I wonder where the production tax credits bill on critical minerals processing will end up?
The production tax credits is a form of matching the US's IRA to encourage on-shore downstream processing of critical minerals. The policy was to return through tax incentives up to $17.6B to producers over 14 years and was a way of competing with the likes of China (and it's industry subsidies) and Indonesia which granted primarily Chinese companies tax incentives for on-shoring Nickel production in Indonesia.
Firstly, it doesn't appear that Li batteries will ever be produced in Australia (at scale at least), secondly, the coalition were against this policy at the time and fourth it wouldn't kick in until 2027 and lastly wouldn't apply unless companies processed the locally mined critical minerals in Australia.
RNU's near term plan to supply primarily concentrates for export appears to exclude its access to the production tax credits however the PSG plant could if implemented post 2027 if the coalition doesn't support the bill in the mean time (a-la IRA, we know dutton is heading in similar direction as stump).
AFR-Budget.pdfSome snippets:
On Tuesday, that backing – in the form of production tax credits – wasunveiled in the federal budget to the acclaim of miners and a backlash fromthe Coalition, which branded it “handouts for billionaires”The figures are based on careful analysis of existing processing of criticalminerals and the projects in commodities such as lithium, rare earths,graphite, cobalt, vanadium and nickel that might make the long, risky andexpensive journey from upstream to downstream.
They are in line with the modelling Pearce and AMEC produced in makingtheir case to government, but a lot needs to go right between now and 2027when they kick in and through the 2030s for the tax credits to amount tomuch.
Pearce sums it up like this: “This incentive is a zero-risk approach forAustralia to take. If companies don’t produce a value-added product, theydon’t receive a tax credit. It’s as simple as that.”
It found what it was looking for in the US Inflation Reduction Act and itsproduction tax credits – no money up front from the government and norebate unless you make it downstream.A host of miners quickly came on board, seeing the credits as a big steptowards making the most of an abundance of critical minerals by addingvalue onshore in a world awash with subsidies that threatened to confineAustralia to quarry status.Picton’s attempts to engage with Canberra on tax breaks in late 2022 weremet with what a source describes as a “mixture of disengagement,disinterest and confusion” because although politicians liked to talk aboutmaking EV batteries onshore, most had no idea of the manufacturing baserequired. A month earlier, Prime Minister Anthony Albanese had proclaimed hewanted Australia to move all the way downstream from mining to batterymanufacturing.
“The fact that prior to the IRA, the US was already one of the world’s mostcompetitive manufacturing economies – and Australia was one of the world’s least – means it will now be more challenging for Australia to movemuch further down the lithium-ion value chain and for Australiancompanies to convince overseas joint venture partners and investors toinvest in Australia,” it said.
His biggest disappointment in the past few days has been the stand taken bythe Liberal leader Peter Dutton and shadow treasurer Angus Taylor, andtheir “handouts for billionaires” commentary.
