EC President Says Biden Agrees European Critical Minerals Should Be Eligible for Tax Credits

European Commission President Ursula von der Leyen told reporters after her meeting with President Joe Biden that he agrees that the goal should be for critical minerals processed, mined or recycled in the EU to qualify under Inflation Reduction Act standards for electric vehicle batteries.

The law says that for EVs assembled in the U.S., Mexico or Canada, $3,750 of a buyer's tax credit is dependent on North American battery components, and $3,750 is dependent on the percentage of critical minerals in that battery coming from either the U.S. or a country that has an FTA with the U.S.

"We have agreed that we will start work now with the clear goal, the goal is to have an agreement on critical raw materials that have been sourced or processed in the European union, that these strategic supply chains are able to access the American market as if they had been sourced in the United States," von der Leyen said March 10.

The White House and the EU put out a joint statement that said, in part: "we intend to immediately begin negotiations on a targeted critical minerals agreement for the purpose of enabling relevant critical minerals extracted or processed in the European Union to count toward requirements for clean vehicles in the Section 30D clean vehicle tax credit of the Inflation Reduction Act. This kind of agreement would further our shared goals of boosting our mineral production and processing and expanding access to sources of critical minerals that are sustainable, trusted, and free of labor abuses. Cooperation is also necessary to reduce unwanted strategic dependencies in these supply chains, and to ensure that they are diversified and developed with trusted partners."

Von der Leyen did not say if the regulations -- which are expected to be issued later this month -- will allow EU critical minerals from the start, or only once an agreement on trade in critical minerals is reached.

The European Commission president expressed satisfaction that this arrangement, along with transparency on subsidies given to firms in renewable energy or other IRA priority areas, and the Treasury Department's decision to allow commercial vehicles -- including leased vehicles by consumers -- to bypass the North American assembly requirement will mean that the EU is not being disadvantaged by the law.

The joint statement also said the EU and the U.S. will have a formal dialogue to coordinate business incentives. "Both sides will take steps to avoid any disruptions in transatlantic trade and investment flows that could arise from their respective incentives. We are working against zero-sum competition so that our incentives maximize clean energy deployment and jobs -- and do not lead to windfalls for private interests. The Clean Energy Incentives Dialogue will become a part of the EU-U.S. Trade and Technology Council where it will also facilitate information-sharing on non-market policies and practices of third parties -- such as those employed by the People’s Republic of China (PRC) -- to serve as the basis for joint or parallel action and coordinated advocacy on these issues in multilateral or other fora."

The joint statement also touched on the two sides' efforts to agree on how to confront non-economic overcapacity in the steel and aluminum sectors. They said: "We are committed to achieving an ambitious outcome in the Global Arrangement on Sustainable Steel and Aluminum negotiations by October 2023. The arrangement will ensure the long-term viability of our industries, encourage low-carbon intensity steel and aluminum production and trade, and restore market-oriented conditions globally and bilaterally. Together, we will incentivize emission reductions in these carbon-intensive sectors and level the playing field for our workers. The arrangement will be open to all partners demonstrating commitment to countering non-market excess capacity and reducing carbon-intensity in these sectors."