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Mr. President, your commitment to radical climate and economic policy really does astound me.
Last time around they were bulwarks for climate action. This time is different.
But tariff-related price pain could still be coming for the Northeast and Upper Midwest.
Are these minerals even economically viable?
President Donald Trump is going to be talking rocks with his Ukrainian counterpart Volodymyr Zelenskyy during their Friday meeting in Washington, D.C., where they will sign a “very big agreement,” Trump said Wednesday.
As the Trump administration has ramped up talks to end the war in Ukraine, shift America’s strategic priorities away from Europe, and build a new relationship with Russia, it has also become intensely interested in Ukraine’s supposed mineral wealth, with Ukrainian and American negotiators working on a deal to create an investment fund for the country’s reconstruction that would be partially funded by developing the country’s mineral resources.
But exactly what minerals are in Ukraine and if they’re economically viable to extract is a matter of contention.
So-called critical minerals and rare earths have a way of finding themselves in geopolitical hotspots. This is because they’re not particularly rare, but the immense capital required to cost effectively find them, mine them, and process them is.
“A lot of countries have natural resources. We don’t mine everything that exists underground. We look for projects that are economically competitive,” Gracelin Baskaran, director of the critical minerals security program at the Center for Strategic and International Studies, told me.
Baskaran pointed out, it was precisely Russia’s full-scale invasion of Ukraine that kicked the United States’ interest in building up supplies of critical minerals and rare earths outside of China — which dominates the industry — into overdrive.
“It was a fortuitous moment in that way for Ukraine’s resources, because they weren’t necessarily being mined before,” she said.
And Ukraine has done its best to promote and take advantage of its mineral resources, even if there’s some ambiguity about what exactly they are, and if they can be profitably extracted at scale.
While often conflated, critical minerals and rare earths are distinct. The so-called “rare earths” are 17 similar elements, which the U.S. Geological Survey explicitly says are “relatively abundant,” like scandium and yttrium. Critical minerals are a more amorphous group, with the USGS listing out 50 (including the rare earths) as well as commonly known minerals like titanium, nickel, lithium, tin, and graphite, with uses in batteries, alloys, semiconductors, and other high value energy, defense, and technology applications.
When countries are desperate for outside assistance or their patrons are desperate to see some return on their “investments” in military and foreign aid,as Bloomberg’s Javier Blas has pointed out, the minerals tend to show up — just look at the “$1 trillion in untapped mineral deposits” the United States identified in Afghanistan in 2010. Ten years later when the USGS looked at Afghanistan’s mineral industries, the rare earths remained untapped and instead the country was largely exporting talc and crushed marble to its neighbors.
Ukrainians have been eager to show there are economically viable and valuable minerals in the country, including a claim by one Ukrainian official in early 2022 that “about 5% of all the world’s ‘critical raw materials’ are located in Ukraine,” while a pair of Ukrainian researchers claimed there was 500,000 tons of unmined lithium oxide resources. More recently the country has claimed to have rare earths, and that President Trump has taken a special interest in.
Many industry experts doubt there’s any significant reserves of rare earths in the country, with the exception of scandium, which is used in aluminum alloys and fuel cells. Ukraine does have a significant mining industry and has produced substantial amounts of iron ore and manganese, along with reserves of graphite, titanium, cobalt, and uranium, many of which are those so-called “critical minerals” with uses for energy and defense.
“There do not appear to be hardly any economically viable rare earths in the country – that was largely a misuse of a term someone heard,” Morgan Bazillian, director of the Payne Institute and a public policy professor at the Colorado School of Mines, told me in an email.
Blas has documented a game of telephone whereby rare earths and critical minerals are conflated to make it seem like the former exists in abundance underneath Ukraine. Despite the doubts, President Trump said on Wednesday during his cabinet meeting “we’ll be really partnering with Ukraine, [in] terms of rare earth. We very much need rare earth. They have great rare earth.”
While there’s disagreement about exactly what Ukraine has to offer in terms of minerals, the interest in building up supplies of minerals is part and parcel of what is now a bipartisan priority to build up supplies and the ability to process and refine minerals used for a variety of defense, industrial, and energy applications.
To the extent the United States is able to jumpstart any new mineral operations in postwar Ukraine, it would require first repairing the country’s greatly damaged infrastructure, which has been wrecked by the very conflict that has spiked interest in the country’s mineral sector.
“Their infrastructure is decimated. Rebuilding it will be the priority, getting industry moving again will take time – including from basic services like electricity,” Bazillian told me.
And after that, much basic work needs to be done before any mining can happen, like an updated geological survey of the country, which hasn’t been done since the country was part of the Soviet Union. And all that’s before starting the process for opening a mine, something that on average takes 18 years to do.
