Digging for green solutions

Sep 17, 2024

Presented by

With help from Declan Harty and Jordan Wolman

THE BIG IDEA

President Joe Biden speaks at a critical minerals event.

Critical minerals momentum is surging in Washington, but may not yet be ready for "prime time." | Brendan Smialowski/AFP via Getty Images

MINING MOMENTUM — Critical minerals are getting a fresh look in Washington.

The bipartisan infrastructure law and Democrats’ Inflation Reduction Act provided billions in grants, loan authority and tax credits to build up domestic supply chains for the raw materials needed to power electric cars and other clean energy technologies of the future. But if there’s one point of agreement between companies and lawmakers on both sides of the aisle, it’s that those efforts haven’t been enough to dent China’s dominance.

Despite federal subsidies, investors and potential customers are skeptical that domestic suppliers can overcome Beijing’s efforts to maintain its stranglehold. China in recent years has flooded the global market with cheap minerals and undercut Western projects, according to U.S. officials and the International Energy Agency.

That’s led to American projects being canceled or put on hold, even those that were in line for federal support.

Struggling U.S. firms have pleaded with the government to go beyond supporting capital costs for construction of new mines and processing facilities and to take a more active role in the minerals markets.

One proposal being considered by the Biden administration is a financial backstop under which the government would set a price floor and agree to pay specific U.S. minerals producers the difference when market prices fall below that threshold.

Other companies and groups, including the bipartisan House select China committee, have proposed a national mineral strategic reserve — similar to the Strategic Petroleum Reserve — which would go a step further than a backstop by physically purchasing and selling the minerals to stabilize prices.

Such policies would “send an important signal to potential investors” that the federal government is committed to the minerals effort, even though it has faced criticism from industry for leaving leeway to automakers to keep sourcing some Chinese minerals, said Todd Malan, chief external affairs officer at Talon Metals, which is developing a nickel mine and processing plant in the U.S.

Reps. Rob Wittman (R-Va.) and Kathy Castor (D-Fla.), who lead a minerals working group on China panel, recently told the POLITICO Energy podcast that they plan to introduce a legislative package before the end of the year that could establish price supports or fund a strategic reserve.

A bill produced by the Select China Committee is likely to carry extra weight given that a broad bipartisan majority voted to establish the panel last year. Senate leadership has also prioritized countering China, and members of the upper chamber have introduced several bipartisan critical minerals bills this year.

That includes a pair of bipartisan bills introduced Friday by Sens. John Hickenlooper (D-Colo.) and Thom Tillis (R-N.C.) — first reported by POLITICO — that would force the federal government to develop a national strategy to spur U.S. production of the critical minerals, which they pitched as a first step before further action.

Still, the push is unlikely to bear much fruit in the thick of an election year.

Republicans and Democrats disagree over how aggressively to move in disentangling supply chains from China, and former president Donald Trump has seized on the fight to attack the Biden administration’s climate spending, which the GOP nominee says is worsening dependence on Beijing.

That partisanship could be difficult to overcome and make it unlikely there would be action in the lame duck session of Congress after the election, no matter who wins the White House.

“There is opportunity for bipartisan work here,” said Emily Domenech, senior vice president at Boundary Stone Partners who was a senior policy adviser to House Speaker Mike Johnson and his predecessor Kevin McCarthy. “We are seeing a lot of issues migrate into this China competitiveness space because there is a lot more room for bipartisan cooperation that way, but I’m not sure the coalition needed will be ready for prime time before the end of the year.

CARBON MARKETS

SEEING GREEN IN CARBON — With Republican resistance thwarting U.S. efforts to contribute to global funding to help vulnerable countries fight climate change, the Biden administration is planning to pitch an approach relying on carbon credits and private sector money, Sara Schonhardt and Zack Colman report.

“Voluntary carbon markets will certainly be part of” the U.S. “multi-layered approach” to financing, a senior State Department official who was granted anonymity to discuss internal deliberations told POLITICO.

But despite efforts within the administration and the market to improve carbon markets, recent high-profile failures are casting a long shadow over the integrity of any financing package that relies on credits.

“Carbon offsets as a financing mechanism have not performed well and show no signs of performing well,” said Danny Cullenward, a senior fellow at the Kleinman Center for Energy Policy, a research group affiliated with the University of Pennsylvania.

The U.S. is set to take its view into COP29, where negotiators are expected to decide on a new global climate finance goal. It will push for two parts — one involving money generated through country contributions, and another bigger pot that includes private dollars.

Whether developing countries will agree with the U.S. push remains to be seen.

“I think it’s just smoke and mirrors,” said Kevin Conrad, executive director of the Coalition for Rainforest Nations, who has consulted on forest-based carbon crediting projects.

