The escalating geopolitical tensions between the United States and China have thrust a spotlight on rare earth materials, a group of 17 critical minerals that are indispensable for modern energy technologies, particularly the rapidly expanding clean energy industry. China's recent move to tighten its grip on the export of these minerals presents a significant risk to global supply chains and casts a shadow of uncertainty over Energy Exchange-Traded Funds (ETFs) focused on the energy transition.

Why Green Energy?

Rare earth minerals like Neodymium, praseodymium, dysprosium, and terbium are critical components in the permanent magnets used in wind turbines and high-efficiency electric vehicle (EV) motors. Other clean energy components, like advanced power storage batteries and specialized solar panels, also rely on select rare earth minerals.

While conventional energy applications also use rare earth elements, the volume of these critical minerals used in renewable energy technologies is quite high on a comparable level. To this end, the World Nuclear Association mentioned in its December 2024 report that EVs are six times more intensive for critical minerals than the fossil fuel alternatives they replace. Therefore, a supply-chain disruption in these critical minerals poses a direct risk to the green energy industry.

China’s Restriction & Dominance Amid US Capacity Gaps

In October 2025, China announced that it is increasing export controls for five rare-earth metals in addition to the seven on which these controls were implemented in April this year. This came as a major blow to the U.S. clean energy industry, as America remains heavily reliant on China for rare earth elements.

This reliance stems from China's dominance of the global supply chain, as it processes about 90% of the world's rare-earth metals (as per the Center for Strategic and International Studies’ report in 2024). Against this backdrop, it is imperative to mention that the United States faces critical bottlenecks in its domestic rare earth capacity. The Mountain Pass mine in California represents America's sole rare earth mining operation, with the output from this facility representing only a fraction of U.S. consumption needs.

Another vulnerability in the U.S. rare earth supply chain is the absence of domestic processing capacity, as most of the extracted materials from its Mountain Pass mine still require overseas processing, primarily in China. This processing gap further puts pressure on domestic supply chains for these critical materials despite having natural deposits.

Market Disruption and Investment Risk Mitigation

Considering the current market situation, China’s new restrictions may result in short-term bottlenecks, supply instability, and increased costs for manufacturers in the renewable energy industry, potentially slowing the growth of America’s energy transition.

For clean energy investors seeking to mitigate this supply risk, a key strategy may include investing in ETFs that offer exposure to renewable energy-focused companies that have global exposure, particularly in Asia, rather than being concentrated in the United States. This is because Asia is currently leading the global renewables capacity growth by contributing 71% of new renewables added in 2024, compared to only 7.8% added by North America (as per the International Renewable Energy Agency’s July 2025 report).

Green ETFs to Keep on Watchlist

The following clean energy ETFs include clean energy companies that have global exposure in terms of operations, including Asia, and thus may offer an investor the required protective shield against current market disruption. Impressively, these ETFs have gained significantly since April, when China announced export restrictions on the first set of seven rare earth minerals, reflecting their resilience against the supply-chain vulnerability.

Invesco WilderHill Clean Energy ETF ((PBW Quick QuotePBW - Free Report) )

This fund offers exposure to a broad range of clean energy companies. Its top five holdings include Navitas Semiconductor (2.38%) and Fluence Energy (2.35%). Navitas ((NVTS Quick QuoteNVTS - Free Report) ) has a significant portion of sales and operations in Asia, particularly China, which accounted for 60% of its revenues in 2024. Fluence ((FLNC Quick QuoteFLNC - Free Report) ) has established a strong presence across key markets in the Asia-Pacific region, including Australia, Taiwan, Singapore, India, the Philippines and Japan.

PBW has surged 92.5% since April 1. The fund charges 64 basis points (bps) as fees.

Fidelity Clean Energy ETF ((FRNW Quick QuoteFRNW - Free Report) )

This fund offers exposure to companies that distribute, produce or provide technology or equipment to support the production of energy from solar, wind, hydrogen and other renewable sources. Its top five holdings include Bloom Energy (4.69%), GE Vernova (4.28%) and First Solar (4.21%).

Bloom Energy ((BE Quick QuoteBE - Free Report) ) has a strong exposure in Asia, particularly in South Korea, Taiwan, Singapore, and India. GE Vernova ((GEV Quick QuoteGEV - Free Report) ) has 29 manufacturing facilities across the Asia Pacific region, with operations in more than 22 countries. First Solar ((FSLR Quick QuoteFSLR - Free Report) ) has manufacturing facilities in India, Malaysia and Vietnam.

FRNW has surged 54.7% since April 1. The fund charges 40 bps as fees.

iShares Global Clean Energy ETF ((ICLN Quick QuoteICLN - Free Report) )

This fund is the largest clean energy ETF, providing exposure to leading companies in solar, wind, and other renewable sectors worldwide. Its top three holdings are in First Solar (9.12%), Bloom Energy (8.66%) and Vestas Wind Systems (5.85%). Vestas’ ((VWDRY Quick QuoteVWDRY - Free Report) ) pipeline of development projects totaled 26.6 GW as of the second quarter of 2025, with the Asia-Pacific region accounting for the largest share at 16 GW.

ICLN has surged 38.2% since April 1. The fund charges 39 bps as fees.