurrently, Myanmar’s volatile political landscape and the seizure of mineral-rich territories by army-related militias and insurgent groups pose threats to supply stability11. Myanmar is the world’s third-largest source of mined rare earths, including Dy12. The environmental consequences of mining in Myanmar are severe, with toxic chemicals causing major damage to local ecosystems and communities10. China’s dependence on Myanmar for rare earth elements (REE) has only intensified these issues, leading to global supply chain vulnerabilities12. Efforts to diversify supply include new mining projects in other countries, but these are still developing11,13. Hence, the region is expected to be plagued by illicit mining operations, labour violations, and ecological degradation in the short run, signalling an outsourcing of this industry’s negative externalities to Myanmar.

At the same time, the European continent faces a profound scarcity of domestic Dy reserves for an extended period14. ‘Urban mining’ efforts have struggled to achieve substantial end-of-life recycling rates, remaining under 1% due to unfavourable process economics and the complex logistics involved15. However, progress in permanent-magnet processing technologies have reduced Dy content in high-temperature permanent magnets to 1 wt% or less, compared to the 5 wt% or more used in the 1990s. This reduction enables the chemical recycling of older magnets, yielding ample Dy to produce a proportionally greater number of new high-temperature magnets using modern procedures16.

As mentioned above, the Chinese control over the Dy supply chain poses a significant geoeconomic risk, particularly given China’s history of using REE export restrictions as a tool for economic retaliation17, exemplified by the ban announced on 21 December 2023, on exporting technology for making rare earth magnets, in addition to existing bans on technology for extracting and separating critical materials18. These dynamics highlight the urgent need for a comprehensive risk management framework to secure the objectives of the green transition and bolster strategic autonomy. Europe must explore innovative approaches to mitigate such risks as much as possible.

Mitigating Dysprosium Supply Chain Risks

While there is no immediate solution to fully offset these risks, a combination of policy, innovation, and investment could help reduce Europe’s vulnerability over time. The following three approaches represent possible pathways to enhancing supply chain resilience while also fostering sustainable technological development.

 

1. Biomimicry: Nature as Mentor

Biomimicry, drawing inspiration from nature, could serve as a unique assessment method. Biomimicry has been involving examining biological systems and processes to create new technologies, materials, and systems19. This concept, popularized in the 1990s by Janine Benyus’s book “Biomimicry: Innovation Inspired by Nature,” has since gained attention from various industries for its potential to create sustainable and efficient solutions16. Examples of biomimicry-based solutions include self-healing plastics inspired by squid beaks and super-strong adhesives modelled after gecko feet20, 21.

Besides engineering applications, the nine principles of biomimicry, as championed by Janine Benyus, can inform a sustainable industrial strategy that marries resource conservation with waste repurposing and emphasizes local resources22. Among these principles, ‘Nature fits form to function’ and ‘Nature recycles everything’ emerge as notably relevant for this industrial ecosystem assessment. The former suggests the need for placing a more extensive spotlight on potential research and development in wind energy technology, encompassing turbine design and permanent magnets. The latter clearly advocates for maximizing recovery efforts. While the European Community has been a global leader in sustainability, there are areas where further advancements can be made.

Policy advocacy is pivotal in cultivating a ‘biomimetic’ industrial ecosystem. The lately passed Critical Raw Materials Act aims to increase self-sufficiency in critical minerals essential for the green and digital transitions23. This legislation targets the extraction, processing, and recycling of key raw materials within Europe, reducing reliance on imports, mostly from China. The act includes provisions mandating that manufacturers disclose detailed information about the composition of permanent magnets in their products, facilitating recycling efforts. Furthermore, specific rules will be adopted to set minimum shares of recycled materials in new permanent magnets24.

Zero-waste metallurgy, and thus any recycling process, remains a significant challenge25. Recent research, though, underscores advancements in REE recovery technologies26,27, particularly the promising techniques of biosorpotion via bacteria28 or fungi29. Biomimetic principles, such as those mimicking humpback whale fins and lotus flowers, have demonstrated improved aerodynamic performance and increased power output in wind turbine blades30. Integrating biomimetic designs into wind turbines can improve their efficiency and reduce material usage, specifically permanent magnets. Furthermore, innovations like ferrite-based magnets or high-temperature superconductors in direct-drive turbines offer a strategic response to REE shortages9. Policies and industry initiatives backing continued research in biomimetic designs and alternative materials, engaging biologists, engineers as well as material scientists, are important for eventually reducing supply chain vulnerabilities9.

