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What began as a dispute over world-leading computer chips is now rocking the auto and clean energy industries.
America and China’s increasingly acrimonious rivalry over national security is now spilling over into clean energy.
On Friday, China imposed export restrictions on three high-purity forms of graphite, a mineral that is essential to making semiconductors, electronics, and — most importantly — electric vehicle batteries. Under the new rules, Chinese companies cannot export any of these especially valuable types of graphite without getting a waiver from the government.
For now, these new restrictions exist in a curious quantum state: They could be a big deal, permanently reshaping the global clean-energy economy, or they could quickly fizzle into a bureaucratic wrinkle.
Yet the potential importance of these new rules to the EV industry is difficult to overstate. Graphite makes up about 20% of the mass of an EV battery, and at least two-thirds of the world’s graphite comes from China.
What’s most ominous might be the fact that the rules exist at all. The new restrictions show that America and China’s growing trade battle over “dual-use technologies” — tools and materials that can be used by both civilians and the military — is proving difficult to contain. What began as a dispute over world-leading computer chips is now rocking the auto and clean energy industries.
As far as critical minerals go, graphite is relatively simple: It is just a crystal of carbon atoms. It can be mined from the Earth or produced synthetically by processing fossil fuels. Humanity goes through hundreds of tons of low-grade graphite every year — it is in pencils and chemicals, for instance — but high-grade graphite is crucial for two uses. First, it is used in the equipment needed to make semiconductors, including those used for AI and other uses. Second, it makes up the anodes — or the negative electrodes — of lithium-ion batteries, the type of batteries that power smartphones, laptops, and electric vehicles.
Right now, China makes most of the world’s graphite. It also processes much of that graphite, grinding it into flakes 1/10th the size of a human hair and rounding them into tiny spheres. Graphite then must be processed to incredible purity — 99.5% or higher — to be used in batteries or semiconductors; only exceptionally pure graphite has the chemical properties needed for these technologies. It is the export of these very pure forms of graphite that China has now restricted.
The new rules follow restrictions on the export of gallium and germanium, which are crucial for electronics and EVs, that China imposed in June.
“In the wider critical minerals space, the talking point is that China dominates. Which is true. But it’s especially true for graphite,” Morgan Bazilian, the director of the Payne Institute for Public Policy at the Colorado School of Mines, told me.
Graphite makes up about 20% of the mass of a lithium-ion battery. There is, in all likelihood, several grams of graphite in the device you are using right now. The odds are high that it originated in a Chinese factory.
The new limits came in the context of a widening United States-China trade war. A few days earlier, the United States had closed loopholes and tightened its restrictions on the kind of semiconductors that can be exported to China. Those American restrictions were first imposed last year; they aimed to preserve America’s technological supremacy by blocking China’s ability to produce the most advanced forms of semiconductors domestically. The restrictions limited what kinds of technology and intellectual property could be shared with China; they also blocked U.S. citizens or green-card holders from working on technology that could be shared with the Chinese.
There is some disagreement about whether these rules are working; China has announced production of a 7-nanometer chip, which puts it close to the state of the art. But in any case, China’s new limits on graphite export don’t seem to be an in-kind response to the American semiconductor restrictions, and it’s unclear whether the graphite restrictions will matter as much for the rest of the world. The restrictions could temporarily spike short-term prices, according to Alex Turnbull, an investor who has proposed, along with the think tank Employ America, that the U.S. maintain a strategic lithium reserve. But in the long-term, graphite producers in the West should be able to increase production and fill the gap.
Bazilian said that these new restrictions have hit at a lucky time. Graphite prices have fallen this year due to an excess of Chinese capacity and softer demand for electric vehicles than expected.
The good news is that unlike with other minerals, a number of American, Indian, and Japanese firms have already begun manufacturing graphite. Many of these firms saw their share prices rise on Monday.
