Rare earths, real stakes: New Deloitte report highlights strategic importance of rare earth minerals in global energy transition

Dubai, United Arab Emirates, July 28th, 2025 – Deloitte’s report, Rare Earth Minerals and Their Role in the Energy Transition, highlights the critical role these elements play in driving the shift to a low-carbon future. The report explores rising demand, geopolitical complexities, and sustainability challenges, offering actionable insights for governments, industries, and stakeholders invested in the clean energy economy.

Rare earth minerals, used in technologies from electric vehicle (EV) motors to wind turbines and advanced electronics, are set to become even more vital as the world accelerates its transition to renewable energy. The report projects a substantial increase in demand; rare earth needs linked to clean energy technologies are expected to grow by 300–700% by 2040. However, it also warns of supply chain vulnerabilities, as the majority of these essential materials are processed in a few key regions, such as China, which dominates 90% of rare earth processing globally.

“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.”

The report highlights the growing reliance on rare earths for renewable energy technologies. For example, electric vehicles require six times more mineral inputs than traditional internal combustion engines. Direct-drive wind turbines, known for their high efficiency, also depend heavily on rare earth magnets. This dependency poses challenges, especially given the environmental impact of mining and processing rare earths, which can result in land degradation, water contamination, and toxic waste if not managed responsibly.

China’s dominant position in rare earth extraction and processing adds further complexity. While the country accounted for 60% of rare earth supply, it has also been investing heavily in global supply chains, raising concerns about potential trade restrictions and supply disruptions. This has prompted efforts in regions such as the United States, Europe, and the Middle East to diversify sourcing, develop recycling technologies, and explore alternative materials.

The Middle East, particularly Saudi Arabia, is emerging as a key player in diversifying rare earth supply. The country’s investments align with its broader Vision 2030 goals to reduce dependency on fossil fuels. However, potential projects in arid regions will need to address significant environmental and resource challenges, such as water scarcity and high energy costs.

“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.”

The Deloitte report also emphasizes the role of policymakers in creating clear frameworks to encourage investment in rare earth supply chains. By defining regulatory goals and standards, governments can help foster industry trust and innovation to accelerate cleaner, more efficient technologies.

Looking ahead, the study identifies opportunities for industries to lead the charge in reducing dependency on rare earths. Automakers, for instance, are developing alternative EV technologies that require fewer minerals or rely on substitutes. Tesla and other companies are making advancements in externally excited synchronous motors that avoid the use of rare earth magnets, offering potential paths to mitigate supply risks.

Rare Earth Minerals and Their Role in the Energy Transition paints a picture of both opportunity and urgency, outlining the strategic actions required to unlock the full potential of rare earths while safeguarding the environment.

To download the full report, please click here.

Download the Arabic version