Lithium is an increasingly important resource for clean energy systems of the future. Latin America, very rich in this material, however, has to deal with the meager earnings that derive from its extraction and the environmental impact that this entails.

Among the raw materials that have had a significant increase in price in recent times, there is certainly also lithium, which recently reached its all-time high with a value almost ten times higher than two years ago. This sudden price increase was dictated by the high demand due to the market shift towards electric vehicles, given that lithium carbonate is a key component of many batteries, to which is added a structural supply deficit which has meant that countries and automakers try to secure as much of this type of resource as possible. From 2035, all new cars and light-duty vehicles sold in the EU will have to produce no CO2 emissions.

The Cauchari Olaroz project in northern Argentina, a new frontier for lithium extraction in South America (Photo: Government of Jujuy)

This apparently should be good news for South America, given that the salt flats of the so-called ‘Lithium Triangle’ – made up of Argentina, Chile and Bolivia – contain about half of the world’s known lithium. In fact, most of the lithium industry’s profits come from the long value chain that creates lithium batteries. Countries that only mine and export lithium have very limited earning potential.
The top 10 manufacturers of batteries for electric vehicles, for example, by market share, are all based in Asian countries, concentrated in China, Japan and South Korea, and they are those who gain most from this ‘green revolution’ of the market.
The production of lithium inevitably also entails important environmental and social costs. Most of Latin America’s production comes from fragile ecosystems, where lithium extraction from salt flats is associated with concerns about contaminating local watersheds with harmful chemicals. These basins are home to biodiversity that depends on the delicate balance between fresh and brackish water. Furthermore, many of these areas are inhabited by indigenous communities who depend on water for their main economic activities.

Brine evaporation ponds of SQM, the second-largest lithium company in Chile (Photo: SQM).

In Chile’s Salar de Atacama, for example, lithium mining could cause a water sustainability crisis in a country that has already had water shortages for some time. The extraction takes place through a process that involves procedures lasting up to 18 months, in which the quantity of water required is particularly high: about 2.2 million litres of water are needed to produce a ton of lithium. With the impact of climate change around the world, the importance of lithium as a strategic mineral will increase exponentially, becoming an essential component for what will be the clean energy systems of the future. The paradox is that while on the one hand, lithium will be fundamental in the transition to alternative energies, on the other, its particular extraction process used in the Lithium Triangle presents many environmental problems.
The European Union and Chile have announced the end of their negotiations to update the association agreement in force since 2002, demonstrating the Union’s strategic interest in diversifying its economic relations and guaranteeing access to those materials useful for the energy transition process, including lithium.

The Uyuni Salt Flat. Bolivia is the holder of the world’s largest known lithium reserves. CC BY-SA 4.0/ Dan Lundberg

This deal can reduce Europe’s dependence on China in the lithium import sector. Since lithium supply chains will be crucial to the future of technology and clean energy, lithium will play a key role in the competition between the United States – and the West in general – with their competitors, mainly China. It is no coincidence that Beijing is currently the world leader in the production of electric vehicles. In large part, this is because it has acquired 55% of the supplies of the chemical lithium needed for electric vehicle batteries, largely due to its early investments in Australia’s largest mining production operations. At the end of January 2023, the Bolivian government of Luis Arce signed a $1 billion deal with the Chinese companies CATL, BRUNP and CMOC (CBC) and the Bolivian state company Yacimientos de Litio Bolivianos (YLB), to explore the deposits of lithium in the South American nation. The CBCs are Chinese firms with previous involvement in lithium mining, battery recycling, and metal mining, respectively. Between 2018 and 2020, China invested about $16 billion in mining projects in the Lithium Triangle and is likely to continue to invest in the region in the coming years. (Open Photo: Bolivas Salar de Uyuni. 123rf.com)

Matteo Barbanera/CgP