In a way, the restrictions were a blessing for non-Chinese graphite suppliers, Turnbull said. Many companies would have struggled to scale up in the same market as the Chinese firms, which regularly produce more graphite than they need. (It also helps that — unlike semiconductors — graphite does not rely on proprietary or especially advanced technology; its risks are primarily financial, rather than technical.)
That said, there are still reasons why a rapid scale up might not happen, Bazilian said. “This is really a place where China dominates, and the other parties that have, like, 10% market share are places like Mozambique,” he said.
And Mozambique’s mines have suffered from what are sometimes euphemistically referred to as “security issues.” Last year, the Balama mine in the country’s Cabo Delgado was attacked by Islamist terrorists, who beheaded two security guards. The Islamic State has claimed responsibility for the attack.
America’s efforts to develop a rival graphite supply chain depend on that mine. Last year, the Department of Energy issued a $102 million loan to Syrah Vidalia, a new Louisiana facility that will process graphite from the Mozambique mine and manufacture battery anodes.
“The critical minerals discussion is not a homogenous discussion. Each of these supply chains is different — it’s not easy to make big analogies to the oil market or something,” Bazilian said. “People love to say, Rare earths aren’t rare, but that’s not nearly as profound as people think. All of these minerals are abundant on Earth, but it’s not easy to find economically viable deposits of these ores.”
As long as the global graphite market remained constrained, he added, then Chinese firms would continue to have the easiest, cheapest access to it — which means that they will likely continue their dominance of producing anodes, a crucial midstream part of the EV battery supply chain.
Climate advocates have long pointed out that the technologies needed to fight climate change — batteries, renewables, electric vehicles, and more — have profound national-security implications. They are, like semiconductors, the industries of the future. It’s little surprise that battles over the former have been dragged into fights over the latter.
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On the budget debate, MethaneSAT’s untimely demise, and Nvidia
Current conditions: The northwestern U.S. faces “above average significant wildfire potential” for July • A month’s worth of rain fell over just 12 hours in China’s Hubei province, forcing evacuations • The top floor of the Eiffel Tower is closed today due to extreme heat.
The Senate finally passed its version of Trump’s One Big Beautiful Bill Act Tuesday morning, sending the tax package back to the House in hopes of delivering it to Trump by the July 4 holiday. The excise tax on renewables that had been stuffed into the bill over the weekend was removed after Senator Lisa Murkowski of Alaska struck a deal with the Senate leadership designed to secure her vote. In her piece examining exactly what’s in the bill, Heatmap’s Emily Pontecorvo explains that even without the excise tax, the bill would “gum up the works for clean energy projects across the spectrum due to new phase-out schedules for tax credits and fast-approaching deadlines to meet complex foreign sourcing rules.” Debate on the legislation begins on the House floor today. House Speaker Mike Johnson has said he doesn’t like the legislation, and a handful of other Republicans have already signaled they won’t vote for it.
The Environmental Protection Agency this week sent the White House a proposal that is expected to severely weaken the federal government’s ability to rein in planet-warming pollution. Details of the proposal, titled “Greenhouse Gas Endangerment Finding and Motor Vehicle Reconsideration,” aren’t clear yet, but EPA Administrator Lee Zeldin has reportedly been urging the Trump administration to repeal the 2009 “endangerment finding,” which explicitly identified greenhouse gases as a public health threat and gave the EPA the authority to regulate them. Striking down that finding would “free EPA from the legal obligation to regulate climate pollution from most sources, including power plants, cars and trucks, and virtually any other source,” wrote Alex Guillén at Politico. The title of the proposal suggests it aims to roll back EPA tailpipe emissions standards, as well.
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So long, MethaneSAT, we hardly knew ye. The Environmental Defense Fund said Tuesday that it had lost contact with its $88 million methane-detecting satellite, and that the spacecraft was “likely not recoverable.” The team is still trying to figure out exactly what happened. MethaneSAT launched into orbit last March and was collecting data about methane pollution from global fossil fuel infrastructure. “Thanks to MethaneSAT, we have gained critical insight about the distribution and volume of methane being released from oil and gas production areas,” EDF said. “We have also developed an unprecedented capability to interpret the measurements from space and translate them into volumes of methane released. This capacity will be valuable to other missions.“ The good news is that MethaneSAT was far from the only methane-tracking satellite in orbit.
