Inflation Reduction Act Cuts EV Tax Credits, Boosts Mining
The Inflation Reduction Act contains more than strict domestic sourcing and production clauses. It also contains a number of subsidies and incentives to boost U.S. mining of battery metals, which most people are overlooking because of the threat to EV tax credits.
The imminent loss of tax credit eligibility is important, but it’s overshadowing the rest of the subsidies in the proposal, which earmarks a lot of its $370 billion budget to climate change, according to Vox.
Even groups opposed to the proposal outline what the subsidies are, like the Alliance for Automotive Innovation. The AAI gathered the supply chain, purchasing and infrastructure provisions in a statement. We already know the purchasing clauses, but here’s some of the supply chain clauses per the AAI:
Advanced Manufacturing Production Credit: Provides an outline of credits available to those entities that produce materials used for clean energy production. Materials eligible for credits include the production of electrode active materials, battery cells, battery modules and applicable critical minerals. Credit phase outs do not apply to the production of critical minerals.
Advanced Technology Vehicle Manufacturing: Appropriates $3 billion for the Secretary of Energy to make direct loans for the cost of establishing or expanding U.S. manufacturing facilities that produce advanced technology vehicles or components with low or zero greenhouse gas emissions.
Domestic Manufacturing Conversion Grants: Appropriates $2 billion for grants for electric hybrid, plug-in electric hybrid, plug-in electric drive and hydrogen fuel cell electric vehicles.
Defense Production Act Funding: Includes $500 million (available until September 2024) for additional incentives to spur onshoring for critical minerals.
There’s more in the full proposal, but these are some of the biggies. Especially the last one, which the AAI mentions only briefly. In that clause, the U.S. is noting the importance to national security of domestic battery metals.
That includes lithium, nickel, cobalt, graphite, and manganese. Given how critical these metals are to the production of EVs, the provision argues the U.S. should subsidize domestic mining and processing. It seems like a dramatic classification of mining to invoke its importance to national defense, but given the tariff and trade scuffle the U.S. had with China and the Russian invasion of Ukraine, it’s not that much of a stretch.
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Basically, the clause is meant to funnel money into U.S. EV metals mining, but even mining companies are upset about it. They say expanding U.S. projects quickly will be difficult, as Reuters reports. But whether it’s ten years or twenty, it looks like industries are always opposed to change.
Who’s to say that even with a longer timeline, miners or carmakers won’t just drag their feet that much longer? In the meantime, the U.S. can still get minerals from free-trade partners like Canada, Chile and Australia, and by recycling — although that’s in its nascent stage because there aren’t that many EVs at the end of their lifecycle to get batteries from.
Tha AAI says what’s really needed is “expedited permitting for critical mineral mining and related processing” in the U.S., and some speed would help. Of course, we shouldn’t cut corners, which is what climate activists claim. But it’s telling that the industry is happy to let others mine and process metals. It’s only a problem when someone says we should do it in the U.S. — under regulation and better work conditions and pay.