“You need to have a geological mapping. You need to identify investors who want to go in. You need to build infrastructure,” Baskaran said.
“Ukraine has undeveloped or untapped potential that could be utilized. And the question is whether that untapped potential is economically viable, and we don’t know yet.”
Uncertainty about Congress and the Trump administration has investors a little shook.
The Inflation Reduction Act’s fate will soon be decided by a Republican-controlled Congress, and the market the law built up to fund its signature clean energy markets is on edge, even if there’s still brisk business being done.
Before the IRA, to claim a clean energy tax credit essentially required having an actual investment interest in a project. One of the biggest changes of Biden’s climate law, however, was to make those tax credits transferable, meaning that if a developer itself didn’t have a large tax liability, it could transfer — i.e. sell — those credits to someone who did. This fed what quickly became a thriving market connecting developers and owners of clean energy projects with tax equity investors who buy the credits to reduce their own tax bills.
Much of the clean energy business relies on this structure to fund its activities. So when the investment bank Jefferies issued a note late last week on the residential solar company Sunnova — whose share price is down over 80% in the past year and 70% since the 2024 presidential election — arguing that the tax equity market as a whole had “tightened,” and that it expected Sunnova to post below-expectations earnings due to the “increasingly tightening tax equity market that we believe has constrained NOVA’s ability to raise tax equity financing in the near term,” the market reacted. The company’s shares dropped around 7% on Friday, and are down about a fifth since close of trading on Thursday.
The note wasn’t just a ding against Sunnova, though. It also raised a red flag for the tax credit market as a whole. “Our industry conversations increasingly suggest a tightening in the market as usual tax credit buyers/investors pause on transacting in response to growing uncertainty on anything IRA related under the new Trump administration," the Jefferies analysts wrote in the note. “We perceive traditional buyers/investors have moved to the sideline and are awaiting clarity from the Trump administration, resulting in a slow-down in the tax equity capital markets.”
On Monday, the Jefferies analysts appeared to rollback their assertion. “Investors disagreed and referenced a strong/robust market, thereby prompting questions of whether constrained tax equity capital is limited to NOVA or if it's a broader market issue after all. We note that we have not heard any issues with raising tax equity from [Sunrun, the country’s largest residential solar company],” they wrote. “We appreciate [that the] market is intact.”
A Sunnova spokesperson declined to comment on the Jefferies commentary, citing the “quiet period” before the company announces earnings in early March.
Based on market data and conversations with market participants, the industry also seems to see an “intact” market, though perhaps one with weakness or holes in specific sectors (such as residential solar), even if sources I talked to didn’t want to speculate specifically about any one company.
Research by the tax credit marketplace Crux shows that there were $30 billion worth of tax equity deals in 2024, $6 billion of which included some kind of forward commitment — either agreeing to purchase future investment tax credits or a portion of production tax credits that accrue over time.
“With the presence of a forward commitment, it is much easier for the seller, the developer, to procure financing at lower costs because they have a commitment for the tax credit,” Alfred Johnson, the co-founder of Crux, explained to me. “So that is lowering the cost of capital for projects that will be delivered sometime far in the future.”
Johnson told me that these forward commitments were a “really positive dynamic” for areas like geothermal and nuclear, which “require a lot of future investment.”
“It does suggest that people are taking a multi-year view of the importance and viability of the [transferability] program,” Johnson said.
And if there are major changes to the IRA’s tax credit regime — whether Congress decides to scrap it entirely or restrict it to forms of power generation more favored by Republicans and the Trump administration, such as geothermal and nuclear — Johnson notes that “Congress has rarely, if ever, made a retroactive change with an adverse impact to the taxpayer.”
“I think the fact that buyers are engaging quite actively in the market across credit types is indicative of the view that they believe that the market will remain viable and important for this year and for near future years,” Johnson added.
But just because changes to the IRA may not affect current deals doesn’t mean that the industry isn’t nervous. “Grandfathering is a longstanding practice that we expect to continue,” Jack Cargas, head of originations on the tax equity desk at Bank of America, said on a podcast hosted by the law firm Norton Rose Fulbright. “We are cognizant that neither Republicans nor Democrats are going to act in a way that jeopardizes their constituents’ interests or livelihoods, however we expect a slowdown in financing for projects on which construction starts in 2025 until it is clearer what Congress will do.”
There may also be questions about projects that start this year.
“I have not actually seen any deals derailed over change of law concerns, but also everything I'm working on at the moment began construction before the end of the year,” David Burton, a partner at Norton Rose Fulbright, told me.
Burton said his clients are focused on getting deals started and done so that they can be “grandfathered” into any changes of the tax credit system. “We are counseling sponsor clients to begin construction under the tax rules as soon as they can,” Burton said.
