How sourcing rules shaped the market
The Inflation Reduction Act of 2022 tied the Section 30D clean vehicle credit to battery sourcing requirements. Part of the credit depended on a rising share of the value of critical minerals being extracted or processed in the United States or a free trade agreement partner, or recycled in North America. The rest depended on the share of battery components manufactured or assembled in North America.
That recycling provision made domestic recycling strategically important. Recovered metals processed in North America could help vehicles qualify, which encouraged investment in collection, black mass production and refining capacity across the United States and Canada, and increased interest in securing end-of-life packs and production scrap.
Foreign entity of concern restrictions
Sourcing rules also excluded batteries containing components or critical minerals from foreign entities of concern, as defined in the legislation and Treasury guidance. For recyclers and their customers, this means ownership and control of processing facilities, as well as the origin of materials, can affect whether recovered material supports incentive eligibility.
Demonstrating compliance requires detailed supply chain tracing: where material was collected, where it was processed and who controlled each step. Recyclers supplying into incentive-linked supply chains are typically asked to provide documentation to that level.
- Location of extraction, processing or recycling
- Ownership and control of each facility in the chain
- Traceable records linking outputs to inputs
A changing policy landscape
US incentives have not stood still. Legislation passed in 2025 ended the Section 30D credit for vehicles acquired after 30 September 2025 and altered other clean-energy credits, while manufacturing incentives such as the Section 45X advanced manufacturing production credit continue under revised conditions and schedules. Grant programmes supporting battery recycling have also been subject to review.
For businesses, the lesson is to base investment cases on durable fundamentals, such as domestic supply security, lower-carbon materials and customer demand for recycled content, rather than on a single incentive. Where incentives remain relevant, eligibility should be confirmed against current law and guidance before contracts are signed.
Field note