Research Topic

The Treasury Department recently released guidance for the Biden administration’s new clean vehicle credit, which is just the latest part of his administration’s efforts to push clean energy onto the markets. Earlier this year, for example, he introduced tax credits worth more than $1,000 a year for consumers who buy electric vehicles. And he vowed during his State of the Union address that 500,000 EV charging stations would be built nationwide by 2030.

What is most frustrating about President Joe Biden’s clean energy infrastructure projects is his claim that they will result in more companies and consumers “buying American.” That’s a good idea in theory. But the reality is far different. The United States does not produce enough critical minerals to meet domestic demand. And to secure these minerals, the nation’s supply chains woefully rely too much on unpredictable nations, most notably China.

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Both of these problems have significant implications for the energy transition and national security.

Demand for critical minerals is expected to explode by 400% to 600% over the next several decades. For lithium and graphite in particular, both of which are used in electric vehicle batteries and are also key components in achieving U.S. climate goals, the Biden administration estimates demand will increase by a staggering 4,000% . These forecasts are driven by policies such as the Inflation Reduction Act. The IRA not only offers incentives for EV ownership but also ramps up vehicle and charging station production.

The administration has committed to “expanding domestic mining, production, processing, and recycling of critical minerals,” but these efforts belie the facts. The U.S. Geological Survey reported the country has less than 1% of the world’s cobalt reserves . For nickel, U.S. domestic production doesn’t even meet 10% of what the nation consumes. USGS noted , “The only lithium production in the U.S. was from one brine operation in Nevada.” Simply put, the U.S. has neither the resources nor the manufacturing capacity to meet its critical mineral demand.

Enter Beijing, where the Chinese government continues to tighten its grip on global critical mineral supply chains. China is the largest producer and consumer of rare earth elements. Due to its aggressive industrial policy, 90% of the world’s REE refining capacity is located within the nation’s borders. According to a report from the International Energy Agency last summer, China’s control over batteries and their components is alarming . The nation produces 75% of all lithium-ion batteries and possesses 70% of production capacity for cathodes and 85% for anodes.

China’s dominance is even more problematic given the nation’s human rights abuses and aggression toward the U.S. It has been reported that China relies on forced labor from its Uyghur ethnic minority to keep its car battery supply chain operational. And its most recent and blatant displays of hostility, including sending a spy balloon to traverse the continental U.S. and increasing its military presence in the Taiwan Strait, confirm the U.S. must reduce its reliance on China.

How can that be achieved? The answer lies in diversifying our supply chains through strategic partnerships with private, foreign companies. Commercial operators based in Canada, the United Kingdom, Australia, Europe, and even the Democratic Republic of Congo provide ample opportunity to forge these relationships.

The U.S. should also look to nations other than China to meet critical mineral supply chain needs. For example, India recently discovered lithium deposits for the first time. In Latin America, home to the Lithium Triangle , alliances with nations such as Argentina and Chile should be nurtured. Along with Peru, this region contains half of the world’s proven lithium reserves.

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U.S. dependence on China for critical minerals production jeopardizes the success of the energy transition and weakens national security. Since meeting demand for these minerals through domestic production is unrealistic, partnerships with multinational companies, rather than state-owned enterprises, are essential. This is especially true when hostile regimes produce their critical minerals in tandem with human rights violations.

The Biden administration would be wise to focus on shaping the nation’s critical minerals supply chain into one that does not rely on China. Reliable international partners will be the key to meeting demand for critical minerals, achieving collective climate objectives, and ensuring future security.

Graham Copley is co-CEO of Issaquena Green Power and founding partner of Chemical Market Analysis & Consulting Company (C-MACC).