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Friday Five

27th Jan 2023

How will the US IRA's electric vehicle provisions impact Europe?

What are the implications of long-term and bankable production tax credits?

Is there a way for Europe to compete with this support?

The US Inflation Reduction Act (IRA) introduced provisions to support the electric vehicle (EV) supply chain. These provisions include long-term and bankable production tax credits worth billions of dollars, given to batteries and the critical metals supply chain until 2032. Europe is now faced with a dilemma: how should it respond?


The IRA tax credits are of little concern as the EU is currently expected to export only small numbers of electric cars in the foreseeable future, so it cannot rely on EV tax credits as a response. Instead, Europe should look at its funding mechanisms to make production attractive. At the EU level, more than EUR 20 billion has been devoted to the battery value chain via the IPCEI framework, the EIB and research funding in the last few years.

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Billions more are available via InvestEU and the EU Recovery and Resilience Facility launched in response to Covid-19. Almost EUR 6 billion was spent in 2022 to subsidise EV sales across member states.


However, these sums still need to be increased - especially when compared with what is being offered by US legislation - and there is also complexity in getting them approved. This means that Europe needs to look at ways of making its funding easier to access while increasing its overall investment in EV supply chains.

For Europe's response to be effective, it must focus on three key areas:

  • Improving access to finance.

  • Developing new technologies.

  • Creating an enabling policy environment encourages innovation and investment in EV supply chains.


It must also ensure that new measures are consistent with existing European regulations, such as competition law or state aid rules.


Ultimately, Europe's response should be twofold: firstly, it should increase its investment in EV supply chains; secondly, it should create an enabling policy environment that encourages innovation and investment in this sector. By doing so, Europe can ensure that it remains competitive with other countries in terms of EV development while protecting its citizens from any potential negative impacts associated with US legislation on electric vehicle supply chains. 

Source: Global-supply-chains-of-ev-batterieselectric-vehicles-supply-chainbattery-supply-chains-101response-to-us-inflation-reduction-act/

Climate Change: An Enduring Part of the Business Agenda
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Climate change was an enduring part of the business agenda in 2022, with leaders ranking it as a top issue in Deloitte’s latest global C-suite survey. This recognition comes as no surprise, given the overwhelming evidence that climate change is accurate and its effects are already being felt worldwide.

The survey reveals that CxOs believe their organizations and the global economy can continue to grow while reducing greenhouse gas emissions. This belief is shared by many experts who have argued that transitioning to a low-carbon economy will not only help mitigate climate change but also create new economic opportunities.

Organizations are increasingly taking action to address climate change, from setting ambitious emission reduction targets to investing in renewable energy sources such as solar and wind power. Companies are also engaging with stakeholders such as governments, non-profits and other businesses to develop innovative solutions for tackling climate change.


Progress towards solutions will require collaboration across private, public and non-profit organizations. Governments must provide incentives for businesses to invest in green technologies, while companies must take responsibility for their environmental impact. Non-profits can play a crucial role in advocating for policies that promote sustainability and raising awareness about the importance of addressing climate change.


Ultimately, it is up to all of us—individuals, businesses, governments and non-profits—to work together if we want to make meaningful progress on this critical issue. We must recognize our collective responsibility for protecting our planet and take action now before it’s too late.


Gigafactories are of high political significance. They drive a nation's ambition for industrial growth and provide an opportunity to create an innovative industry around electric vehicles and alternative energy storage solutions instead of relying on fossil fuels.


A recent article by 'Benchmark Minerals' explains that there are five 'benchmark' rules that should be followed for any plans to build or expand on these factories:

Work with automakers and key end users to develop products that meet their specific needs:


From the very beginning, it is essential for emerging battery cell producers to collaborate with automakers and their desired end users. This partnership will ensure that these manufacturers can create a product catered to their intended audience. It is a reason why many significant gigafactories are joint-ventures

Know your chemistries to define your target customer base and supply chain strategy:


Your end market customer base and supply chain will profoundly impact your security-critical minerals and battery chemicals decisions for the gigafactory. While cell chemistry is rapidly advancing with every technological breakthrough in Lithium-ion batteries, you'll have to stay agile to keep up with the competition. Crafting cutting-edge cell chemistry while building a fledgling business and brand is a feat, especially with limited capital and going up against leading global manufacturers in China and South Korea.​


Secure raw material supply chains before production, factoring in localisation, sustainability, and product quality:


In 2022, up to 70% of the cost of some battery cells was composed by their bill of materials. With further production advancements and efficiencies, this percentage may surge even higher – thus creating critical raw material supply chain interruptions that must be circumvented at all costs. The first struggle lies in obtaining access to these raw components; additional issues such as localisation, sustainability, and product excellence come. Consumers are becoming more exposed to unpredictable hazards within the supply chain process each day.        


