Without rare earths, producing iPods and Blackberry cell phones would be impossible and even Copenhagen might become meaningless. However, for 45-year-old Liu Shengyuan, had rare earths not been mined, his hometown would have remained a beautiful place.

Rare earths, a class of 17 chemical elements, have become increasingly important in manufacturing sophisticated products, including flat-screen monitors, electric car batteries, wind turbines, missiles and aerospace alloys.

However, mining these minerals, which are vital for developing a green world, took a toll on China's environment.

Liu's hometown, a small town named Beitou, is located in the southern part of east China's Jiangxi Province. The town is rich in rare earth resources.

Rare earth mining started 20 years ago in Beitou, and "that's when the nightmare began -- trees were toppled, green hills were studded with holes and toxic chemicals were pumped in, rivers were polluted and not fit for drinking", he said.

"We used to drink water in the rivers, but now even fish and shrimp cannot survive in the water," he said.

"To extract the rare earth elements, they (the miners) use sulfates, ammonia and other chemicals. The chemicals finally enter rivers and poison surrounding farmlands," Liu said.

"Crops would stop growing after being irrigated by the water," he noted.

"My rice output fell by more than 40 percent last year. It's not enough to feed me and my wife and I have to buy extra rice." However, Liu thought he was lucky compared with some of his neighbors, who harvested nothing.

According to Liu, local residents had to use pipes to divert drinking water from neighboring towns, but now they have to find water sources that are even farther away as the pollution continues spreading.

It is the price Beitou's people have paid for exploiting rare earths. Sadly, Beitou's experience is not the only such case in China.

China has long recognized the strategic importance of rare earths, as former Chinese leader Deng Xiaoping put it -- "The Middle East has oil, and China has rare earths". Currently, the country supplies more than 90 percent of the world's rare earths.

However, lax environmental standards and a low industry threshold led to serious overcapacity in China's rare earth market in the past two decades. Excessive and disordered mining of this non-renewable resource then caused environmental degradation and serious resource wastes, analysts say.

Take Ganzhou City, a major production base of precious ion-absorbed-type rare earths, as an example. At its peak, the city had 1,035 companies with legal rare earth mining licenses and nearly every county had its rare earth mine, said Li Guoqing, director of Ganzhou's mineral resource management authority.

"The extraction and processing process were damaging to the environment," Li said. "A green hill could turn into a moonscape within several months."

To make things worse, half of the resources were wasted during extraction and processing because of the use of backward mining technologies, he said.

Although China worked to improve mining methods and minimize environmental damage, experts said pollution was still inevitable during the mining process.

To protect the environment, China announced a number of measures to regulate the rare earth industry, including reduced export quotas, crackdowns on illegal mining and mineral smuggling, issuing no new mining licenses and production caps.

As the latest effort, China announced guidelines last week to encourage mergers and acquisitions in the rare earth sector to enhance industry consolidation. According to media reports, the government planned to cut the number of rare earth firms from the current 90 to 20 by 2015.

These measures, however, sparked complaints from global rare earth consumers, including Japan and the United States, which are reliant on China for rare earth metals after years of cheap Chinese exports in the 1980s and 1990s as well as tough environmental rules which rendered many foreign rare earth mines unprofitable.

China's Commerce Minister, Chen Deming, said that "mass exploitation of rare earths will cause great damage to the environment, and that's why China has tightened controls over rare earth production, exploitation and trade."

"China has no choice but to take such measures" in order to protect the country's environment, he said. "Rare earth exports should not threaten environmental protection or national security to promote the domestic economy."

"China is supplying too much rare earths, it's not fair nor sustainable," said Zhao Zengqi, head of the Baotou Rare-earth Research Institute.

According to a report by Marc Humphries, energy policy analyst from the Congressional Research Service of the United States, China's rare earth reserves accounted for 36 percent of the world's total in 2009, but output hit 120,000 tonnes, or 97 percent of the world's total. In comparison, rare earth reserves in the United States made up 13 percent of the world's total without any production last year.p The report, entitled "Rare earth elements: the global supply chain", was released in late July this year. It expected the world's rare earth demand to reach 180,000 tonnes by 2012.

Zhang Anwen, deputy general secretary of the Chinese Society of Rare Earths, said the share of China's rare earth deposits in the world was actually lower than market expectations as many large mines were found in other countries.

"On a per-capita level, China has become a country with scarce rare earth resources," Zhang said.

Further, prices of the finite metals will go up while rare earth output outside China must be increased to meet surging demand, said Zhao.

Experts said both China and the world must work to secure a balanced and sustainable way of operating for the rare earth industry. "It's unwise to drain the pond to catch all the fish," as they put it.