There’s a critical-mineral incentive in the recently announced Inflation Reduction Act of 2022. Will Canada seize the opportunity?
Along with reducing the heartburn from Canada’s EV manufacturing sector by extending tax credits to EVs assembled in North America (not just in the United States), the deal reached this week by U.S. senators Chuck Schumer and Joe Manchin included a US$3,750 federally funded incentive for vehicles manufactured using critical minerals extracted or processed by U.S. free-trade-agreement partners, or recycled in North America. The percentage of these geographically extracted critical minerals scales up over time, starting at 40 per cent and rising to 50 per cent in 2024, going all the way up to 80 per cent by the end of 2026.
Given their close proximity to U.S. automakers this could be a boon for Canadian miners. But can they meet such aggressive timelines?
Canada is a top destination for mining-company public listings, and is one of just 20 countries with a U.S. free-trade agreement. If Canada got all of its mines currently in development into production, it could gain 35 per cent of the 2030 North American nickel and graphite markets, according to a report released last month by the Transition Accelerator. Canada could hit 12.5 per cent market share of lithium, the other key mineral in the EV supply chain, but that would be a “stretch goal,” according to the report.
To speed that timeline up, “you need investment,” said Bentley Allan, author of the report, “and you need the government to deliver on that strategy.”
It takes on average more than 16 years for a mine to have its first production, according to the IEA, and the proposed U.S. incentive program begins next year.
“Lithium, phosphate and iron can be readily supplied by North America or U.S. free-trade partners,” Allan told The Logic. “Nickel, graphite and probably cobalt would need to be supplemented by others. It’s very unlikely we’d be able to do 100 per cent of those,” he said, and major nickel suppliers like Indonesia and Russia are not U.S. free-trade partners. Much of Canada’s nickel goes toward stainless steel.
Canada needs to invest in chemical processing faster “or we’re in trouble, said Allan.
David Billedeau, senior director at the Canadian Chamber of Commerce, said the government risks being left “in the dust” unless it expedites mining-project approval while ensuring environmental protections, the approval of Indigenous communities, and attracting new venture capital. It will also need to invest in infrastructure to get mining operations up to scale quickly, so they can bring costs down over time, he said.
Incentive or not, Ian Lange, former member of the White House Council of Economic Advisers and director at the Colorado School of Mines’s mineral-economics program, said little is likely to change in the long-term partnership between the U.S. and Canada on critical minerals, noting that the language is more likely an olive branch to Democrats who oppose new domestic mining projects and would prefer to rely on allies.
“If you get these things up and running, there’s gonna be a market for them,” said Lange. “Certainly a place like Canada’s already way closer to ESG-friendly than [the Democratic Republic of the Congo]. In all senses, this is only more helpful.”
Read Shift—The Logic’s authoritative weekly newsletter on automotive technology industry news—for more; and if you know someone who should be reading it, they can sign up here.
