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Tensions rise over China's control of critical materials

While there is disagreement in Congress over how to diversify the critical materials supply chain, there is bipartisan agreement that China's dominance needs to be addressed.

The clean energy transition faces a supply chain issue that Congress believes poses a national security threat but has no clear fix.

Clean energy technologies like wind turbines, solar panels, electric batteries, and even semiconductors used to power phones and computers all rely on critical materials and minerals such as gallium, germanium, cobalt, silicon and nickel. The issue is that China accounts for nearly 60% of rare-earth mining and 85% of processing capabilities for rare-earth minerals, according to a report from Rice University's Baker Institute for Public Policy. China also leads in manufacturing of clean energy technologies such as solar panels and electric vehicle (EV) batteries.

U.S. dependence on China for critical materials grew over time, particularly as the use of clean energy technologies and semiconductors increased, said Thomas Duesterberg, a senior fellow at the Hudson Institute. China aggressively sought out the raw materials, purchasing mines around the globe in Africa, South America, Canada and Australia, while building out its own refining capabilities. The U.S. largely didn't compete with China on mining and processing, partly due to environmental concerns and partly because of pricing, he said.

"Another part of the Chinese tactic was to start producing lots of these materials and selling them at a cost that even if the U.S. allowed the mining and processing, it couldn't be competitive," Duesterberg said.

Congress held hearings this week focused on how the U.S. could diversify its critical materials supply chain. While the issue has been developing for many years as China made substantial investments in mining and processing capacity, the pandemic brought renewed attention as gaps emerged in U.S. supply chains. President Joe Biden signed into law the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law, both of which provide incentives for improving the supply chain, such as recycling EV batteries or sourcing them from allied countries.

However, it's not enough to stop U.S. reliance on China for critical materials, said Rep. Cathy McMorris Rodgers (R-Wash.), chair of the House Committee on Energy and Commerce. McMorris Rodgers spoke during a hearing on the critical materials supply chain held by the Environment, Manufacturing and Critical Materials Subcommittee.

While addressing the critical materials supply chain is a bipartisan issue, Republicans and Democrats differ on the approach. Republicans, including McMorris Rodgers, supported increasing U.S. production and supply of critical materials by reducing regulatory burdens for mining companies. Meanwhile, Democrats, including Rep. Frank Pallone (D-N.J.), argued that securing the critical materials supply chain must be a "holistic, multifaceted approach" that includes recycling. He said responsible mining is only part of the equation.

"Time and again, Republicans have put the interests of corporate polluters over those of our economy and the American people," Pallone said during the hearing. "We simply cannot allow our country to be dragged backward. Laws like the Bipartisan Infrastructure Law and the IRA are important down payments on our clean energy future."

Congress disagrees on methods to diversify supply chain

Rep. Paul Tonko (D-N.Y.) echoed this sentiment, noting that the IRA reformed the EV tax credit to support domestic production and granted new authorities for the U.S. Department of Energy to support supply chain projects. Recycling and innovations in new battery chemistries can reduce the need for some of the most challenging critical materials, he said.

Supporting domestic production, processing and manufacturing is certainly one part of the solution. But there is so much more we can do.
U.S. Rep. Paul Tonko

"Supporting domestic production, processing and manufacturing is certainly one part of the solution," Tonko said. "But there is so much more we can do."

House Republicans argued that the U.S. still needs to expand domestic extraction of minerals. In retaliation for U.S. export controls implemented by the Biden administration in 2022, China said it would suspend exports of gallium, germanium and graphite to the U.S. It also limited exports of rare-earth processing technologies. These measures place the U.S. in a dangerous position, said Rep. Buddy Carter (R-Ga.), during the hearing.

"We are faced with a choice," Carter said. "We can choose to support American development of critical mineral supply chains through sound permitting reforms, strategic investments and responsible trade. Or we can continue the status quo perpetuating the policies and permitting roadblocks which will delay the start of new mines, strengthening China's stranglehold on the processing sector and forcing us to turn to the world's polluters and human rights' abusers for the critical materials we need."

Carter said another issue is that most minerals mined in the U.S. are exported to China due to a lack of domestic processing capabilities.

Indeed, the U.S. capacity to mine, process and refine minerals has been decimated, McMorris Rodgers said. Should the U.S. consider options to boost domestic mining capabilities, she believes the U.S.'s strong environmental laws will help guide future responsible mining efforts. Mining and refining of minerals are processes that can be environmentally damaging. Many U.S. mines closed due to environmental contamination, resulting in Superfund sites that have taken years to clean up.

"It's possible to continue building on our legacy of environmental stewardship without pushing our supply chains overseas," McMorris Rodgers said.

Tackling China's dominance in critical materials

In 2023, more than two-thirds of the lithium chemical supply globally involved Chinese companies, said David Klanecky, CEO of Cirba Solutions, a U.S.-based battery recycling company.

"We're allowing American businesses to be controlled by foreign entities of concern," he said. Klanecky spoke as a witness during the hearing.

He said onshoring of manufacturing and creating a closed-loop domestic supply chain are key to stabilizing the critical materials market and protecting U.S. national security.

Klanecky noted that the IRA and Bipartisan Infrastructure Law have created more opportunities in the clean energy sector for U.S. businesses and have attracted billions in U.S. investments. However, he said further rules and laws will be needed to protect those investments.

Hudson Institute's Duesterberg said pricing will continue to be a challenge the U.S. faces as it grapples with diversifying the critical materials supply chain. While the U.S. will need to focus on domestic capabilities, it also needs to work with allies like Japan, Canada and Australia to fortify the supply chain.

Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general assignment reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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