Production cost exclusion for raw materials may undermine domestic investments
Washington, D.C. (December 15, 2023)—In further response to the U.S. Treasury Department’s announcement yesterday on the proposed guidance regarding the Inflation Reduction Act Advanced Manufacturing Production Tax Credit 45X, SAFE Acting Director of the Center for Critical Minerals Strategy Abigail Hunter issued the following statement:
“Processing is the biggest chokepoint in mineral production supply chains. Without accounting for the highest share of production costs, which in many cases is raw material, the credit will not achieve its intention of reindustrializing the United States and securing critical supply chains,” Hunter said.
“While sharing Treasury’s concerns about crediting the same production cost multiple times, SAFE believes not including material costs puts us at risk of relying on feedstock from non-market actors who do not share our values,” she said.
Based on Treasury’s decision on defining aluminum, it is clear the administration wants to provide as much incentive to domestic industry to produce these materials here as possible. However, excluding raw materials costs from 45X eligibility undercuts the development of upstream projects in the United States. China’s willingness to use supply chain coercion, as seen through the export controls on germanium, gallium, and graphite, point to the need for secure supply of these minerals at home and with allies. SAFE will provide thoughtful comments laying out a feasible way to incorporate production costs while addressing Treasury’s double counting concerns.
The SAFE Center for Critical Minerals Strategy’s seminal report, A Global Race to the Top, highlighted how policies, like 45X, will enable more high standard critical mineral project development and contribute to a much-needed diversification of the supply chain.
SAFE is an action-oriented, nonpartisan organization committed to transportation, supply chain, and energy policy solutions to ensure the economic and national security of the United States, its partners, and allies. SAFE has convened business and former military leaders since 2004 to advance secure, resilient, and sustainable energy solutions. Visit secureenergy.org to learn more.