Electric cars

Biden to invoke Defense Production Act for electric vehicle battery materials

Biden to invoke Defense Production Act for electric vehicle battery materials

US President Joe Biden announces the release of 1 million barrels of oil per day for the next six months from the US Strategic Petroleum Reserve, as part of the administration’s efforts to lower gasoline prices, during remarks in the Eisenhower Executive Office Building’s South Court Auditorium at the White House in Washington, United States, March 31, 2022.

Kevin Lamarque | Reuters

President Joe Biden will use the Defense Production Act to encourage domestic production of minerals needed to manufacture batteries for electric vehicles and long-term energy storage. It will also help the United States minimize its reliance on foreign supply chains.

The president’s order could help companies receive government funding for feasibility studies on projects to extract materials, including lithium, nickel, cobalt, graphite and manganese, for the production of electric vehicles .

The Defense Production Act, established by President Harry Truman during the Cold War, allows the president to use emergency authority to prioritize the development of specific materials for domestic production.

“The President will issue a directive authorizing the use of the Defense Production Act to secure U.S. production of critical materials to bolster our clean energy economy by reducing our dependence on China and other countries for minerals and materials that will power our clean energy future,” the White House said in a statement Thursday.

The Department of Defense will impose authority using “strict standards of environmental, labor, community and tribal consultation,” the White House said. The administration also said it was examining other uses of the law to “ensure safer, cleaner and more resilient energy for America.”

The transportation sector is one of the largest contributors to greenhouse gas emissions in the United States, accounting for approximately one-third of emissions each year. The transition from gasoline-powered to electric vehicles is seen as key to combating human-induced climate change.

Lithium demand also exploded as more automakers rush to develop electric vehicles. Growth in the number and size of electric vehicle batteries could account for more than 90% of lithium demand by 2030, according to Benchmark Mineral Intelligence. And around 24% of new vehicles sold worldwide are likely to be fully electric by 2030, according to forecasts from consultancy AlixPartners.

“We look forward to seeing the details of the president’s announcement, but the Biden administration should be commended for its efforts to secure the production of critical minerals like lithium here at home,” said Lithium Americas, a resources focused on developing lithium, CNBC told CNBC.

Administration in February unveiled a plan to allocate $5 billion to states to fund EV chargers over five years as part of the bipartisan infrastructure package. The United States is the the third largest in the world electric vehicle market, behind China and Europe.

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Sierra Club President Ramón Cruz said in a statement that the organization “appreciates that President Biden is taking action to invest in clean energy and help lead the world more in transition.”

“However, it is essential that it is done correctly,” Cruz added. “We must ensure that labor and environmental standards are not circumvented, nor are crucial consultations with nations and tribal communities that would be directly affected.”

The White House also announced on Thursday a further release of oil from its strategic reserves to help reduce gas prices and fight inflation in the United States. The announcement comes as the administration seeks to tackle a rise in energy prices caused by Russia’s invasion of Ukraine.

—CNBC Clifford cat and pippa stevens contributed report.