Obtain government backing for competitive cost advantages against Chinese companies:


The US Department of Energy recently agreed to lend $2.5 billion to a joint venture between GM and LG Energy Solution to build a domestic battery plant. On the other hand, Britishvolt failed to reach the milestones outlined in its borrowing agreement; therefore, it could not access £100 million of UK government funding, ultimately leading to its downfall.

Have a credible management team experienced with battery technology at the helm of development efforts:


To achieve success, battery startups need to be led by an experienced and reputable management team. In the case of Northvolt, Peter Carlsson and Paolo Cerruti had both worked at Tesla in its supply chain before co-founding the company. Furthermore, Yasuo Anno's decades of experience in Japan's battery industry joining early on proved invaluable for their development.


A new report has revealed that more than 90% of rainforest carbon offsets by the world's biggest provider are worthless. 


The nine-month investigation has been undertaken by the Guardian, the German weekly Die Zeit and SourceMaterial, a non-profit investigative journalism organisation, looked into Verra, the world's leading carbon standard for the rapidly growing $2 billion voluntary offsets market.


The investigation found that most of Verra's projects were failing to reduce emissions and, in some cases, even increasing them. This is due to a lack of monitoring and enforcement of standards and incentives to cut emissions being too low or non-existent.

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This is a significant blow to companies relying on these offsets as part of their net-zero strategies. It also raises questions about the effectiveness of carbon offsetting in general and whether it should be used at all to reach climate goals.


This report shows that we need better regulation and oversight regarding carbon offsetting if we want it to be an effective tool for reducing emissions. Companies must ensure that they are only buying credits from projects that reduce emissions and not just those that claim to do so but don't deliver results.


If we want to progress towards our climate goals, we need to take action now and start investing in solutions that work.


Carbon offsetting can be one part of this, but only if it is done correctly with proper oversight and regulation in place.

Sources:  Motherjones​ The Guardian.  Fast Company

Video © of Polestar 

As electric vehicle maker Polestar continues to drive the transition towards carbon-neutral vehicles, sustainability boss Fredrika Klaren has called on Australian miners and manufacturers to develop traceable and carbon-neutral supply chains. This is to provide components for the company’s revolutionary climate-neutral car, Polestar 0.


To ensure complete traceability from start to finish, Polestar aims to make the car from minerals and materials that have not emitted any carbon during their extraction or production process. It also wants suppliers who source “risk” minerals such as Cobalt, Nickel and Lithium with full traceability, so they are not at risk of human rights violations or pollution during production.

Ms Klaren also raised the urgent need for greater transparency regarding charging electric cars regarding where exactly they source energy, whether derived from fossil fuels or otherwise. Additionally, research needs to be done into how batteries can balance power fluctuations in electricity grids.


Ms Klaren was only stopping in Sydney during her trip down under from Polestar’s headquarters in Gothenburg because she prefers to limit her time in the air. “I have a climate action plan for myself,” she said.


“One of the things on that list is that I don’t want to fly too much ... it would have been great if you had high-speed trains.


Whilst her efforts may be small compared to the broader needs of supplying components for Polestar 0 and creating a genuinely sustainable future for electric vehicles, it is still noteworthy given the current state of clean transport alternatives.


Given this ambitious goal set by Polestar – and with Circulor providing an essential platform for traceability - there’s no doubt that both local miners and manufacturers will be keenly exploring what steps can be taken to develop supply chains that are both carbon-neutral and transparent throughout the process.


With electric vehicles quickly becoming more commonplace around the world, initiatives like this could prove invaluable as we advance in helping pave the way towards a zero-emissions future on our roads.


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