The Biden administration’s electric vehicle plan bets the U.S. will be able to secure enough critical minerals to electrify up to two-thirds of the nation’s new cars within less than a decade.
But industry experts say the plan rests on assumptions that are bullish given volatility in the still-burgeoning mineral markets, a disconnect that could undermine one of President Joe Biden’s most aggressive climate rules.
EPA in its proposed tailpipe rules released last week, which would aggressively limit emissions from cars, SUVs and trucks on U.S. roads by 2032, includes key assertions about the future of the EV industry. Among those: The price of lithium needed to make batteries will “likely stabilize” at or near historic levels by the mid-2020s, a crucial detail as this would help make EVs more affordable for consumers. EPA says that contention is supported, among other things, by proprietary price forecasts, analysis and news stories.
“No one … has any idea whether that’s correct or not,” said Morgan Bazilian, public policy professor at the Colorado School of Mines.
Right now, critical minerals like lithium, cobalt and nickel needed to make EV batteries are largely mined and processed abroad — an industry dominated by China. As part of its EV push, the Biden administration has pledged to help shift that supply chain to the United States and allied countries, giving itself an enormous additional challenge on top of shepherding automakers away from gas-powered cars and trucks. That means the cost and availability of minerals like lithium in new supply chains will play a central role in EV adoption — and, ultimately, Biden’s climate and national security goals.
EPA in its proposed clean car rule acknowledges uncertainty around pricing, as well as the pace of permitting of new mines and just how fast supply chains for refining and processing, EV battery manufacturing, and recycling can scale up. But the agency also concludes that prices for lithium — currently the essential ingredient in batteries — will stabilize and sufficient supplies will be available through at least 2027, and likely beyond.
But Bazilian, a former energy specialist at the World Bank, said it’s difficult to make predictions about critical minerals markets given they’re small, opaque, and don’t have good liquidity or price discovery.
Andrew Miller, chief operating officer at U.K. mining data firm Benchmark Mineral Intelligence, said he doesn’t expect the U.S. to be able to produce the amount of lithium it needs over the coming decades. Miller also said he expects the “incredibly volatile” pricing around lithium and other minerals seen in recent weeks and months to continue, throwing into question the United States’ ability to secure enough material in an increasingly competitive global landscape.
“That’s really a warning sign of what’s to come in the future,” said Miller. “So I think there’s a lot baked into those assumptions around the U.S.’s ability, in particular, to source raw material and establish the security of supply.”
Tim Carroll, a spokesperson for EPA, emphasized in an email that the agency’s proposed rule includes a detailed and robust assessment of critical minerals, as well as cost assessments, and citations from the Department of Energy, the Argonne National Laboratory, Wood McKenzie and other well-known experts in the field. He also noted that a large portion of the batteries used in domestic EVs are already manufactured in the United States, showing that the nation’s production doesn’t need to be dependent on foreign imports of batteries.
What’s more, Carroll said the supply chain for battery materials is rapidly growing, bolstered by powerful programs and incentives under the bipartisan infrastructure law and landmark Inflation Reduction Act. The latter restricted federal tax credits available to U.S. consumers buying EVs with the express purpose of trying to help create domestic minerals-related industries. Already, he said the laws have prompted numerous manufacturers to build battery manufacturing facilities and pursue mining and processing agreements in the U.S.
“Over time, we believe that it is possible for virtually all of the inputs necessary for producing batteries to be sourced from the U.S. or from countries with which we have a free trade agreement,” said Carroll.
The Inflation Reduction Act’s requirements could prove tricky as EV productions ramp up. They limit how many vehicles can get tax credits, as the law specifies many battery parts and the minerals that go in them must be sourced domestically or from U.S. trade allies — a mandate only a fraction of EVs can now meet, according to a list Treasury released Monday (Greenwire, April 17).
Even so, EPA throughout the proposal expresses confidence that the critical minerals and EV battery industries are already responding to the Inflation Reduction Act and other market signals in the form of new plants and processing facilities. And despite Republican accusations that a rush to electrification will make the nation more reliant on China, EPA says that’s not the case.
“It is also our assessment that widespread automotive electrification in the U.S. will not lead to a critical long-term dependence on foreign imports of minerals or components, nor that increased demand for these products will become a vulnerability to national security,” EPA wrote in its car rule.
‘Difficult to predict’
The nation’s ability to deploy EVs at an aggressive clip will hinge, in part, on bringing down the price tag of EV batteries — which account for up to 40 percent of the car’s cost — and securing supplies of critical minerals and metals needed to manufacture them.
As it stands, today’s battery and mineral supply chains revolve around China, and the International Energy Agency has said that supply chains will need to expand tenfold to meet the world’s ambitions for EV adoption.
China pumps out three-quarters of all lithium-ion batteries, and over half of lithium, cobalt and graphite processing and refining capacity is located there, according to IEA. The U.S., in comparison, has a much smaller role, with only 10 percent of EV production and 7 percent of battery production capacity.
EPA in the justification for its car tailpipe rule acknowledged uncertainty around the supply and demand of critical minerals and noted that the U.S. is largely reliant on minerals sourced from global suppliers. EPA also acknowledged new mines and processing plants will face questions around permitting and investor expectations of demand and future prices. Those factors, EPA said, make it “difficult to predict with precision the rate at which new capacity will be brought online in the future.”