2. Circular Taxation: Incentivizing Efficiency

Reducing Dy use and strengthening recycling frameworks through economic stimuli could enhance the resilience of material supply chains. A unified ‘circular taxation’ framework, which has been subject to academic scrutiny, proposes incentivisation of material efficiency and heightened recycling initiatives. Potential measures within this framework could include taxing the extraction of raw materials to encourage the use of recycled alternatives (raw material resource tax) and offering fiscal benefits (tax credit or VAT reduction) to those who prioritize recycling or adopt sustainable design practices31. Such policies might catalyse a shift towards diminished dependence on raw Dy, especially for magnet manufacturing in the wind energy industry. The practicality and effectiveness of these taxation tools, concerning REEs in permanent magnets as well, demand rigorous examination.

Investing in more efficient REE recovery technologies and fostering policy and industry collaboration are essential for creating a robust recycling infrastructure, even in China. Despite the advancements in the past few years, the industry encounters challenges such as small scale, limited raw material sources, and low-end product output32. Therefore, China has passed a law implementing a 30% VAT refund as an incentive for the comprehensive use of rare earth product processing waste with minimum 95% limit (Announcement No.40 2021)33. While the proposed Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023 (H.R.2849) in the US would grant substantial tax credits of $20 per kilogram for domestic production, increasing to $30 per kilogram if 90% or more of materials are sourced domestically, including recycling34.

Nevertheless, taxation remains complex and predominantly under the jurisdiction of individual member states. Consequently, the European Commission could rather focus on providing funding to establish the technical foundations necessary for a more balanced REE ecosystem.

3. Boosting EU Funding for Bio-Inspired Design and Recovery

A strategic reassessment of EU funding mechanisms is recommended to bolster the resilience of the dysprosium supply chain and ensure the long-term stability of wind energy development. Existing European Commission-administered funding programs offer valuable opportunities, yet targeted adjustments are needed to maximize their impact.

The Horizon Europe framework (Clusters 4 and 5) already prioritizes permanent magnet research, listing several call topics in this area35, 36. However, future funding calls must explicitly integrate Dy recycling and material recovery strategies, requiring applicants to detail how their innovations contribute to Dy recovery. This approach would help gradually overcome current economic viability concerns that hinder the large-scale recovery of Dy from end-of-life products, thereby addressing some of the supply bottlenecks. Additionally, the next rounds of Horizon Europe calls should emphasize nature-inspired material efficiency approaches, aligning with ongoing efforts in bio-intelligent manufacturing and biomimetic material development.

The European Innovation Council (EIC) could further strengthen its support by refining its Accelerator and Pathfinder programs37. These initiatives should dedicate specific funding streams for projects focusing on permanent magnet design innovations, as well as advanced recycling technologies. At recent EIT Raw Materials Summit discussions, industry stakeholders consistently emphasized the need for increased grant sizes to sponsor scale-up efforts. A solution could involve allocating additional points to proposals that integrate Dy recycling or bio-inspired alternatives, similar to how 2024 EIC calls incentivize sustainability in agriculture and food packaging.

To complement these efforts, the Innovation Fund could introduce a dedicated financial window for permanent magnet recycling and rare earth element recovery38. Offering preferential evaluation criteria for proposals incorporating circular economy principles—such as reusing and repurposing magnetic components—would significantly enhance the commercial feasibility of Dy recovery. A potential model for this approach is the Hydrogen auction scheme39, which provides fixed premiums for hydrogen production and could be adapted for permanent magnet materials sourced from recycled REEs. It could be modelled after the ongoing H.R.2849 bill in the US, similar to how a comparable approach has already been discussed for EU-based battery production40.

By reinforcing funding mechanisms for Dy recycling and alternative materials, the EU can fortify its strategic autonomy in critical supply chains while advancing its clean energy and circular economy objectives.

Conclusion: Strengthening Europe’s Wind Industry

Ensuring supply chain resilience in the wind energy sector requires addressing overlooked yet essential elements like dysprosium. By integrating biomimetic innovations, circular taxation policies, and targeted EU funding, Europe can build a sustainable and geopolitically less dependent wind industry.

These initiatives also align with broader EU industrial policies, particularly the Clean Industrial Act, a cornerstone of the new European Commission mandate. Alongside recently announced complementary measures such as the Circular Economy Act, the European Innovation Act, or the Advanced Materials Act, strengthening Dy supply resilience could support the EU Competitiveness Compass vision—the latest roadmap ensuring Europe’s industrial and technological leadership in the global green transition.

