What is the clean car deal about?
The United States has passed the Inflation Reduction Act, moving up tax advantages and subsidies for companies that are contributing to green technologies, such as electric vehicles.
With this deal, the European Union has been scared that companies would move their operations abroad, losing access and innovation. This would mean a bad move for the advancement of green technology for the EU.
However, behind closed doors, since March, both parties have been working on an agreement dubbed ‘the green car deal’, which leads to a transatlantic critical mineral partnership.
This deal would ensure that the raw materials used for the construction of these electric vehicles and more, would still be tradeable from the European Union, as well as possibly having the opportunity to manufacture some parts abroad.
Why are the EU and US not coming to an agreement?
The negotiations on this trade deal for raw materials has been going on for months now, with both parties not coming to an agreement.
Surprisingly, this has not been because of the actual content of the deal, as this seems to be where both parties agree. Ultimately it is the legal formulation of the deal that causes concerns on both sides.
The United States has now been holding back on completing the clean car deal, because the deal would not require all 27 member countries to approve the critical minerlas used in electric car batteries.
Unfortunately, the U.S. wants binding laws that would have Europe commit to boosting their supply of raw materials to the nation, in exchange for the tax perks that are in effect in the country.
How does this deal impact the investment of raw materials?
The delay will most likely last throughout the summer of 2023, slowing down the production of EV’s in America by European companies.
This would drive a rift between the U.S. and Europe, just when they are attempting to form a bond strong enough to counter the Chinese markets.
For investments in raw materials, it is tough to predict the swing. The expectation is that the deal will go through eventually, it just needs to be polished.
In this case, the hope is that the import and export of raw materials to and from Europe and the United States will increase, creating more demand and supply.
However, because the United States laws attempt to take a rise in domestic production of EV’s, the demand should rise quicker than the possibility for Europe to scale up production.
If the success of this domestic production is a fact, then we could see a nice upward trend in all raw materials related to building EV’s and specifically the cars’ batteries.