Can Australia develop its own Inflation Reduction Act?

There have been more than 1500 different incentive schemes established across the world to support investment in the critical minerals supply chain.

The US’ Inflation Reduction Act (IRA) is the most notable of these, with the potential to drive more than $US1 trillion of investment in renewables through 2035.

The IRA includes a $US30 billion advanced manufacturing production tax credit (AMPTC) that subsidises the downstream processing of critical minerals.

A report commissioned by the Association of Mining and Exploration Companies (AMEC) and prepared by Mandala Partners suggests Australia must introduce its own PTC if it’s mining and downstream industries are to remain globally competitive.

“Using proprietary industry data from 10 firms in Australia’s critical minerals industry, we have determined that Australia’s production is on average 10 per cent more expensive than in the US when it comes to refining critical minerals and producing battery active materials,” the report said.

“This has been caused first and foremost by the US’ PTC which provides for a 10 per cent production subsidy both for critical minerals and active materials.”

AMEC believes that by developing its own 10 per cent PTC that matches the policy parameters of the US AMPTC, Australia can achieve cost parity with US production.

“The proposed credit would cover the same inputs as the US AMPTC, i.e. production costs such as utilities, labour, consumables and the processed inputs for active materials production,” the report said.

Led by AMEC, a broad delegation of Australian companies met with the Federal Government this week to discuss the production tax credit. This included Wyloo Metals, IGO and Pilbara Minerals.

“Today’s meetings provided an opportunity to relay the real struggles facing the industry at the moment. It also sends a strong message to the Federal Government that the time for action is now,” AMEC chief executive officer Warren Pearce said.

“The upcoming Federal Budget provides Treasury with a lever to pull that will reinvigorate the critical minerals sector and help Australia compete further downstream.

“If Australia wants to be more than a dig and ship country, now is the time to provide incentives required for the energy transition vision.”

Australia is home to the Kemerton (owned by Albemarle) and Kwinana (owned by Tianqi Lithium and IGO) lithium hydroxide plants. IGO and Wyloo have aspirations to establish an integrated battery material facility (IBMF) in WA.

Combining IGO’s nickel refining technology with battery precursor manufacturing technology, the proposed IBMF would produce precursor cathode active material (PCAM) needed for the manufacture of nickel-rich cathodes for lithium-ion batteries.

These downstream processing projects and operations are more likely to be viable if Australia establishes its own PTC. It will also benefit Australia’s overall competitiveness in the critical minerals supply chain.