References

  1. European Commission. (2020). An EU Strategy to harness the potential of offshore renewable energy for a climate-neutral future (COM/2020/741 final). Retrieved from https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0741
  2. European Commission. (2023). European Wind Power Action Plan. Retrieved fromhttps://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52023DC0669&qid=1702455143415
  3. European Commission. (2023). Commission sets out immediate actions to support the European wind power industry. Retrieved fromhttps://ec.europa.eu/commission/presscorner/detail/en/ip_23_5185
  4. Lv, A., Jackson, L., & Shivaprasad, A. – Reuters (2025).China expands key mineral export controls after US imposes tariffs. Reuters. Retrieved from https://www.reuters.com/world/china/china-expands-critical-mineral-export-controls-after-us-imposes-tariffs-2025-02-04/
  5. Lv, A., & Jackson, L. – Reuters (2025, February 4).China’s curbs on exports of strategic minerals. Reuters. Retrieved from https://www.reuters.com/world/china/chinas-curbs-exports-strategic-minerals-2025-02-04/
  6.  Evenett, S., & Fritz, J. (2023, July 19). Revisiting the China–Japan Rare Earths dispute of 2010. Centre for Economic Policy Research. Retrieved from https://cepr.org/voxeu/columns/revisiting-china-japan-rare-earths-dispute-2010
  7. Dai, T., et al. (2023). Unlocking Dysprosium Constraints for China’s 1.5 °C Climate Target.Environmental Science & Technology, 57(38), 14113-14126. https://doi.org/10.1021/acs.est.3c01327.
  8. Li, Y., Wang, Y., & Ge, J. (2023). Tracing the material flows of dysprosium in China from 2010 to 2020: An investigation of the partition characteristics of different rare earth mining areas.Resources Policy, 85, 103836. https://doi.org/10.1016/j.resourpol.2023.103836
  9. Hu, Z., et al. (2024). Evaluating Rare-Earth Constraints on Wind Power Development Under China’s Carbon-Neutral Target. Science of the Total Environment, 912, 168634. https://doi.org/10.1016/j.scitotenv.2023.168634
  10. Alves Dias, P., Bobba, S., Carrara, S., & Plazzotta, B. (2020).The Role of Rare Earth Elements in Wind Energy and Electric Mobility. Joint Research Centre Science for Policy Report, EUR 30488 EN. Luxembourg: Publications Office of the European Union. https://doi.org/10.2760/303258.
  11. Basu, T. (2021). Rare earths in Myanmar: Unobtanium. The Diplomat. Retrieved from https://thediplomat.com/2021/06/rare-earths-in-myanmar-unobtanium/
  12. Reuters. (2023). Myanmar Rare Earth Mines Still Awaiting Notice to Restart – Sources. https://www.reuters.com/article/idUSKBN30L0MT
  13. Global Witness. (2022). Myanmar’s Poisoned Mountains: The Toxic Rare Earth Mining Industry at the Heart of the Global Green Energy Transition.https://www.globalwitness.org/en/campaigns/natural-resource-governance/myanmars-poisoned-mountains/
  14. Balomenos, P., et al. (2017). The EURARE project: Development of a sustainable exploitation scheme for Europe’s rare earth ore deposits.Johnson Matthey Technology Review, 61(2), 142-153.
  15. Graedel, T. E., et al. (2011). Recycling rates of metals – A status report: A report of the Working Group on Global Metal Flows to the International Resource Panel. UNEP.
  16. Binnemans, K., & Jones, P. T. (2021). Rare-earth recycling needs market intervention. Nature Reviews Materials, 6, 201-204. https://doi.org/10.1038/s41578-021-00308-w
  17. Mancheri, N. A. (2015). World trade in rare earths, Chinese export restrictions, and implications.Resources Policy, 46(Part 2), 262-271. https://doi.org/10.1016/j.resourpol.2015.10.009
  18. Liu, S., & Patton, D. (2023). China bans export of rare earths processing technologies.Reuters. Retrieved from https://www.reuters.com/markets/commodities/china-bans-export-rare-earths-processing-technologies-2023-12-21/.
  19. Benyus, J. M. (1997). Biomimicry: Innovation Inspired by Nature. New York: Quill.
  20. Saskia Muijsenberg. (2023). 9 Biomimicry and the Circular Economy. https://doi.org/10.1515/9783110723373-012.
  21. Elmira Jamei and Zora Vrcelj.(2021). Biomimicry and the Built Environment, Learning from Nature’s Solutions. Applied Sciences, 11(16), 7514. https://doi.org/10.3390/app11167514.
