By James Morton Turner
China recently rattled the world’s electric vehicle supply chains by announcing new export controls on graphite, a key component of lithium-ion batteries. If China uses the export controls, which take effect on Dec. 1, to reduce exports of graphite or to favor Chinese-owned companies operating abroad, it could slow down efforts to scale up advanced battery manufacturing globally.
Welcome to the geopolitics of the clean energy transition. Unlike in the 20th century, when China was largely a bystander in petroleum politics, the country has achieved new geopolitical significance by scaling up investments in clean energy manufacturing and the critical minerals that work requires.
The supply chains for many critical minerals, not just graphite, run through China. In the case of materials critical to the production of lithium-ion batteries, which power electric vehicles, the consulting group Benchmark Mineral Intelligence estimated that China controlled 58 percent of the global production of lithium compounds in 2022, 69 percent of nickel sulfate, 69 percent of synthetic graphite, 75 percent of cobalt, 95 percent of manganese and 100 percent of spherical graphite. China plays a similarly outsize role in the supply of materials used in solar panels and wind turbines.
But this isn’t simply a story about China’s geological good fortune. The country’s reserves of most of these minerals aren’t actually that large. Instead, it is a story of strategy. Over the past decade, China has systematically invested in overseas and domestic mines that feed into Chinese-owned refineries, where raw materials from around the world are processed into the high-grade materials needed for advanced manufacturing.
China justified the new export controls on graphite as a national security measure. But most observers read China’s move as a warning shot in an increasingly high-stakes trade skirmish, as China, the United States and the European Union explore the new geopolitics of advanced manufacturing and a clean-energy transition. Three days before China announced the export controls on graphite, the Biden administration restricted exports of computer chips used in artificial intelligence applications to China.
China’s leverage over the global critical minerals supply explains why the particulars of the Inflation Reduction Act are so important. The law, passed in August 2022, is not just the most consequential piece of climate and energy legislation in U.S. history; it is also designed to drive investment in domestic manufacturing and in supply chains that do an end run around China. It does this, in part, by providing generous incentives for domestic production of critical minerals, battery components and batteries.
Consider its $7,500 tax credit toward electric vehicle purchases. For a vehicle to be eligible for the subsidy, in addition to meeting price caps, final assembly must take place in North America, and an increasing percentage of the critical minerals and battery components must be sourced from North America or, in the case of critical minerals, from free-trade partners. China does not have a free-trade agreement with the United States. The Treasury Department may also further limit the use of materials or components from China, depending on how it enforces the act’s restrictions on sourcing materials from a “foreign entity of concern.”
In some respects, this law is working. Based on tracking I’ve undertaken with my students at Wellesley College, companies have announced $65.5 billion in investments since the act became law, including 15 new large-scale factories to produce batteries. If these projects all come online as planned, the United States will have enough battery manufacturing capacity to supply 14 million electric vehicles per year.
What the Inflation Reduction Act hasn’t done, however, is spur similar investments in mining and minerals processing. Although it includes a 10 percent tax credit for critical minerals production (a category that includes graphite), about 2 percent of the newly announced investments are going toward mining and materials processing facilities. So as the United States expands investments in clean energy manufacturing, its dependency on global supply chains, dominated by China, will only grow.
Building more diverse and resilient supply chains for critical minerals requires action at home and abroad. First, the United States needs to reduce the hurdles to investing in domestic mines and mineral processing facilities. While a new battery or E.V. factory can be brought online in a few years, identifying, permitting and commissioning mines and refineries often stretches out over a decade or more. Reforming permitting processes to ensure better engagement with local communities and expedited environmental reviews is urgently needed. Such reforms could help advance projects like Graphite One, a mine planned for Alaska’s Seward Peninsula.
Second, the United States needs to support investments that diversify global supply chains. The Biden administration has begun laying the groundwork for such investments. In June 2022, it announced the Minerals Security Partnership, which includes promises of loan guarantees and debt financing and emphasizes the need for projects to benefit local communities and expand supplies of critical minerals from overseas. One potential project is a mine in Mozambique, which could supply graphite to the United States.
What isn’t going to solve the supply problem, at least in the coming decades, is recycling. Given the global goals for scaling up clean-energy deployment, nowhere near enough of these critical minerals are available for recycling to meet the rapidly growing demand. The International Energy Agency forecasts that if the world is going to meet its most ambitious clean-energy goals by midcentury, production of critical minerals will need to increase to six times 2020 levels by 2040; graphite production will need to increase up to 25 times 2020 levels.
Climate action can no longer be about phasing out fossil fuels alone. It must also be about phasing in a new set of extractive industries needed to enable a clean-energy transition. China figured this out a decade ago. The United States and its free-trade partners now face a monumental challenge: scaling up production of critical minerals, diversifying supply chains to protect national security and doing so in ways that are both more just and more sustainable.
The place to begin is by reckoning with what it is going to take to build a clean-energy future, from the ground up.
James Morton Turner is a professor of environmental studies at Wellesley College and the author, most recently, of “Charged: A History of Batteries and Lessons for a Clean Energy Future.” Energiesnet.com does not necessarily share these views.
Editor’s Note: This article was originally on the NYtimes in the November 6, 2023. All comments posted and published on EnergiesNet or Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of EnergiesNet or Petroleumworld.
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EnergiesNet.com 11 08 2023