US Treasury allows miners to access clean energy manufacturing subsidy

24 October 2024

The U.S. Treasury Department said on Thursday it would allow some mining companies to access a tax credit aimed at boosting American production of solar panels, lithium-ion batteries and other clean energy components, a shift in position after industry pressure.

The move reflects the growing realization in Washington that efforts to combat climate change will be moot unless the U.S. boosts its production of lithium, cobalt, and other critical minerals and curbs reliance on China and other overseas rivals.

Washington last December issued proposed rules for manufacturers to access the so-called 45X tax credit, created by President Joe Biden's 2022 climate change law, the Inflation Reduction Act, which offers a 10 percent production credit for U.S.-made products. Those draft rules excluded raw materials from the production costs in favor of processing. For example, the mining of lithium would not have received the credit, but the processing of that lithium into a form usable to build a battery would.

The mining industry cried foul, noting that processing is impossible without first extracting a mineral.

Citing "feedback from stakeholders," the Treasury Department on Thursday reversed itself, saying that the "material costs and extraction costs" would be eligible for the tax credit under the final 45X rules, "provided certain conditions are met."

"The Biden-Harris administration understands how important onshoring the production of critical minerals is to developing secure, clean energy supply chains," Wally Adeyemo, the deputy Treasury secretary, told reporters on a call. "This will not only help incentivize additional mining, but will mean that mining that already exists is more profitable and they can make greater investments in those mines," he said.

Rich Nolan, president and CEO of the National Mining Association noted it move in a positive direction for the mining industry but said more is needed.

“Supply chain security begins in the mine. While this updated guidance begins to reflect the clear intent of Congress to bolster the nation’s mineral supply chains and address a glaring strategic vulnerability, Treasury’s decision to limit the credit to those producers who also refine materials will prevent many important projects from benefitting from the credit as Congress intended,” Nolan said in a statement.

The final rules stipulate that the credit can only be obtained once an "eligible component" is created, essentially favoring mining companies that own processing facilities. The mining would have to take place in the United States, officials said.

"The action of extraction alone does not produce an eligible component," the Treasury Department said in the final rule, which ran to 177 pages.
“We have an urgent need to level the playing field for American producers against Chinese and Russian efforts to dominate global mineral supplies by flooding the markets with oversupply of cheap minerals produced under questionable environmental, labor and safety standards; by making U.S. processed, foreign sourced materials available for the credit we’re not solving the problem,” Nolan said. “Made-in-America should also mean mined-in-America and the miners who secure the very first link in our supply chains should benefit from the same credits as the entities that refine their materials.”

That may help Sibanye Stillwater, which mines and processes palladium in Montana and had pushed for the 45X expansion to offset cutthroat Russian competition. But several proposed U.S. nickel mines, for example, would not be eligible because the U.S. does not yet have a nickel smelter.

Ali Zaidi, the White House national climate adviser, gave the hypothetical example of a lithium hydroxide processor that also runs a lithium mine. That company would be eligible for a 10 percent per metric ton credit for the mining and another 10 percent per metric ton credit for the processing, he said.

"This is absolutely a game changer for our ability to lean into mineral security," said Zaidi.

The credits would begin phasing out in 2030 and end after 2032 for clean energy components. Critical mineral credits will not phase out.

(Reporting by Nichola Groom and Ernest Scheyder; additional reporting by Timothy Gardner; writing by Ernest Scheyder; editing by Leslie Adler)

 

Tags: US Treasury Department, Mining, Tax Credit Lithium, EVs, Electric Vehicles, Clean Energy, Manufacturing