US, UK launching negotiations on critical minerals agreement

The US will immediately begin negotiations with the United Kingdom on an agreement to allow five critical minerals sourced in the UK to qualify for tax credits under the Inflation Reduction Act, the White House said June 8.

The agreement will cover cobalt, graphite, lithium, manganese and nickel extracted or processed in the UK for use in electric vehicles.

Under the Inflation Reduction Act, EVs must meet thresholds for the percentage of battery components and critical minerals sourced from the US, or a country with which US has a free trade agreement with, in order for the final EV to be eligible for a tax credit known as 30D.

The free trade agreement requirement can be extended to select countries that may not have a formal free trade agreement with the US, according to proposed guidance from the US Treasury Department.

This includes nations such as Japan that have already signed critical minerals agreements with the US. The US also signed a statement of intent with Australia on May 20 that would allow Australian critical minerals projects to be funded under the law.

The White House made the US-UK announcement during UK Prime Minister Rishi Sunak's visit to Washington, DC.

"We intend to use these focused negotiations to ensure the consistency of our approaches on supply chain diversification and robust labor and environmental standards," the White House said in a statement. "Through our strong US-UK partnership we will work towards increasing our respective and collective clean energy industrial capacity, boosting electric vehicle production and deployment, and expanding access to sustainable, secure, high-standard critical mineral and battery supply chains."

Critical minerals agreements are not the only avenue the Biden administration is targeting to secure supplies of important materials.

The US Defense Department plans to make awards totaling approximately $300 million for projects in the "battery and materials space" within the next three to five months, Joseph Sopcisak, technical integration officer for industrial base policy at the department, said at Benchmark Mineral Intelligence's Battery Gigafactories USA conference on June 8.

That project funding will be issued under the authority of the US Defense Production Act, which Biden has previously invoked to shore up domestic critical minerals supply chains.

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