  22.   Hayes, S., Desha, C., & Baumeister, D. (2020).Learning from nature – Biomimicry innovation to support infrastructure sustainability and resilience. Technological Forecasting and Social Change, 161, 120287. https://doi.org/10.1016/j.techfore.2020.120287.
  23. European Union. (2024). Critical Raw Materials Act.Official Journal of the European Union. Retrieved from https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202401252
  24. Simon, F. (2023). EU readies new recycling goals for permanent magnets in white goods, wind turbines.Euractiv. https://www.euractiv.com/section/energy-environment/news/eu-readies-new-recycling-goals-for-permanent-magnets-in-white-goods-wind-turbines/
  25. Binnemans, K., & Jones, P. T. (2022).The twelve principles of circular hydrometallurgy. Journal of Sustainable Metallurgy, 9(1), 1-25. https://doi.org/10.1007/s40831-022-00636-3
  26. Padhan, E., Nayak, A. K., & Sarangi, K. (2017). Recovery of neodymium and dysprosium from NdFeB magnet swarf.Hydrometallurgy, 174, 210-215. https://doi.org/10.1016/j.hydromet.2017.10.015
  27. Yang, Y. et al. (2017). REE recovery from end-of-life Nd-Fe-B permanent magnet scrap: A critical review.Journal of Sustainable Metallurgy, 3(1), 122-149. https://doi.org/10.1007/s40831-016-0090-4
  28. Atalah, J., et al. (2022). Advantages of using extremophilic bacteria for the biosynthesis of metallic nanoparticles and its potential for rare earth element recovery. Frontiers in Microbiology, 13, 855077. https://doi.org/10.3389/fmicb.2022.855077
  29. Kishida, M., & Kakita, K. (2022). Dysprosium absorption of aluminum tolerant- and absorbing-yeast. Applied Sciences, 12(9), 4352. https://doi.org/10.3390/app12094352
  30. Omidvarnia, F., & Sarhadi, A. (2024). Nature-Inspired Designs in Wind Energy: A Review. Biomimetics, 9(2), 90. https://doi.org/10.3390/biomimetics9020090.
  31. Boulderstone, Z., Lee-Simion, K., & Chowdhury, T. (2022). Circular taxation: A policy approach to reduce resource use and accelerate the transition to a circular economy. European Environmental Bureau. https://eeb.org/wp-content/uploads/2022/11/Circular-Taxation-study-EEB-Final-Report.pdf
  32. Zhang, H., Con, B., & Tian, C. (2022). Multipurpose utilization of mineral resources. Integrated Use of Minerals. https://doi.org/10.3969/j.issn.1000-6532.2022.03.016
  33. Ministry of Finance of the People’s Republic of China. (2022, February 28).资源综合利用产品和劳务增值税优惠目录（2022年版） [VAT Preferential Catalogue for Comprehensive Utilization of Resources Products and Services (2022 Edition)]. Retrieved from https://www.gov.cn/zhengce/zhengceku/2022-02/28/5676109/files/0f30bfd034414d7dab06ff12e476cf80.pdf
  34.  U.S. Congress. (2023). H.R.2849 – Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023. Retrieved from https://www.congress.gov/bill/118th-congress/house-bill/2849
  35. European Commission. (2023). Horizon Europe Work Programme 2023-2024 – Cluster 4: Digital, Industry and Space. Retrieved from https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/horizon/wp-call/2023-2024/wp-7-digital-industry-and-space_horizon-2023-2024_en.pdf.
  36.  European Commission. (2023). Horizon Europe Work Programme 2023-2024 – Cluster 5: Climate, Energy, and Mobility. Retrieved fromhttps://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/horizon/wp-call/2023-2024/wp-8-climate-energy-and-mobility_horizon-2023-2024_en.pdf
  37. European Innovation Council. (2024). EIC Work Programme 2024. Retrieved fromhttps://eic.ec.europa.eu/document/download/d801a0d8-492e-4510-9dd6-8d942756e7c7_en?filename=EIC-workprogramme-2024.pdf.
  38. European Commission. (2023). Innovation Fund Call 2023 Net Zero Technologies. Retrieved fromhttps://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/innovfund/wp-call/2023/call-fiche_innovfund-2023-nzt_en.pdf.
  39. European Commission. (2023). Innovation Fund: Auction Call for RFNBO Hydrogen. Retrieved fromhttps://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/innovfund/wp-call/2023/call-fiche_innovfund-2023-auc-rfnbo-hydrogen_en.pdf.
  40. European Commission. (2024). IF Stakeholder Workshop: Supporting European Battery Manufacturing. Retrieved fromhttps://climate.ec.europa.eu/news-your-voice/events/innovation-fund-stakeholder-workshop-supporting-european-battery-manufacturing-2024-04-25_en.
Mr. Alex Toth
Financial Engineering Trainee
CINEA, European Commision