Meeting the Inflation Reduction Act’s EV battery requirements will be hard

The Inflation Reduction Act (IRA) has some car troubles. One of President Joe Biden’s major initiatives, the law was intended to foster activities that are both good for the economy and green. As such, it contains stipulations about the manufacturing of EVs—particularly that their batteries come from local sources or free-trade partners. But there are some issues with the availability of critical minerals that meet the "local" criteria and some vagueness on important terminology, according to a recent paper.

Higher standards

The IRA was signed into law in August of last year. It includes a provision that gives tax credits to producers that use critical minerals that come from the US or some of its close trade partners. In particular, to get the credits, an electric vehicle—which needs to be fully electric—would need to have a battery in which 80 percent of the market value of its critical minerals is sourced from within the US. Alternatively, this benchmark could be reached using minerals sourced from free-trade partners, or the minerals could hail from elsewhere but be processed in the US.

This is an increase over the requirements (40 percent) for receiving previous incentives. In theory, purchasing one of the vehicles eligible for a tax credit would be more affordable for many consumers.