May 3, 2024 - Energy & Environment

Biden exempts EV metal from climate law sourcing rule

Illustration of a dollar sign with an electric bolt through the center

Illustration: Natalie Peeples/Axios

The Biden administration is allowing graphite, a key battery metal, to be temporarily exempt from Inflation Reduction Act sourcing requirements.

Why it matters: The concession to industry should theoretically let more EVs qualify for the full consumer credit in the new climate law, though how many cars is TBD.

Catch up quick: The new climate law expanded a $7,500 credit that goes directly to Americans buying an EV.

  • But the car can't be made with components or minerals sourced from a "foreign entity of concern," a wonky government term applied to adversaries like China and Russia.

Driving the news: The Treasury Department this morning released the formal regulation for the consumer EV credit today along with a final criteria for sourcing battery minerals — i.e. what can't come from China.

  • One big surprise: the administration said graphite used in anodes would be considered "impracticable-to-trace" until 2027.
  • Administration officials told reporters this was done because the existing graphite supply chain involves mixing material together and that synthetic graphite is made from crude oil that's hard to trace.

Reality check: The exclusion of graphite is a big win for auto and battery companies.

  • Trade associations — both U.S. and international — told the Treasury Department it would take years to stand up a supply chain that would get around China, or else far fewer cars would qualify for the credit.

Between the lines: This news is a walk-back from the sourcing plans the administration put out at the end of last year.

  • Those plans clamped down on how much of a car's battery could be made with anything substantially sourced back to China.
  • Both natural graphite taken from mines and synthetic graphite made from oil are almost entirely produced and processed in China.

What's next: We won't know how many vehicles can qualify under the new credit's criteria until 2025, when the foreign sourcing rules come into effect, according to administration officials.

Go deeper