Forbes Piece: IRA Subsidies Might Create Energy Minerals Supply Shortages

Nickel mining facility of PT IWIP (Indonesia Weda Bay Industrial Park) in the village of Lelilef Sawai, District of Central Weda, Central Halmahera Regency, North Maluku Province, Thursday, Oct. 13, 2022. This particular hill was owned by Arnikus Jinimaya, 66, a farmer from the village of Gemaf, District of North Weda, before PT IWIP land-grabbed and took over his land without compensation. The coastal nickel mining facility stands on top of reclaimed land what was previously mangroves area, which limits access to local fishermen from neighbouring villages Gemaf and Sagea, among other villages. Locals are also impacted by dust and smog coming from the mining activities, which affect their respiratory health. Various parts of Halmahera Island are currently the site of nickel mining, including Weda and Buli, in Central and Eastern Halmahera respectively. (Photo by Joshua Irwandi/For The Washington Post via Getty Images)

The array of tax incentives and subsidies contained in the 2022 Inflation Reduction Act appears likely to create supply shortages of critical energy minerals. That is the central finding in a new study published this week by S&P Global titled, Inflation Reduction Act: Impact on North America Metals and Minerals Market.

“The IRA impacts minerals in two ways,” the report’s authors write. “On the demand side, it does so by providing major stimulus and subsidies for a wide range of mineral-intensive decarbonization technologies, from electric cars to off-shore wind turbines. On the supply side, it seeks to promote mineral development by imposing percentage requirements for mineral content from the United States or countries with which it has a free trade agreement (“FTA countries”).”

The problem comes in the reality that the provisions appear likely to stimulate the demand side more rapidly and substantially than the U.S. and FTA countries will be able to produce and source needed supplies of critical minerals like nickel, cobalt, and copper. The report finds that projected U.S. demand for lithium, copper, nickel, and cobalt are materially higher post-IRA than they were before. Much higher, in fact. “Spurred by the IRA, energy-transition-related US demand for the critical minerals lithium, nickel and cobalt, taken together, will be 23 times higher in 2035 than it was in 2021. For copper, it will be twice as high,” the report says.