Michael McCarthy: The ecological risks of clean energy's 'dirty little secret'

Producing rare-earth metals carries considerable environmental risks, not least because the ores in which they are found often contain thorium, radium and uranium, which are radioactive. Add to that the toxic acids involved in the refining process, and the "tailings", or waste sludge, from the mine can be very unpleasant indeed. Rare earths, which are widely used in such green energy applications as electric cars and wind turbines, have been referred to as "clean energy's dirty little secret".

The environmental difficulties are well illustrated by the Mountain Pass mine in California. Until it closed in 2002, the Mojave desert facility for a long time provided most of the world's rare-earth metals, but the environmental cost was high. In the 1980s, its owners began piping its waste water, which carried radioactive waste, to evaporation ponds 14 miles away. However, the pipeline ruptured some 60 times – until it was shut down in 1998 – and 600,000 gallons of radioactive and hazardous waste flowed out into the surrounding desert. The company was eventually ordered to mount a major clean-up exercise and was fined more than $1m (£650,000).

Mountain Pass closed eight years ago because of the environmental difficulties and because the price of rare earths had dropped, making operations uneconomic. But China's tightening of supplies has led to a decision by Mountain Pass's new owners, Molycorp Inc, to reopen it. This year, the company issued shares to raise the $500m that restarting production will cost. One of the great prizes from reopening Mountain Pass will be the rare-earth mineral neodymium, which makes the world's lightest and strongest magnets, essential for the electric motors of hybrid cars such as the Toyota Prius, and for wind turbines.

Molycorp hopes to have the mine working again by late 2011 after negotiating environmental safeguards with no fewer than 18 California regulatory agencies. The company will be spending $2.4m a year on environmental monitoring and compliance – a cost its Chinese competitors may not have to bear.

But even if its products turn out to be more expensive, Molycorp has already signed supply contracts with customers both in the US and Japan, such is the demand for rare earths.