The Inflation Reduction Act of 2022 (IRA) was signed into law by President Biden on August 17, 2022. The IRA includes provisions that aim to strengthen the U.S. supply chain for critical minerals, which are essential for the production of electric vehicles, batteries, and other clean energy technologies.

One of the key provisions of the IRA is an advanced manufacturing production credit for the production of critical minerals in the United States or allied countries. The credit is equal to 10% of the costs incurred by the taxpayer with respect to the production of these minerals1. The tax credit can also be stacked, so a company can get a credit for mining the minerals and also refining the minerals.

The IRA also includes provisions that aim to incentivize the domestic sourcing of critical minerals2.  For example, the IRA requires that 40% of the critical minerals contained in the battery must be extracted or processed in the U.S. or allied countries, or be recycled in North America by 2023. That percentage increases to 80% in 2027.

4 Challenges to the U.S. Critical Mineral Supply Chain

The IRA is a positive step towards strengthening the U.S. supply chain for critical minerals. However, there are still a number of challenges that need to be addressed to ensure that the U.S. is able to meet the growing demand for these minerals.

  1. China’s dominance of the critical battery minerals supply chain is a major challenge to the global transition to clean energy. Globally, China controls most of the market for processing and refining cobalt, lithium, rare earths, and other critical minerals.3 Dominance of the critical battery minerals supply chain has raised concerns about China’s ability to control the global market for these minerals, as it has been accused of using its dominance to manipulate prices and restrict supplies. In 2010, when tensions rose between Beijing and Tokyo over a territorial dispute, China cut the export of rare earths to Japan4.
  2. Another challenge is the lack of domestic production of critical minerals. The United States currently imports over 80% of the critical minerals it uses to produce clean energy technologies and other products, highly concentrated in a small number of countries5. This reliance on imports makes the U.S. vulnerable to supply disruptions due to political instability, geopolitical risks, and possible export restrictions. Export restrictions can make it difficult or impossible for companies to obtain the components or raw materials they need, which can disrupt production. They can also increase costs by making it more expensive to obtain these materials. In addition, export restrictions can lead to a talent drain, as companies may be forced to lay off employees or relocate operations to other countries where they are not subject to these restrictions. Finally, export restrictions can increase the risk of retaliation from other countries.6
  3. The high cost of producing critical minerals in the United States is the third challenge. The cost of mining and refining critical minerals is often higher in the U.S. than in other countries. This is due to a number of factors, including the high cost of labor and environmental regulations.
  4. To meet NetZero targets by 20507 the world needs 600% more metal mined8 resulting in hundreds of new terrestrial mines with massive environmental, social, and corporate governance (ESG) impacts. 

Deep Sea Mining: A New Source of Critical Minerals

Deep sea mining is a potential new source of critical minerals. Deep sea minerals are found on the ocean floor, and they include a variety of metals that are essential for the production of electric vehicles, batteries, and other clean energy technologies.

There are four main types of deep sea minerals: cobalt and ferromanganese crusts, hydrothermal vents, rare earth element (REE) muds, and polymetallic nodules. 

Cobalt-rich crusts are found on the ocean floor at depths of 1,000 to 4,000 meters, and they are particularly rich in cobalt. Ferromanganese crusts are found on the ocean floor at depths of 4,000 to 6,000 meters, and they are rich in manganese, iron, and other metals. Hydrothermal vents are found in the deep ocean, and they are a source of a variety of metals, including copper, zinc, and gold. REE muds have been discovered at 6,000 meters in Japan’s Exclusive Economic Zone (EEZ).

Polymetallic nodules are the most abundant type of deep sea mineral, and they are found on the ocean floor in all of the world’s oceans. They are rich in copper, nickel, cobalt, and manganese. They are typically found between 4,000 to 6,000 meters deep on abyssal plains. Impossible Metals is developing a patented technology to responsibly harvest these nodules from the seabed floor with minimal impact.

A conservative estimate is that 21.1 billion dry tons of polymetallic nodules exist in the international Clarion-Clipperton Zone (CCZ) manganese nodule field, the largest in area and tonnage of the known global nodule fields. Based on that estimate, the tonnages of many critical metals in the CCZ nodules are greater than those found in global terrestrial reserves9. 

How the IRA Could Apply to Deep Sea Mined Metals

There are two potential scenarios as to how the IRA would apply to metals harvested from the seabed: internationally sourced and domestically sourced metals.

    • As long as the internationally sourced CCZ nodules were processed in the U.S.—which would bolster the reshoring of critical mineral supply chains as called for in the Inflation Reduction Act—there’s no reason to believe that the processed nodules would not be eligible for the advanced manufacturing production credit.
    • The U.S. exclusive economic zone (EEZ) extends 200 nautical miles offshore and contains 3.4 million square nautical miles of ocean—the largest in the world. The United States Geological Survey (USGS) has been investigating marine mineral potential since the 1970s, focusing primarily on the U.S. EEZ10. While we don’t know yet how rich the U.S. EEZ is in manganese nodules, researchers aboard a NOAA Ocean Exploration Expedition surveying the New England Seamount chain off the North Atlantic coast discovered a nodule field in the saddle between two peaks of Gosnold Seamount.11
        • Metals mined in the domestic seabed and processed in the U.S. would meet both of the IRA provisions that aim to strengthen the U.S. supply chain for critical minerals: 
          • The advanced manufacturing production credit for the production of critical minerals in the United States or allied countries
          • The provisions that aim to incentivize the domestic sourcing of critical minerals

In conclusion, deep sea mining could play a significant role in both the future of the U.S. critical minerals industry and enabling the meeting of NetZero targets by 2050.

  1. Inflation Reduction Act creates new tax break for US critical minerals
  2. Treasury Releases Proposed Guidance on New Clean Vehicle Credit to Lower Costs for Consumers, Build U.S. Industrial Base, Strengthen Supply Chains
  3. White House FACT SHEET: Securing a Made in America Supply Chain for Critical Minerals
  4. CNBC: China Bans Rare Earth Exports to Japan Amid Tension
  5. DOE Launches $32 Million Program to Advance Domestic Supply Chain for Critical Mineral
  6. Impacts of Sanctions and Export Controls on Supply Chains
  7. Net-Zero Coalition
  8. IEA The Role of Critical Minerals in Clean Energy Transitions
  9. USGS: Deep-ocean polymetallic nodules and cobalt-rich ferromanganese crusts in the global ocean: New sources for critical metals
  10. USGS: Critical Minerals in the EEZ
  11. Ferromanganese Nodules—2021 North Atlantic Stepping Stones Expedition

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