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U.S., EU work to set up critical-minerals club for EVs, in bid to reduce reliance on China

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U.S. and European officials are discussing how to set up a new group of allies that cooperate on procuring minerals used in clean-energy technologies, hoping to rely less on China while patching up a rift over U.S. subsidies for electric vehicles. 

Under the plan to form a so-called critical-minerals club, the U.S. would negotiate trade agreements focused on such minerals with allies including Japan, the EU and U.K., according to people familiar with it. Once the allies have trade agreements between themselves, they would try to reach additional agreements with such countries as Ukraine or Zambia on securing supplies of raw materials essential to batteries and other clean- energy technologies, according to the people.

Supplies of critical minerals have been at the center of a spat between Washington and Brussels over the healthcare, tax and climate law known as the Inflation Reduction Act, which Congress passed last year. Top French and German officials, while in Washington last week, called for the formation of a critical-minerals club as they again raised concerns about the law, which passed Congress last year. 

The law overhauled subsidies for electric vehicles, creating a series of new requirements for vehicles to qualify for the full $7,500 tax credit. One of those new rules is that 40% of the value of the minerals in a vehicle’s battery must come from the U.S. or a country with a free-trade agreement with the U.S. That percentage rises over time, hitting 80% after 2026. 

Several U.S. allies, including the EU and Japan, don’t have free-trade agreements with the U.S., adding to their frustrations about the law’s approach to subsidies. Treasury Secretary Janet Yellen told The Wall Street Journal last month that those nations would need to negotiate new agreements to meet the law’s sourcing requirements

An expanded version of this story appears on WSJ.com.

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