US and Japan make trade deal for battery minerals ahead of IRS decision
The United States and Japan have struck a trade deal for battery minerals, according to Reuters. This deal could potentially allow Japanese electric cars greater access to US EV tax credits in the Inflation Reduction Act.
The Inflation Reduction Act, passed in August, included big changes to how the US federal EV tax credit works. One of those changes involves restricting credit availability to vehicles that are assembled in North America, with additional requirements based on where battery components and critical minerals are sourced.
The bill requires that a minimum percentage of EV battery components be built in North America and that “critical minerals” in an EV’s battery be extracted or processed in the US or in a country with which the US has a free trade agreement. This minimum percentage will increase each year.
These requirements went into place rather suddenly – the final assembly provision went into effect immediately, and the battery sourcing provisions were set to go into effect in December. Their implementation was pushed back until March, and the Treasury should announce those guidelines by the end of this week.
This sudden implementation rankled the international community, with foreign automakers and governments decrying it as a protectionist move. Since then, perhaps to smooth over these complaints, the IRS has suggested that foreign-assembled cars could still qualify if they’re leased, an interpretation that was pushed for by South Korean automakers. Though the famously anti-EV Toyota opposed that interpretation, even though the company would benefit from it.
Today, it looks as if Japan has found a different way around these requirements, or at least one of them, by signing a narrow free trade agreement with the US solely for battery critical minerals. The agreement was signed by US trade representative Katherine Tai and Japanese ambassador to the US Koji Tomita.
So today’s agreement will potentially add Japan to the list of free trade countries that can extract or process the critical minerals in EV batteries.
The US is currently negotiating separately with the European Union for a similar agreement, though that has not yet born fruit. We may learn more about it in the coming days or weeks, since the deadline for the Treasury’s decision is fast approaching.
However, all of these agreements are contingent on the Treasury’s interpretation of the bill. In the bill itself, the language specifies “any country with which the United States has a free trade agreement in effect.”
The full list of US free trade countries is available here, and does not include Japan. Japan and the US do not actually have a full free trade agreement. The countries agreed in 2019 to implement some free trade measures in agricultural and industrial goods, and intend to pursue an expanded free trade agreement, but this has not been agreed to yet.
So it’s up to the Treasury now to decide if this new agreement counts under its interpretation of what a “free trade agreement” is. Which we should learn more about this week.
Electrek’s Take
Well, this is an interesting last-minute development.
It was fair for other countries to be annoyed by the speed with which the Inflation Reduction Act went into effect, as it takes time to plan and build battery and car factories, and the US government should have given more lead time. However, given the difficult situation in Congress, with one party presenting a unified front acting against any sort of climate action or environmental stewardship, we got the bill we could get.
So agreements like this seem like a good way to help lessen the blow of the bill, and perhaps to repair the wounded relationships between the US and its allies due to the way the bill was implemented. In the end, it’s the biggest climate action bill ever passed by any nation, and on the world stage that should be commended, as long as we can make other countries feel like they’re being treated fairly.
But it’s also interesting that this is happening with Japan, and not other countries that have shown… a little more interest in EVs. I would have expected an agreement like this to happen faster with Korea, which is home to three large battery suppliers, LG, Samsung SDI and SK On. But perhaps that’s what we’ll hear about next.
Not to spend too much time on my “Japan is falling way behind on EVs” horse, but currently the country doesn’t have a lot of battery vehicles to offer. Panasonic is a major battery supplier, but many of its battery operations are in Nevada in cooperation with Tesla, and Tesla’s minerals (for Li-ion batteries, at least) are largely sourced from Australia and Canada. And Japan is not known to have significant reserves of battery critical minerals, though they have discovered some deep-sea deposits within Japanese territory that could potentially be exploited. Japan could also still process minerals extracted overseas, which would then qualify due to being processed in a free trade country.
Or, maybe we can hope that this is a signal of change on the part of the Japanese auto industry, and that they are finally turning more toward EVs. We’ve seen some moves in this direction – the new CEOs of both Honda and Toyota are finally recognizing that more action is needed on EVs. So removing this roadblock might help, in some small way.
Photo: US President Biden hosts Japan PM Kishida at the White House, May 2022. License
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Wind energy powered 20% of all electricity consumed in Europe (19% in the EU) in 2024, and the EU has set a goal to grow this share to 34% by 2030 and more than 50% by 2050.
To stay on track, the EU needs to install 30 GW of new wind farms annually, but it only managed 13 GW in 2024 – 11.4 GW onshore and 1.4 GW offshore. This is what’s holding the EU back from achieving its wind growth goals.
Three big problems holding Europe’s wind power back
Europe’s wind power growth is stalling for three key reasons:
Permitting delays. Many governments haven’t implemented the EU’s new permitting rules, making it harder for projects to move forward.
