Biden’s climate bill drives demand for key minerals

The U.S. climate law, turning one year old this week, is juicing U.S. demand for a basket of minerals that won't be easy to meet.

Driving the news: U.S. needs were already growing fast before the Inflation Reduction Act, and now there's even more pressure.

• "[E]nergy-transition-related U.S. demand for the critical minerals lithium, nickel and cobalt, taken together, will be 23 times higher in 2035 than it was in 2021," S&P Global finds in a new analysis.
• For copper, it'll be twice as high.

Why it matters: The study distills, in great detail, one of several hurdles before the law that's bringing a surge of investment in projects and tech designed to accelerate the displacement of fossil fuels.

• Electric vehicle batteries, renewable power projects, transmission, hydrogen production and more require lots of raw materials.

The big picture: U.S. demand for nickel will be 14% higher in 2035 than it would have been absent the law, S&P projects.

• The same dynamic holds for cobalt (13%), copper (12%) — which has widespread applications — and lithium (15%), though S&P's most optimistic about meeting lithium needs.

How it works: The climate law is also industrial policy. In various ways, incentives for EVs and cleaner power are tethered to domestic sourcing and supplies from free-trade partners.

• "The energy transition, that has of course heated up the pressure on minerals, and the [Inflation Reduction Act] adds to the heat considerably — and complicates it to some degree," Dan Yergin, S&P Global's vice chairman, tells Axios.

Threat level: It will be "very challenging" to obtain enough energy transition materials, S&P finds.

• It lays out several reasons why, ranging from long permitting timelines in the U.S. — 7-10 years for copper mines — to growing international competition for supplies.
• For instance, nickel production is highly concentrated in nations that lack free-trade deals with the U.S. (Of note: the U.S. has been striking ad-hoc mineral-specific agreements with some nations).

The intrigue: Even formal free-trade deals don't prevent supply risks.

• Take Chile, a major source of U.S. lithium and copper. It also has a strong trading relationship with China at a time when U.S.-China tensions are rising.

What we're watching: Whether the analysis will help create any momentum for long-shot Capitol Hill talks to speed permitting.

The bottom line: The law's success is far from guaranteed, at least at the scale its backers envision.