Still, EPA pointed to a proprietary report from Wood Mackenzie, as well as a New York Times article that showcases how falling lithium prices are making batteries more affordable.
“This expected stabilization of prices after a period of elevation is a common feature of commodity markets that experience rapid growth in demand, and further supports the outlook that sufficient chemical product will be available to meet growing demand,” the agency wrote.
EPA also asserted that lithium supply is “likely to be adequate to meet anticipated demand as demand increases and supply grows.” The agency pointed to an IEA reportreleased last year, which found global lithium carbonate equivalent production from operating mines and those under construction would meet primary demand until at least 2028.
But even those estimates are likely conservative, said EPA, pointing to more than a dozen additional lithium projects the Energy Department and the Argonne National Laboratory identified in a memo. “Some of these projects are likely to ramp in before 2030 and if considered in the other projections likely would advance lithium sufficiency well beyond 2028,” the agency wrote.
EPA’s Carroll said the agency acknowledged the uncertainty in projecting mid- and long-term costs, which is why the proposal includes both a lower- and a higher-cost projection for batteries.
But Benchmark’s Miller said that while the U.S. does have potentially plentiful lithium resources, it will take time to actually use them. Establishing the mines and processing plants to turn raw material into a battery-grade chemical could require multiple years and even decades.
Miller said it’s “incredibly optimistic” to look at the lithium in the ground across the United States and expect the nation can rely on projects coming into production.
“This isn’t something that happens quickly,” he said. He predicted many projects wouldn’t reach “their full potential or even … some type of production” until the 2030s. “I agree that the potential for some of these lithium resources in the U.S. definitely does give you a trajectory past 2028 and into the 2030s, but that’s also because a lot of these won’t be reaching their full potential or even … some type of production before the 2020s or 2030s.”
Aaron Mintzes, senior policy counsel for Earthworks, said EPA’s rule will coincide with the growing supply for recycled and reused batteries, fueled by policies taking shape in Europe, as well as the Inflation Reduction Act’s mineral sourcing provisions.
EPA concurred in its rule, stating that “minerals that are imported for vehicle production remain in the vehicle and can be reclaimed through recycling.”
Going forward, Miller agreed there’s a big potential for the United States to emerge as a leader in recycling EV battery materials — taking the pressure off of mining — instead of playing catch-up to China. But first, an EV industry must develop that produces the materials that can be recycled.
“You’re constrained by the fact that there’s fundamentally not enough material to recycle to meet your ambitions,” he said. “You’re going to need new mines, you’re going to need recycling, we’re going to need technology to play a role.”
IRA incentives vs. ‘reality’
Central to the Biden administration’s EV and climate goals are lucrative incentives being doled out under the Inflation Reduction Act — financial support that’s meant to make electric cars more affordable for Americans while securing and onshoring minerals. EVs on average are pricier than gas-powered cars.
Specifically, a car becomes eligible for half of the Inflation Reduction Act’s $7,500 tax credit if at least 40 percent of the critical minerals in an EV battery are extracted or processed in the United States or in a country that has a free-trade agreement with the United States, or are recycled in North America.
To receive the other half of the credit, 50 percent of EV battery components must be manufactured or assembled in North America. Eligible cars cannot contain battery components from “foreign entities of concern” starting in January, a rule that kicks in for minerals the following year.
Guidance the Treasury Department released last month limited the number of EV models that qualify for the credits. And major questions remain, including how Treasury will define “foreign entities of concern” to keep out China-linked cars, as well as whether and how the federal government can enforce the law (Greenwire, March 31).
EPA’s Carroll said that while the Inflation Reduction Act’s 30D clean vehicle tax credit is subject to critical minerals and “foreign entity of concern” requirements, this is not true of some other significant incentives under the law, such as the credit available to leased EVs.
Benchmark’s Miller said the law is already changing the flow of global trade around the EV battery supply chain and helping the U.S. entice business onshore.
What the law doesn’t do, he said, is guarantee that mining projects or even processing and refining projects will come to fruition, especially given permitting timelines in the United States, a point of contention between industry and environmental groups.
“The reality of the industry is that, from a mining perspective, these supply chains don’t move incredibly quickly,” he said. “For a large part of the market, they’re not going to be able to activate all aspects of these incentives and credits.”
Timothy Johnson, a professor of energy and environment at Duke University’s Nicholas School of the Environment, said the targets for developing supply chains under both the Inflation Reduction Act and the tailpipe rule are “aspirational” given where the United States is right now.
While the minerals exist in the U.S. and its allies, Johnson said the bigger question is whether people will accept what’s poised to be a mining boom in the name of climate change as nations across the globe search for minerals like lithium, manganese, copper and graphite needed for not just EVs, but also electrifying buildings, boosting renewables and energy storage.
“It would take the equivalent of, I think, the industrial ramp-up you saw in the run up to World War II, that’s the level of industrial transformation that needs to take place,” said Johnson. “So physically, could we do it? Yeah, if we decided, but I think the big question here is would it be socially acceptable.”