The IRA, which was finally passed by the Senate on August 7 after 18 months of political infighting, includes incentives to increase the production of electric vehicles, renewables, and critical minerals as part of a policy to reduce reliance on Chinese and Russian supplies.
The act extends a $7,500 per vehicle consumer tax credit for the purchase of electric vehicles made by firms which include Tesla and General Motors.
But these firms will have to observe stricter, regional sourcing requirements for critical minerals and sources for other materials used in electric vehicle batteries such as lithium, nickel and cobalt.
The tax credit is not valid if the vehicle battery contains critical minerals sourced from countries designated a "foreign entity of concern", namely China and Russia.
Not less than two-fifths of the critical minerals used in electric vehicle batteries will have to be extracted and processed in the US or with a free trade agreement partner or recycled in North America. This threshold increases to 80% in 2026.
An additional tax credit of $3,750 is applied if at least half of the battery's components are manufactured or assembled in North America. A 200,000 vehicles per manufacturer cap on the tax credit is also removed under the act.
How successful this will be in stimulating US production of lithium and other key elements used in batteries is unclear.
"The presently proposed $7,500 credit for those EVs that do not contain any critical minerals from China or Russia will effectively be made redundant, considering the proposal ends in 2024 just when a domestic supply chain is beginning to gain momentum," said Simon Moores, chief executive of Benchmark Mineral Intelligence.
"It is almost impossible that any Fair Trade Alliance countries - of which Australia and Chile are the stand out - could fill China's raw material gap for the US's EV demand between now and 2024. Considering it takes seven years to build a mine and refining plant but only 24 months to build a battery plant, the best part of this decade is needed to establish an entirely new industry in the US," Moores said.
New lithium mines are set to be developed in the US, but their supply will be limited.
According to the Benchmark Lithium Forecast, lithium chemical supply from North America is set to increase to nearly 60,000 tonnes LCE in 2025, underlining almost a four-fold increase on 2022 supply.
But that is enough for only around 1 million electric vehicles.
The US and Canada currently refine only 3% and 3.5% of the world's lithium and cobalt, compared to 59% and 75% for China, according to Benchmark's Lithium Forecast. By 2030 the US and Canada will contribute about 7% and China 46%.
The IRA also provides $10 billion in investment tax credits for domestic manufacturing plants that produce electric vehicles and renewables.
A $500 million provision is also made for the "enhanced" use of the Cold War-era Defense Production Act which President Biden invoked in March this year to support critical minerals.
Additional loan guarantees of up to $40 billion to support critical minerals projects are also included in the legislation under Title XVII program directives, which have been traditionally used for energy-related projects rather than mining.
The IRA is expected to put the US on course to curb US emissions by 31%-44% compared with 2005 levels by 2030, from a 24%-35% reduction without the legislation, according to an analysis by clean energy consultants Rhodium Group.
The 775-page IRA contains a list of critical minerals which includes lithium, cobalt, nickel, graphite, tin and aluminum. Copper is not included in the list.
The IRA does not address the issue of mine permitting and environmental approvals which have been a major impediment to copper and critical minerals projects in the US.
But this, including changes to the foundational 1872 General Mining Act, is expected to be passed by the end of the current fiscal year.
The package is scheduled to be voted on in the House of Representatives on August 12 before being signed into law by President Biden. The Act was passed in the Senate on the tie-breaking vote of Vice President Kamala Harris.