The Rare Earth Magnet Manufacturing Production Tax Credit Act incentivizes the domestic production of rare earth magnets used, for example, in wind turbines.
The bipartisan Rare Earth Magnet Manufacturing Production Tax Credit Act is set to be introduced in Congress later this week, according to the Wall Street Journal (Paywall), and would provide a $20/kg production tax credit for magnets that are manufactured in the U.S. and increase the credit to $30/kg for companies sourcing 90 percent of their material from U.S. producers.
The U.S. and other Western nations have expanded their investments in rare earth elements (REE) supply chains in recent years to limit their dependency on China which dominates the industry currently. The act underwent multiple legislative steps beginning in 2021 before gaining traction in 2022 following the rising geopolitical tensions especially the war in Ukraine and the arising criticality of REEs. The Department of Commerce announced its support of the act in September 2022.
Once the biggest producer, the U.S. lags behind China and other competitors in REE industry
The U.S. once supplied most of the global REE demand in the late 20th century through the Mountain Pass mine, but global competition and environmental struggles forced the mine out of business at the turn of the century. The new operator MP Materials, a Las Vegas-based REE producer, restarted operations in 2017. In the time between shutting down and restarting, REEs have become critical for technologies from lasers to magnets or LED screens. REEs also continue to become more relevant in the context of electromobility and clean energy. MP Materials’ CEO, James Litinsky, in an interview with the Wall Street Journal (Paywall), said government support is crucial but private funding for REE projects remains the most important element to develop further projects like the Mountain Pass mine. The newly proposed act is one step of many to secure a secure U.S. REE supply chain.
According to the U.S. Geological Survey, China accounts for roughly 60 percent of REEs mined globally but further down the supply chain, China’s dominance becomes even more prominent reaching, for example, 91 percent of refining activity. Following China’s threats of imposing export bans on REE technologies, the U.S. and other Western nations are ramping up efforts to secure their own supply chains.