The Dysprosium Supply Chain: A Forgotten Child in the European Wind Industry?

This article is part of a series of articles authored by young, aspiring China scholars under the Future CHOICE initiative.

The European Green Deal, as part of its robust response to the triple planetary crises, simultaneously prioritizes decarbonization and energy security. A vital component of this policy is the expansion of offshore wind energy, which is crucial for achieving the European Union’s renewable energy targets. The EU aims for at least 42.5 percent renewable energy by 2030, with an aspirational target of 45 percent. Meeting this goal will require a considerable increase in wind capacity – from 204 GW in 2022 to over 500 GW by 2030.

However, this ambitious expansion faces a significant challenge due to the EU’s heavy reliance on rare earth elements (REEs). 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 REE-related products, citing national security concerns.

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 (EV) batteries. In 2010, during a territorial dispute with Japan, China temporarily reduced its REE export quotas by 37 percent, causing global prices to skyrocket and exposing the vulnerabilities of countries dependent on these materials. 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, such as clean energy and defense.

Dysprosium’s Role in Wind Energy

Dysprosium (Dy) plays a vital role in the development of rare-earth-based permanent magnets, especially neodymium-iron-boron (NdFeB) magnets, which are critical to achieve 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 EVs. The increasing demand for these technologies has significantly raised the need for Dy. Projections indicate that China’s demand for Dy could rise five- to tenfold by 2050, driven largely by the rise of EVs and wind energy installations, with wind energy accounting for only 18-24 percent of total cumulative Dy demand.

Geoeconomics: China’s Strategic Leverage

At present, global extractable Dy reserves are primarily concentrated in China. However, rising demand could deplete these reserves by 2045. China’s domestic supply of Dy, regulated by a production quota policy, will only meet a fraction of its future demand, necessitating substantial imports. While recycling and material substitution strategies may alleviate some of the supply constraints, a Dy shortage is anticipated in the short to medium term. 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.

The sourcing of Dy is deeply entangled in geopolitical complexities, with China and Myanmar as chief suppliers. China, driven by its aspirations for an ecological civilization and a dual circulation policy, could monopolize Dy to meet its soaring domestic needs. Meanwhile, Myanmar’s volatile political landscape and the seizure of mineral-rich Chipwi and Pangwaun regions by military-linked militias and insurgent groups pose threats to the stability of supply. Myanmar is the world’s third-largest source of mined rare earths, including Dy. The environmental consequences of mining in Myanmar are severe, with toxic chemicals causing major damage to the local ecosystems and communities. China’s dependence on Myanmar for rare earth elements has exacerbated these issues, increasing global supply chain vulnerabilities.

Although efforts to diversify supply are underway, including new mining projects in several countries, these projects remain in the development phase and are not yet operational at scale. As a result, regions like Myanmar are likely to continue being plagued by illicit mining operations, labor violations, and ecological degradation in the short run, signaling an outsourcing of this industry’s negative externalities to Myanmar.

As mentioned above, China’s control over the Dy supply chain represents a major geo-economic risk, particularly given its history of using REE export restrictions as a tool for economic retaliation. A good example of this is the December 2023 ban on exporting technology for manufacturing rare earth magnets, which complemented existing bans on technology for extracting and separating critical materials.

Mitigating Dysprosium Supply Chain Risks

These dynamics underscore the urgent need for a comprehensive risk management framework to safeguard the objectives of the green transition and reinforce strategic autonomy. Accordingly, Europe must adopt a blend of policy, innovation, and investment to reduce its vulnerability over time. The following three approaches represent possible pathways for enhancing supply chain resilience while fostering sustainable technological development.

1. Biomimicry: Nature as Mentor

Biomimicry, drawing inspiration from nature, could serve as a unique assessment method. Popularized in the 1990s by Janine Benyus’s book “Biomimicry: Innovation Inspired by Nature,” the approach involves studying biological systems and processes to develop new technologies, materials, and industrial processes. Besides engineering applications, the nine principles of biomimicry can inform a “biomimetic” industrial strategy that emphasizes resource conservation, waste repurposing and the use of local resources. This approach highlights the need for intensified R&D in wind energy technology – particularly turbine design and permanent magnets – and maximizing recovery efforts.

The recently passed Critical Raw Materials Act includes provisions mandating that manufacturers disclose detailed information about the composition of permanent magnets in their products, thereby facilitating recycling efforts. Furthermore, specific rules will be adopted to set minimum shares of recycled materials in new permanent magnets. Although zero-waste metallurgy, and by extension any recycling process, remains a significant challenge, recent research points to advancements in REE recovery technologies, including the promising techniques of biosorption via bacteria or fungi.

Biomimetic designs, such as those mimicking humpback whale fins and lotus flowers, have already demonstrated improved aerodynamic performance and increased power output in wind turbine blades. Incorporating such designs can improve efficiency and reduce material usage, specifically permanent magnets. Furthermore, innovations like ferrite-based magnets or high-temperature superconductors in direct-drive turbines offer strategic responses to REE scarcity. Policies and industry initiatives supporting ongoing research in these areas – engaging biologists, engineers and material scientists – are crucial for reducing supply chain vulnerabilities.

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 measures such as 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 practices. Such policies could catalyze a shift away from raw Dy use, especially in wind energy magnet production.

Investing in more efficient REE recovery technologies and fostering industry-policy collaborations are vital for building robust recycling infrastructure, even in countries like China. Despite recent progress, the industry still faces challenges such as small scale, limited raw material sources, and low-end product output. Therefore, China has passed a law implementing a 30 percent VAT refund for processing waste with at least 95 percent rare earth content. In the meantime, the now-expired Rare Earth Magnet Manufacturing Production Tax Credit Act (H.R. 2849) of 2023 sought to grant substantial tax credits of $20 per kilogram for domestic production – rising to $30 per kilogram if 90 percent or more of materials were sourced domestically, including recycled content – though it failed to pass committee review.

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

The Horizon Europe framework (Clusters 4 and 5) already supports research in permanent magnets, but future funding calls should explicitly require integration of Dy recycling and material recovery strategies, requiring applicants to outline how their innovations contribute to Dy recovery. 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 should further enhance its Accelerator and Pathfinder programs by earmarking specific funding streams for projects focusing on permanent magnet design innovations and advanced recycling technologies. At recent EIT Raw Materials Summit, 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 incentivized sustainability in agriculture and food packaging.

To complement these efforts, the Innovation Fund could create a dedicated financing stream for permanent magnet recycling and rare earth element recovery. Offering preferential evaluation criteria for proposals incorporating circular economy principles – such as reuse and repurposing of magnetic components – would significantly enhance the commercial viability of Dy recovery. A potential model for this approach is the Hydrogen auction scheme, which provides fixed premiums for hydrogen production and could be adapted for permanent magnet materials sourced from recycled REEs. It could follow the structure of the US H.R. 2849 proposal, similarly to a comparable approach that has already been discussed for EU-based battery production.

Strengthening Europe’s Wind Industry

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

These initiatives also align with broader EU industrial policies, particularly the Clean Industrial Deal – a cornerstone of the current European Commission’s 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 directly contribute to the EU’s Competitiveness Compass – the latest roadmap for ensuring Europe’s industrial and technological leadership in the global green transition.