The G7 Chicago Conference Focuses on Rare Earth Supply Chains: Proposals for Price Floors and Carbon Taxes Surface

Reuters reported that amid the escalating global tensions over critical minerals supply, the G7's technical team held a closed-door meeting in Chicago in mid-September to discuss a series of measures to counter China's dominance in rare earths. The core of the meeting revolved around setting a price floor for rare earths, carbon taxes or tariffs based on energy usage ratios, as well as investment regulations and geographical procurement restrictions. This development highlights the urgent concerns of Western countries over supply chain security, but also exposes the internal divisions and implementation challenges within the G7.

The meeting came at a time when European companies were once again facing supply bottlenecks after China implemented rare earth export controls in April, seen as retaliation against US tariffs. Although China subsequently expedited the issuance of licenses to the EU, the delays in approval still posed potential risks of production halts. The G7's discussions stemmed from the "Critical Minerals Action Plan" launched in June, aimed at reducing reliance on China. Australia's participation as an observer in the meeting underscored the role of resource-rich countries in the global game.

Key points of the meeting: A multi-pronged approach from investment regulation to trade tools

The Chicago meeting focused on the reality that G7 countries (excluding Japan) are highly dependent on China for rare earth magnets and battery metals, aiming to reshape supply chains through economic and regulatory means. According to informed sources, no consensus was reached in the discussions, but the following points have become the focus:

Price floor and subsidy mechanism: The G7 is considering a government subsidy-supported minimum price for rare earths to encourage domestic production. The US Department of Defense has set a price threshold of $110 per kilogram for rare earths, which is much higher than the market price in China. Australia is independently evaluating similar measures to support local key mineral projects; Canada is in an optimistic stance but has not made a commitment. EU officials stated that they are exploring price floors, joint procurement, and G7 internal reciprocal agreements.

Carbon tax or tariff proposals: The meeting discussed imposing a carbon tax or tariff on China's rare earth and minor metal exports based on the proportion of non-renewable energy usage. This is intended to punish China's high-carbon production methods while incentivizing green investment. A Trump administration official said that the US is coordinating broader trade measures with the G7 and the EU to prevent "rare earth price dumping", including tariffs and price floors.

Investment and geographical restrictions: The core issue is to raise the regulatory threshold for foreign investment in key materials to prevent companies from "flowing to China". Another option is geographical restrictions, such as mandatory local content requirements in public procurement or prohibiting purchases from specific countries like China, but there are significant differences in opinions among G7 countries, with Japan being cautious due to its lower dependence on China.

Strategic reserves and joint actions: The EU Industry Commissioner suggested establishing a joint inventory of rare earths similar to oil reserves. The meeting also mentioned embedding ESG (Environment, Social, and Governance) standards into supply chains in the G7 action plan.

The Canadian Department of Natural Resources and the White House did not immediately respond to inquiries. Analysts pointed out that the meeting reflects the G7's shift from passive response to active reshaping, but internal coordination is difficult and it is unlikely to be implemented in the short term.

This meeting marks a shift from resource competition to rule-based negotiation for rare earths. The G7's action plan emphasizes transparency and sustainability, but success depends on coordination and investment scale. For China, this is not only a challenge but also an opportunity to promote green upgrading and diversified exports. The global rare earth landscape is transforming from a "China-centered" model to a multi-polar one. It is expected that by 2030, a more resilient supply chain ecosystem will be formed.