Nvidia is backing a D.C.-based startup called Emerald AI that “enables AI data centers to flexibly adjust their power consumption from the electricity grid on demand.” Its goal is to make the grid more reliable while still meeting the growing energy demands of AI computing. The startup emerged from stealth this week with a $24.5 million seed round led by Radical Ventures and including funding from Nvidia. Emerald AI’s platform “acts as a smart mediator between the grid and a data center,” Nvidia explains. A field test of the software during a grid stress event in Phoenix, Arizona, demonstrated a 25% reduction in the energy consumption of AI workloads over three hours. “Renewable energy, which is intermittent and variable, is easier to add to a grid if that grid has lots of shock absorbers that can shift with changes in power supply,” said Ayse Coskun, Emerald AI’s chief scientist and a professor at Boston University. “Data centers can become some of those shock absorbers.”
In case you missed it: California Governor Gavin Newsom on Monday rolled back the state’s landmark Environmental Quality Act. The law, which had been in place since 1970, required environmental reviews for construction projects and had become a target for those looking to alleviate the state’s housing crisis. The change “means most urban developers will no longer have to study, predict, and mitigate the ways that new housing might affect local traffic, air pollution, flora and fauna, noise levels, groundwater quality, and objects of historic or archeological significance,” explainedCal Matters. On the other hand, it could also mean that much-needed housing projects get approved more quickly.
Tesla is expected to report its Q2 deliveries today, and analysts are projecting a year-over-year drop somewhere from 11% to 13%.
Jesse teaches Rob the basics of energy, power, and what it all has to do with the grid.
What is the difference between energy and power? How does the power grid work? And what’s the difference between a megawatt and a megawatt-hour?
On this week’s episode, we answer those questions and many, many more. This is the start of a new series: Shift Key Summer School. It’s a series of introductory “lecture conversations” meant to cover the basics of energy and the power grid for listeners of every experience level and background. In less than an hour, we try to get you up to speed on how to think about energy, power, horsepower, volts, amps, and what uses (approximately) 1 watt-hour, 1 kilowatt-hour, 1 megawatt-hour, and 1 gigawatt-hour.
Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Jesse Jenkins: Let’s start with the joule. The joule is the SI unit for both work and energy. And the basic definition of energy is the ability to do work — not work in a job, but like work in the physics sense, meaning we are moving or displacing an object around. So a joule is defined as 1 newton-meter, among other things. It has an electrical equivalent, too. A newton is a unit of force, and force is accelerating a mass, from basic physics, over some distance in this case. So 1 meter of distance.
So we can break that down further, right? And we can describe the newton as 1 kilogram accelerated at 1 meter per second, squared. And then the work part is over a distance of one meter. So that kind of gives us a sense of something you feel. A kilogram, right, that’s 2.2 pounds. I don’t know, it’s like … I’m trying to think of something in my life that weighs a kilogram. Rob, can you think of something? A couple pounds of food, I guess. A liter of water weighs a kilogram by definition, as well. So if you’ve got like a liter bottle of soda, there’s your kilogram.
Then I want to move it over a meter. So I have a distance I’m displacing it. And then the question is, how fast do I want to do that? How quickly do I want to accelerate that movement? And that’s the acceleration part. And so from there, you kind of get a physical sense of this. If something requires more energy, if I’m moving more mass around, or if I’m moving that mass over a longer distance — 1 meter versus 100 meters versus a kilometer, right? — or if I want to accelerate that mass faster over that distance, so zero to 60 in three seconds versus zero to 60 in 10 seconds in your car, that’s going to take more energy.
Robinson Meyer: I am looking up what weighs … Oh, here we go: A 13-inch MacBook Air weighs about, a little more than a kilogram.