WASHINGTON WATCH

INCOMING GUIDANCE — The Commodity Futures Trading Commission is preparing to once and for all set up new guidelines for the wild world of voluntary carbon markets, Declan reports.

Commissioners are scheduled to vote later this week on final guidance for financial exchanges that list derivatives products linked to voluntary carbon credits, according to an agency notice.

The guidance proposed late last year marks a massive bid by the agency to bolster the credibility and trustworthiness of voluntary carbon credits.

It comes at a moment both of uncertainty around the legitimacy of private sector carbon credits and on the cusp of an expected boom in the popularity of the markets, which effectively allow companies to balance out their emissions by investing in green projects. Morgan Stanley has estimated that the voluntary carbon offset market could reach $250 billion by 2050.

CFTC Chair Rostin Behnam said Tuesday that the agency is trying to install “standards that otherwise don’t exist.”

“Our goal all along has been to help shape standards in support of integrity, which will lead to transparency, liquidity, and ultimately price discovery — all established hallmarks of CFTC regulated markets,” Behnam said when the proposed guidance was released.

How far the final guidance will go remains unclear. The draft released last year outlined what factors exchanges should be weighing when listing the products, such as quality standards, their transparency and whether information about the credits is publicly available.

Democrats are urging the CFTC to finalize a rigorous version of the guidance.

AROUND THE NATION

CALI CAMPAIGN CASH — A California lawmaker who sponsored one of the state’s landmark climate disclosure laws is getting a boost from a carbon accounting firm that stands to benefit from that measure for a reelection bid in a race he’s seen as all but certain to win, Jordan reports.

Persefoni has formed a campaign committee to help state Sen. Scott Wiener, a progressive Democrat who is seeking a third term in his San Francisco seat, according to state records. The carbon accounting industry is expected to see an uptick in business under the law, which requires large corporations operating in the state to disclose and verify their carbon footprint.

“Persefoni AI recently created an IE committee for climate leaders to support Senator Weiner [sic] with his 2024 campaign,” according to a spokesperson for the company, which was a leading supporter of SB253. “His track record supporting climate issues within California speaks for itself.”

The spokesperson declined to say how much money the committee hopes to raise before November’s election. But with Wiener’s win all but guaranteed and the committee getting formed this late in the cycle, the play may have more to do with the future: Among other things, he may have his eye on the House seat currently occupied by former Speaker Nancy Pelosi.

Wiener spokesperson Erik Mebust said he hadn’t heard of the IE committee.

“We have no idea what their plans are — nor are we allowed to know, under campaign finance laws,” he said in a text message. “If Senator Wiener made policy decisions based on what is most likely to generate campaign contributions, he wouldn’t fight Big Oil quite so hard.”

A message from American Chemistry Council:

A question for the next administration and Congress.
Why is manufacturing chemicals in the U.S. vital to the economy and future? Over the next decade, global demand for chemistry is expected to increase by 30 percent, and by almost 15 percent in the U.S. Bottom line: we need more chemistry not less. Boosting American chemical production would onshore more manufacturing, create jobs and strengthen supply chains. Learn more about why it’s important to #KeepChemistryHere.

YOU TELL US

GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. Join us every Tuesday as we keep you in the loop on the world of sustainability.

Team Sustainability is editor Greg Mott and reporters Jordan Wolman and Allison Prang. Reach us all at gmott@politico.com, jwolman@politico.com and aprang@politico.com.

A message from American Chemistry Council:

WHAT WE'RE CLICKING

— The U.S. Securities and Exchange Commission has quietly disbanded an enforcement group that focused on bringing ESG cases, according to Bloomberg.

— The U.S. power grid has withstood this summer’s record heat thanks to renewable energy and good luck, the Wall Street Journal reports.

— The Washington Post takes a look at why schools are ripping up asphalt playgrounds to plant trees.

A message from American Chemistry Council:

American Success Relies on American Chemistry

Our country’s future depends on making more things here at home. That includes American chemistry. China is the largest chemical producer – and it’s increasing its capacity by more than a third over the next 10 years expanding its lead over the U.S.

That’s a big deal considering nearly every aspect of our economy runs on chemistry from semiconductors to agriculture to energy. Allowing the U.S. to fall further behind China could contribute to the trade deficit and weaken America’s supply chain. 

Whoever wins the next election must make increasing American chemical manufacturing a priority and not rely on other countries like China to fill the void.

Policymakers need to adopt smarter, pro-growth policies that support producing more chemicals in the U.S. to meet the growing demand, strengthen its competitive edge, and protect the nation’s trade balance.

Learn more about why it’s important to #KeepChemistryHere.