Abstract: The smelting and separation stage is a major carbon-emitting segment in the rare earth industry chain because of its relatively high energy consumption and intensive chemical inputs. Existing studies have mainly focused on carbon accounting or process optimization, while systematic analysis of how green factor substitution can contribute to carbon reduction, together with the corresponding supporting policies, remains limited. This study focuses on the rare earth smelting and separation stage. Key green factors with substitution potential are identified from three dimensions, namely carbon contribution, consistency across the literature, and substitution feasibility. On this basis, three substitution scenarios are constructed, including green electricity substitution, low-carbon heat source substitution, and substitution with recycled secondary materials. National-level policies issued in the past five years are further examined to analyze the institutional support and weak links associated with different pathways. The results show that green electricity substitution has broad applicability and the most stable carbon reduction per unit product, and is closely aligned with policies on energy transition, green manufacturing, and carbon footprint management, making it the preferred near-term pathway. Low-carbon heat source substitution mainly applies to high-thermal-demand units such as roasting and calcination, and is therefore more suitable as a medium-term optimization pathway for key processes. Substitution with recycled secondary materials, represented in this study by discarded NdFeB magnet recycling, shows relatively high system-level carbon reduction potential, but depends more strongly on standards, accounting rules, quality control, and recycling system development, making it more suitable as a medium- to long-term strategic direction. The study suggests that the low-carbon transition of the rare earth smelting and separation stage should shift from end-of-pipe control to green factor substitution, with further improvements in standards setting, carbon footprint accounting, demonstration and dissemination, and policy coordination so as to enhance the practical feasibility and institutional alignment of different substitution pathways.