In this Article
- Inflation Reduction Act EV Allocation
- Without these metals, we don’t have EV batteries…
- Extract and process these metals?
- The reality is…
A large chunk of the $369 billion to be spent for “energy security and climate change,” as part of the Inflation Reduction Act, is allocated towards electric vehicle (EV) subsidies.
The subsidies provide a $7,500 tax credit at the point of sale for a new EV. The idea, of course, is that it will act as an incentive for us all to transition to EVs and CO2 emissions will be reduced.
As we’ve reviewed before, if the majority of our electricity is produced by fossil fuels – as it is, almost everywhere on the planet – carbon emissions won’t be reduced by shifting to EVs. Some have even argued that emissions will increase, as typically 7–15% of electricity is lost in transmission from the power plant to the end user. That’s just the nature of the inefficiency of the distribution of power over our current infrastructure.
But let’s set those inconvenient truths aside for a moment. Is it even possible for the automotive industry to produce enough new EVs to hit the targets set aside for 2030? I recognize that it’s a moot point, given the nature of how electricity is produced, but the exercise will reveal something quite interesting.
It is possible to produce enough of the new vehicles, the cars themselves, but – and this is a big but – it won’t be possible to manufacture enough EV batteries to “fuel” them. The fundamental problem is with the EV battery supply chains.
And at the very beginning of the supply chains are the metals that need to be mined and extracted from the earth, and ultimately processed for use. It’s a destructive and very dirty process that leaves massive “scars” on Earth’s surface – and produces immense amounts of carbon emissions. And yet without these metals, we don’t have EV batteries…

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The problem is that with these massive targets for EV production set by countries around the world, the politicians and policymakers (especially those in the U.S.) didn’t think much about the details of whether or not the targets were possible. Or for that matter, whether or not the process would be “clean” and actually result in lower emissions.
In order to meet these grand goals of EVs everywhere by 2030, the world will need to mine and extract critical metals from the ground. The need is no small task either, as seen in the above chart… 50 new lithium mines will have to be built, 60 new nickel mines will have to be built, and 17 new cobalt mines need to be built.
The automotive industry is already struggling with shortages of these metals, as well as with securing future supply, yet the policy targets established within require more than a 5X increase in kilotons (kt) in lithium production, 2X in nickel, and almost double in cobalt.
Making matters worse, on average it takes 7–10 years to get permitted to build a mine in the U.S. And that’s right… in just eight years it will be 2030. How’s that going to work?
Some other countries, particularly in developing markets, are able to permit in shorter periods of time, but it is still a multi-year process. Further, what about the practicalities of the “where” and “how” to extract and process these metals?

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Cobalt is almost entirely mined in the Democratic Republic of the Congo, not exactly an anti-fragile location for a key material in a supply chain. More than half of nickel production comes from Indonesia, the Philippines, and Russia.
The majority of the rare earth metals are all mined in China… critical metals used not just in EVs, but most forms of advanced electronics like our smartphones.
And the majority of the world’s lithium is mined in Australia and Chile. While these locations are politically stable, it’s the required step up in production – more than 5X – that’s the problem.
But even if we assume that somehow the permitting of new mines magically happens within the next two years, and the metals can be found at the scale that is necessary to meet demand, there is one more sticky problem…
The majority of the processing of these metals takes place in China, not exactly the location that I’d choose for a secure supply chain right now. The reality is that extraction and processing of these metals is a very dirty and fossil fuel-intensive business, which is why the western world was happy to offshore these tasks to developing markets.
And now, the implications of those decisions are being felt across supply chains. These metals are not only important in the context of battery production, but in many cases, are considered to be matters of national security.
The reality is that China has a chokehold over these metals and can control how much of each are exported to the world. And of course, its own country’s needs will be prioritized over others.
It’s great to have aspirational goals and objectives with regard to clean energy. My sincere wish is that we transition the entire power production infrastructure to clean energy produced from technology like nuclear fusion.
Sadly, these tax and spend stimulus packages have no chance of achieving their targets. “They” neglected the most basic and fundamental inputs required to meet stated targets.
Even worse, all of this spending will enrich a small number of vested interests, very wealthy individuals, and politicians… at the expense of normal taxpayers.
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