Jenkins: So your laptop. If you want to throw your laptop over a meter, accelerating at a pace of 1 meter per second, squared …
Meyer: That’s about a joule.
Jenkins: … that’s about a joule.
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The Yale Center for Business and the Environment’s online clean energy programs equip you with tangible skills and powerful networks—and you can continue working while learning. In just five hours a week, propel your career and make a difference.
Music for Shift Key is by Adam Kromelow.
If the Senate reconciliation bill gets enacted as written, you’ve got about 92 days left to seal the deal.
If you were thinking about buying or leasing an electric vehicle at some point, you should probably get on it like, right now. Because while it is not guaranteed that the House will approve the budget reconciliation bill that cleared the Senate Tuesday, it is highly likely. Assuming the bill as it’s currently written becomes law, EV tax credits will be gone as of October 1.
The Senate bill guts the subsidies for consumer purchases of electric vehicles, a longstanding goal of the Trump administration. Specifically, it would scrap the 30D tax credit by September 30 of this year, a harsher cut-off than the version of the bill that passed the House, which would have axed the credit by the end of 2025 except for automakers that had sold fewer than 200,000 electric vehicles. The credit as it exists now is worth up to $7,500 for cars with an MSRP below $55,000 (and trucks and sports utility vehicles under $80,000), and, under the Inflation Reduction Act, would have lasted through the end of 2032. The Senate bill also axes the $4,000 used EV tax credit at the end of September.
“Long story short, the credits under the current legislation are only going to be on the books through the end of September,” Corey Cantor, the research director of the Zero Emission Transportation Association, told me. “Now is definitely a good time, if you’re interested in an EV, to look at the market.”
The Senate applied the same strict timeline to credits for clean commercial vehicles, both new and used. For home EV chargers, the tax credit will now expire at the end of June next year.
While EVs were on the road well before the 2022 passage of the Inflation Reduction Act, what the new tax credit did was help build out a truly domestic electric vehicle market, Cantor said. “You have a bunch of refreshed EV models from major automakers,” Cantor told me, including “more affordable models in different segments, and many of them qualify for the credit.”
These include cars produceddomestically by Kia,Hyundai, and Chevrolet. But of course, the biggest winner from the credit is Tesla, whose Model Y was the best-selling car in the world in 2023.
Tesla shares were down over 5.5% in Tuesday afternoon trading, though not just because of Congress. JPMorgan also released an analyst report Monday arguing that the decline in sales seen in the first quarter would accelerate in the second quarter. President Trump, with whom Tesla CEO Elon Musk had an extremely public falling out last month, suggested on social media Monday night that the government efficiency department Musk himself formerly led should “take a good, hard, look” at the subsidies Musk receives across his many businesses. Trump also said that he would “take a look” at Musk’s United States citizenship in response to reporters’ questions about it.
Cantor told me that he expects a surge of consumer attention to the EV market if the bill passes in its current form. “You’ve seen more customers pull their purchase ahead” when subsidies cut-offs are imminent, he said.
But overall, the end of the subsidy is likely to reduce EV sales from their previously expected levels.
Harvard researchers have estimated that the termination of the EV tax credit “would cut the EV share of new vehicle sales in 2030 by 6.0 percentage points,” from 48% of new sales by 2030 to 42%. Combined with other Trump initiatives such as terminating the National Electric Vehicle Infrastructure program for publicly funded chargers (currently being litigated) and eliminating California’s waiver under the Clean Air Act that allowed it to set tighter vehicle emissions standards, the share of new car sales that are electric could fall to 32% in 2030.
But not all government support for electric vehicles will end by October 1, even if the bill gets the president’s signature in its current form.
“It’s important for consumers to know there are many states that offer subsidies, such as New York, and Colorado,” Cantor told me. That also goes for California, New Jersey, Nevada, and New Mexico. You can find the full list here.
Editor’s note: This story has been edited to include a higher cost limit for trucks and SUVs.