Grid connection bottlenecks. Over 500 GW(!) of potential wind capacity is stuck in grid connection queues.
Slow electrification. Europe’s economy isn’t electrifying fast enough to drive demand for more renewable energy.
Brussels-based trade association WindEurope CEO Giles Dickson summed it up: “The EU must urgently tackle all three problems. More wind means cheaper power, which means increased competitiveness.”
Permitting: Germany sets the standard
Permitting remains a massive roadblock, despite new EU rules aimed at streamlining the process. In fact, the situation worsened in 2024 in many countries. The bright spot? Germany. By embracing the EU’s permitting rules — with measures like binding deadlines and treating wind energy as a public interest priority — Germany approved a record 15 GW of new onshore wind in 2024. That’s seven times more than five years ago.
If other governments follow Germany’s lead, Europe could unlock the full potential of wind energy and bolster energy security.
Grid connections: a growing crisis
Access to the electricity grid is now the biggest obstacle to deploying wind energy. And it’s not just about long queues — Europe’s grid infrastructure isn’t expanding fast enough to keep up with demand. A glaring example is Germany’s 900-megawatt (MW) Borkum Riffgrund 3 offshore wind farm. The turbines are ready to go, but the grid connection won’t be in place until 2026.
This issue isn’t isolated. Governments need to accelerate grid expansion if they’re serious about meeting renewable energy targets.
Electrification: falling behind
Wind energy’s growth is also tied to how quickly Europe electrifies its economy. Right now, electricity accounts for just 23% of the EU’s total energy consumption. That needs to jump to 61% by 2050 to align with climate goals. However, electrification efforts in key sectors like transportation, heating, and industry are moving too slowly.
European Commission president Ursula von der Leyen has tasked Energy Commissioner Dan Jørgensen with crafting an Electrification Action Plan. That can’t come soon enough.
More wind farms awarded, but challenges persist
On a positive note, governments across Europe awarded a record 37 GW of new wind capacity (29 GW in the EU) in 2024. But without faster permitting, better grid connections, and increased electrification, these awards won’t translate into the clean energy-producing wind farms Europe desperately needs.
Investments and corporate interest
Investments in wind energy totaled €31 billion in 2024, financing 19 GW of new capacity. While onshore wind investments remained strong at €24 billion, offshore wind funding saw a dip. Final investment decisions for offshore projects remain challenging due to slow permitting and grid delays.
Corporate consumers continue to show strong interest in wind energy. Half of all electricity contracted under Power Purchase Agreements (PPAs) in 2024 was wind. Dedicated wind PPAs were 4 GW out of a total of 12 GW of renewable PPAs.
Read more: Renewables could meet almost half of global electricity demand by 2030 – IEA
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In the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy. In this week’s episode, we discuss the official unveiling of the new Tesla Model Y, Mazda 6e, Aptera solar car production-intent, and more.
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The Chinese EV leader is launching a new flagship electric sedan. BYD’s new Han L EV leaked in China on Friday, revealing a potential Tesla Model S Plaid challenger.
What we know about the BYD Han L EV so far
We knew it was coming soon after BYD teased the Han L on social media a few days ago. Now, we are learning more about what to expect.
BYD’s new electric sedan appeared in China’s latest Ministry of Industry and Information Tech (MIIT) filing, a catalog of new vehicles that will soon be sold.
The filing revealed four versions, including two EV and two PHEV models. The Han L EV will be available in single- and dual-motor configurations. With a peak power of 580 kW (777 hp), the single-motor model packs more power than expected.
BYD’s dual-motor Han L gains an additional 230 kW (308 hp) front-mounted motor. As CnEVPost pointed out, the vehicle’s back has a “2.7S” badge, which suggests a 0 to 100 km/h (0 to 62 mph) sprint time of just 2.7 seconds.
To put that into perspective, the Tesla Model S Plaid can accelerate from 0 to 100 km in 2.1 seconds. In China, the Model S Plaid starts at RBM 814,900, or over $110,000. Speaking of Tesla, the EV leader just unveiled its highly anticipated Model Y “Juniper” refresh in China on Thursday. It starts at RMB 263,500 ($36,000).
BYD already sells the Han EV in China, starting at around RMB 200,000. However, the single front motor, with a peak power of 180 kW, is much less potent than the “L” model. The Han EV can accelerate from 0 to 100 km/h in 7.9 seconds.
At 5,050 mm long, 1,960 mm wide, and 1,505 mm tall with a wheelbase of 2,970 mm, BYD’s new Han L is roughly the size of the Model Y (4,970 mm long, 1,964 mm wide, 1,445 mm tall, wheelbase of 2,960 mm).
Other than that it will use a lithium iron phosphate (LFP) pack from BYD’s FinDreams unit, no other battery specs were revealed. Check back soon for the full rundown.
Source: CnEVPost, China MIIT
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