EU-US critical minerals agreement: Building stronger supply chains together

Written by Marcin Szczepański.

In March 2023, Commission President Ursula von der Leyen and United States (US) President Joe Biden announced their intention to conclude a critical minerals agreement, seeking to foster supply chains in raw materials needed in the production of electric vehicle batteries. The paradigm shift towards clean transport is driving a massive expansion in the market for electric vehicle markets, highlighting the importance of securing the mineral inputs used in their batteries. To that end, the US Congress has embedded various support measures in enacted legislation, notably in its 2022 Inflation Reduction Act (IRA). IRA’s tax credit provisions for electric vehicles are of particular concern to the European Union (EU). To qualify for these subsidies, set and progressively increasing percentages of minerals and battery components must come from North America or a country with which the US has a free trade agreement. The EU and US set up an IRA task force to find a solution under which EU vehicles could be eligible for tax credits. The EU-US agreement would enable relevant critical minerals extracted or processed in the EU to count toward IRA requirements.

Commission presented the negotiating directives to the Council in June, and the latter authorised formal launch of talks in July. The EU is seeking to strengthen the international supply chains of critical minerals, facilitate trade, and improve sustainability and labour rights. It is also pushing for the inclusion of more than 50 minerals and materials relevant to the green transition in the agreement’s scope. The US has expressed its intention to conclude an executive agreement without a vote in the Congress, which is drawing some criticism from US lawmakers. The European Parliament, which will decide whether to give formal consent to the agreement, adopted a resolution on the negotiations in September 2023, calling for wide coverage of minerals, inclusion of critical minerals obtained through recycling, an investment transparency mechanism, and an early warning system against supply chain disruptions.

Read the complete briefing on ‘EU-US critical minerals agreement: Building stronger supply chains together‘ in the Think Tank pages of the European Parliament.