China’s move to limit exports of exotic manufacturing materials has presented the cleantech industry with another problem to innovate around.

There are 31 so-called “rare earth” elements, which share an ability to shed or pick up electrons. They have long been crucial to making TV screens, disk drives, and iPods. More recently, some have been used in both hybrid-vehicle engines and wind-turbine motors. Others are key to the manufacture of LED and compact fluorescent lightbulbs and other cleantech products.

China mines an estimated 95 percent of the world’s supply. It has been reducing its exports of rare earth elements steadily for the last eight years. And it is set to cut them further—at a time when global demand is rising at 10 to 15 percent a year. China also said it will no longer allow certain rare earth elements to be exported—notably yttrium, an element commonly used to turn light from LEDs from blue to the more aesthetically pleasing white.

“You can’t make (fluorescent lightbulbs) without rare earth compounds,” said Keith Delaney, executive director of the newly formed Rare Earth Industry and Technology Association, a Greenwood Village, Colorado-based trade group advocating for reopening mines for rare earth materials in the United States. “The U.S., like a lot of countries in the world, is mandating these technologies be made, but if these rare earths aren’t available, we won’t be able to make them.”

China has said it is pulling back on exports of these materials to protect the environment and also to meet demand for the materials from its own people. And having a monopoly on rare earth materials means products that rely on those materials—like electric cars and wind turbines—will have to be made in China. But with China poised to turn off the taps, Silicon Valley entrepreneurs like Jason Hartlove are working to develop alternatives to rare earth materials.

Hartlove’s Palo Alto, California-based Nanosys, Inc. makes synthetic phosphors out of more common materials that can change the color of LED lights to any color and use less energy to produce than their rare earth counterparts. “We can make phosphors that generate light which is more pleasing, and with very high energy efficiency, without using rare earth material,” Hartlove said.

LED manufacturers will likely have to pay a premium for the new process—Hartlove won’t say how much—but he says predictable access to domestic materials takes risk out of LED manufacturing. The cleantech applications for Nanosys’ technology has revived the 10-year-old company, which cancelled an IPO in 2004 after raising hundreds of millions in venture capital and had served as an example of the overinflated expectations of venture investors in nanotechnology.

Lemnis Lighting, with U.S. headquarters in San Francisco, has also developed a dimmable LED lightbulb that uses dyes to change the LED’s natural color.

“This technology gives Lemnis (an) advantage on lifetime, output, efficacy, and dependency from rare earth materials,” said John Rooijmans, who invented the bulb for Lemnis Lighting.

San Francisco Bay Area battery makers also are innovating around the rare earth problem.

“The fact that we don’t happen to use any rare earth metals is beneficial,” said Neil McGuire, vice president of Menlo Park-based battery maker Imara Corp. “If you’re Toyota and you’re looking at hundreds and hundreds of thousands of nickel metal hydride batteries, you’re probably quite concerned about ‘where do I want to focus my R&D efforts for the next several years?’”

Applied Intellectual Capital had a similar thought. The Alameda, California-based company is targeting the hybrid-vehicle markets with the lead acid battery it has developed, made from recycled and common materials.

“One of the driving forces around all of our research for lead acid batteries was, if you can make an advanced battery out of materials readily available and collected on shore, you’re hedging against silliness with international relationships,” said Stephen Clarke, CEO of Applied Intellectual Capital.