Minister for Resources Madeleine King has announced that tax incentives for critical mineral projects, including lithium processing, are ‘certainly on the table,” as the government actively weighs policy options to attract international investment.
Tesla (NASDAQ:TSLA) chair Robyn Denholm cautioned that Australia might lose its competitive edge to global partners, such as the US and Europe, without tax incentives for battery-grade lithium processing.
“A production tax credit of less than 10% would put Australia on the map as a global battery-grade lithium hydroxide processor,” Denholm stated at the Australian Minerals Council's annual conference.
In response, Minister King cited the United States' Inflation Reduction Act (IRA) as a successful example of leveraging tax subsidies for substantial investment inflow.
“We know how useful the production credits are proving through the Inflation Reduction Act in the US," she said. "That’s proven to be, and will be, an extraordinary policy for the US, driving clean and green technology development, as well as critical minerals partnerships.”
The IRA, which aims to expedite the clean-energy transition with more than US$400 billion in subsidies, permits nations with US free-trade agreements to partake in its benefits. King noted that the Australian government is seeking clarity on which domestic projects could be eligible.
“I can’t pretend to understand the legislative machinations of the US system, but they’re still working on a lot of detail on this, and we’re trying to make sure we feed into it,” King elaborated.
Australia produces 47% of the world's lithium but exports 90% of it for refining in China, which accounts for about 60% of global supplies.
This comes as US and its allies want to reduce reliance on Chinese lithium processing given the ongoing tit-for-tat trade war. Earlier this year, Beijing restricted exports of gallium and germanium — two processed metals crucial to the semiconductor, electric vehicle and weapons industries.
Denholm urged Labor to act swiftly on the tax incentives, warning that delays could allow the US and Europe to surpass Australia with their multibillion-dollar incentives.
“Australia still has a yawning policy gap when it comes to building, financing and operating facilities when compared to our friends overseas," Denholm added.