ARGUMENT: CRITICAL MINERALSThe Inflation Reduction Act Is the Start of Reclaiming Critical Mineral Chains

The Inflation Reduction Act (IRA) passed by Congress and signed into law by U.S. President Joe Biden on Aug. 16, provides billions of dollars in tax incentives for renewable energy, provisions supporting offshore oil and gas leasing, and other innovations designed to buttress U.S. energy security while also addressing climate change.

Morgan D. Bazilian writes in Foreign Policy that one important component of the act, however, has been largely overlooked. “Built within the IRA is a commitment to increasing the domestic U.S. supply of critical minerals—lithium, nickel, manganese, and graphite, among others—to provide the materials necessary for a vast expansion in electric vehicles (EVs), batteries, and renewable power production infrastructure,” he writes, adding:

For the first time, U.S. policy is directly tying the supply of these little-understood minerals to a massive paradigm shift in the automobile market. As the markets for these materials are diverse, global, and dominated largely by China, this offers a rare instance of bipartisan concern.

The purpose of the policy is threefold. The Biden administration wants to accelerate the energy transition to low carbon technologies; encourage domestic manufacturing; and improve U.S. energy security, ostensibly by reducing its dependence on foreign supplies of the minerals needed to support the energy transition. For that reason, the IRA’s EV tax credits come with important caveats—namely, they only apply if the materials used to construct the vehicle come from either the United States or nations the United States has free trade agreements with.

That provision tees up the United States for a significant foreign-policy challenge. The sheer amount of critical minerals necessary to fuel the energy transition is staggering, and currently, the global minerals markets and their associated supply chains are cornered by a small number of countries—with China near the top. Where the 20th century featured battles over access to oil, the 21st century will likely be defined by a struggle over critical minerals, particularly as the United States views China as a global competitor and strives to limit its reliance on Chinese supplies for EV manufacturing and a wide variety of energy and defense technologies.

China is a considerable producer of strategic minerals—sixth-largest for nickel and third-largest for copper—but it dominates the midstream refining and downstream advanced manufacturing markets.

China refines 68 percent of the world’s nickel, 40 percent of its copper, 59 percent of its lithium, and 73 percent of its cobalt. More importantly, China holds 78 percent of the world’s manufacturing capacity for EV batteries, the bulk of the world’s production of solar panels, and three-quarters of the world’s lithium-ion battery factories.

“To achieve the energy security, energy transition, and domestic economic goals of the IRA, the Biden administration needs to put more time and energy into resolving the questions around critical minerals,” Bazilian writes.

The IRA promises a drastic reduction in U.S. carbon emissions and an acceleration of the energy transition away from fossil fuels. The United States needs more wind turbines, solar panels, and electric cars. But to make that possible, it will need more mines.