‘Blood Batteries’ Drive America’s Frantic EV Ambitions

Explanation

In its rush to save and build America’s electric cars and battery supply chains, the U.S. government is reaching far and wide, breaking billions in commitments. But the temptation is misleading.

Last week, the State Department quietly released a Memorandum of Understanding it signed in December to support the commitment between the Democratic Republic of Congo, or DRC, and Zambia to build “a productive supply chain, from mining to on assembly lines.” The agreement, in theory, is intended to drive investment and ensure that the private sector has a “level playing field” in projects.

It turns to Africa for obvious reasons: Abundance of raw materials. About 70% of the world’s cobalt – an important ingredient in certain types of batteries – is mined in the DRC, where almost half of the world’s reserves are found. Zambia is one of the largest producers of copper, which is used for other important components. The US also buys copper from the DRC, the third largest producer of the metal.

However, the US government conveniently failed to report that cobalt from the Congo has been at the center of child abuse, as the State Department’s national report states. The press release announcing the MoU left it as “corruption,” noting that “it is committed to respecting international standards to prevent, detect and take legal measures to fight corruption throughout this process. “

This step is hypothetical. Now that the US needs cobalt and copper as part of its supply chain, it is willing to enter the business and encourage private investors to work in the DRC, targeting one of the most important issues there.

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Worse, it comes after strong criticism of China’s crimes. The US Department of Labor has added solar-grade polysilicon from Xinjiang province to the 2022(1) list of goods produced by children or forced labor – along with cobalt from the DRC. In that report, the United States Secretary of Labor, Martin Walsh, called the exploitation in China “egregious, systematic and ongoing” and said that “goods produced under these conditions have no place in the economy of America.”

The US then continued to block goods from the western Chinese province and was willing to take drastic measures – all because it saw the country as a strategic threat. In 2021, an amendment to the US Innovation and Competition Act (called “Securing United States Supply Chains of Strategic Metals and Minerals”) expressed concerns about China’s control.

That doesn’t seem to work in the DRC – an unstable country in an unstable environment. The rebellion in the east has displaced more than 450,000 people. That makes cobalt the blood diamond equivalent of batteries.

The US has, for several years, provided foreign aid to the DRC for economic support and health programs amounting to $250 million to $300 million per year. It renewed its development cooperation agreement guaranteeing 1.6 billion dollars over the next five years. All good, but not at all the right way to save cobalt and copper resources and boost the industry there. Setting rules and conditions for help can be one place to start.

Cobalt-related violence is not an isolated issue. For example, Mercedes-Benz AG, makes great efforts to disclose its usage to ensure transparency. The car manufacturer audits and monitors battery cell suppliers to prevent child and forced labor. Agreements to buy these components require disclosure from the entire cobalt supply chain. Even the CEO of Tesla Inc. Elon Musk, who was strongly criticized a few years ago because of the use of battery devices in his company’s cars, has left something completely important.

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Trying to preserve cobalt resources and promote its value, as well as encouraging private investment in the DRC, is wrong.

This trend highlights the serious weaknesses and ineffective efforts of the US in terms of industrial policy. It focuses more on its foreign affairs, not on what is possible, or helpful, domestically. If it wants to register for the goods it needs now, then it should wait on who it will do business with, and on what terms.

Furthermore, cobalt’s days can be numbered. With all the complex supply chain issues surrounding it, companies continue to shift away from the category and types of batteries they enter. The use of lithium iron phosphate has continued to rise, as manufacturers increasingly use safer, cleaner chemistry to produce it, with up to 30% less emissions. That’s part of the reason why demand for cobalt in power packs is expected to drop significantly over the next 10 years. That’s why it’s hard to imagine companies doubling.

The State Department MoU says the commitment is in favor of climate change and will limit temperature increases to 1.5 degrees Celsius, which “helps the international community reduce emissions.” However, admirable the goal, no one has ever begun to question what the revival of a factory of billions of US dollars to produce batteries will mean for greenhouse gases. (I’ll get to that in a future column). Research has shown that cathodes containing cobalt are the main contributors. It would be better for the US to invest in developing effective, clean technologies.

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It’s easy to get angry and walk on the moral high ground with China, or Elon Musk and his private sector giants. It’s hard to think seriously, isn’t it?

More from Bloomberg Opinion:

• The Holes in America’s China-Style EV Policy: Anjani Trivedi

• Climate War Emerges as a Geopolitical Power Game: Liam Denning

• Glencore Big Game Avoids US Sanctions: Chris Bryant

(1) The Bureau of International Labor Affairs, or ILAB, maintains a list of goods and countries of origin that it has reason to believe are produced by child labor or forced labor that is contrary to the standards of internationally, as required under the Trafficking Victims Protection Act. Act (TVPRA) of 2005 and subsequent amendments. ILAB maintains the Program primarily to raise public awareness of forced labor and child labor worldwide and to promote efforts to combat it; it is not intended to be punitive, but rather to serve as a catalyst for coordination and strategic cooperation among those working to address these issues.

This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.

Anjani Trivedi is a columnist for Bloomberg Opinion. He works across industries including strategies and firms in the machinery, automotive, electric vehicle and battery sectors across Asia Pacific. Previously, he was a columnist for the Wall Street Journal’s Heard on the Street and the paper’s financial and markets reporter. Before that, he was an investment mayor in New York and London

More stories like this are available at bloomberg.com/opinion

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