Policy Challenges for Accessing Critical Minerals to Electrify Vehicle Transport

Transition by the United States to a decarbonized economy by the middle of the century must include transportation, which today accounts for a little less than 30 percent of US greenhouse gas (GHG) emissions and over one-third of total CO2 emissions (EPA 2023; EIA 2023). Among the options for decarbonizing ground transportation, current policy emphasizes increased electric vehicle use along with decarbonizing the power grid and further advances in electric vehicle (EV) technology, especially for EV batteries.Current EV battery designs use significant quantities of so-called critical minerals, specifically lithium, cobalt, manganese, nickel, and graphite. Radically increasing global production and purchases of EVs with these battery designs will lead to order-of-magnitude increases in demand for these minerals (IEA 2022). However, as discussed in Section 2, critical minerals tend to be found mainly in a handful of countries outside the United States. Moreover, the capacity for processing extracted minerals into forms suitable for use in manufacturing EV batteries is highly concentrated in one country, China.Thus, there are substantial concerns about perceived risks to future affordability and reliability of the supplies of these minerals because of the geographic concentration of the supply chains and the economic and political power that dominant mineral suppliers could wield. Another concern is about mineral price volatility, including large price shocks of uncertain duration, which would complicate planning and management for both battery and vehicle manufacturers. Moreover, critical mineral supplies can be increased and diversified only after lengthy periods for exploration and development of new mineral reserves, as well as construction of new processing facilities. In short, the response of critical mineral supplies to higher prices generally is highly inelastic, at least until enough time has elapsed for mineral extraction and processing capacity to expand. As noted in Section 3.4, in the United States that interval often is many years.This paper explores these challenges in greater detail and highlights implications for US policy toward critical minerals. Section 2 reviews key geographic characteristics of critical minerals and uncertainties regarding expanding their supplies within the United States. Section 3 examines critical mineral policies in the United States and their limitations. The final section identifies some priorities for developing critical mineral policy and filling knowledge gaps.