A top White House adviser acknowledged this week that the US has to do some fast-tracking to preserve the credibility of its supply chain and its independence from competitors such as China.
“Look, it’s a big concern for America and I think for the rest of the world. As we’re going to a clean, green, a whole new energy system, we have to make sure we have a Have a diversified supply chain.” special presidential coordinator Amos Hochstein told CNBC’s Hadley Gamble on Monday.
“We cannot have a supply chain that is concentrated in any one country, it doesn’t matter which country it is,” he said. “We have to make sure that we have a diversified system that we can be well supplied with, from the mining and refining process to the manufacturing of batteries and wind turbines. That is the only way that will work from an economy point of view. “
Asked whether the US was behind in this effort, Hochstein, who also served as chief energy envoy in the Obama administration, replied: “Of course we are behind.” But, he added, “that doesn’t mean we’re out.”
Workers transport clay containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China on October 31, 2010.
Staff | reuters
According to a recent report by Rice University’s Baker Institute for Public Policy, China controls about 60% of the world’s production of rare earth minerals and materials. Those resources include lithium, cobalt, nickel, graphite, manganese and other rare earth elements important for making electric vehicles, batteries, computers and household goods.
They are also essential to renewable technology such as solar panels and wind turbines, which are central to the US effort in the energy transition away from fossil fuels. As just one example, China refines 95% of the world’s manganese – a chemical element used in battery and steel manufacturing – despite mining less than 10% of its global supply.
For the US, whose relations with China can currently be best described as strained, this poses a number of security risks should China at any time decide to weaponize that market dominance. The COVID-19 pandemic and the Russia-Ukraine war have also highlighted the fragility of global supply chains.
‘We didn’t invest’
The White House wrote in a February 2022 fact sheet that “the US is increasingly dependent on foreign sources for many processed versions of these minerals. Globally, China controls most of the market for the processing and refining of cobalt, lithium, rare earths and other important minerals.”
“We have to acknowledge that we haven’t made the investment, and what the United States is trying to do now is not just the same old thing, we want to partner,” Hochstein said. “We’re going to come to this table with our G7 partners, we’re going to pool our resources, we’re going to make sure the money is there.”
This includes dedicated financial and business incentives, Hochstein said. The Biden administration’s massive 2022 Inflation Reduction Act aims to heavily invest in access to and supply of critical minerals in relevant countries, and nearly $369 billion in funding and tax credits to boost renewable energy technology and critical mineral production provides.
“We are incentivizing companies, through the IRA, to say, ‘Look, if you make sure you are mining in the US or other countries and bring it into the US for refining, processing and battery manufacturing. If there are, there’s going to be kind of financial incentive there,'” he said.
Despite his warnings about supply chain risk, Hochstein dismissed the idea that America is being held hostage by China.
“I don’t want to talk about hostage taking, ultimately China is doing what they think is right for them,” he said. “They are trying to create an economic powerhouse in clean energy and we all need to do the same.”
“We need to learn from what happened in the oil and gas energy sector as we transition to a new energy market that is still dependent on natural resources,” he said.
“They may not be oil and gas, but they are still natural resources – they are not abundant everywhere in the world – so we have to make sure from a US perspective that we have a supply chain for the United States , and that is what the law that we passed in the United States of America is trying to do.”