ECLAC stresses the importance of a productive development agenda around the exploitation of lithium

Lithium is one of the fundamental elements for the energy transition and has been considered a strategic resource by the countries of the region that have abundant deposits. For this reason, the Economic Commission for Latin America and the Caribbean (ECLAC) stresses the importance of generating a productive development agenda around lithium to promote its extraction for the benefit of economic activities directly and indirectly related to the mineral, according to a new report special of the agency released today.

The post titled Extraction and industrialization of lithium. Opportunities and challenges for Latin America and the Caribbean, was presented by the Executive Secretary of the United Nations regional commission, José Manuel Salazar-Xirinachs. In the document, ECLAC examines the role of lithium-producing countries in the region (mainly Argentina, Brazil and Chile) in the global value chain of lithium-ion batteries (main current use of lithium), as well as the governance, regulatory and fiscal regimes that determine the operation of mineral exploitation in the countries of the so-called “lithium triangle” (Argentina, Bolivia and Chile). The report concludes with public policy guidelines that can contribute to a productive development agenda around lithium, as well as the industrialization of this and other minerals in clean technologies for the energy transition and electromobility.

“From the perspective of the States, this requires policies and regulations that favor the creation of public goods, the development of capacities and soft and hard infrastructures, and the mobilization and direction of the necessary resources,” the report highlights.

According to ECLAC, lithium is an irreplaceable input until now for the production of lithium-ion batteries, a key technology for the decarbonization of transport and the storage of energy generated from renewable sources. Therefore, it has the potential to contribute to the economic development of the countries through a positive impact from a greater creation of value, that is, the increase in the product, exports, employment and tax collection.

In the region, the resource is considered strategic in Argentina, Bolivia, Chile and Mexico, due to the potential it has to promote socioeconomic development, value addition and productive chains that contribute to a process of structural change in the economies.

The report indicates that the identified lithium resources in Latin America and the Caribbean are concentrated in the so-called lithium triangle (56% of world lithium resources). In addition, it is possible to find lithium in smaller quantities in Brazil, Mexico and Peru, bringing the lithium resources found in the region to almost 60% of the world’s resources. Likewise, the region concentrates 52% of the world’s lithium reserves, located mainly in Chile (41%) and Argentina (10%).

He adds that the fight against climate change, with a view to the transition towards renewable energies and electromobility, is the main engine that triggers the current and future demand for lithium (which can be multiplied by 42 in 2040, according to the sustainable development scenario). of the International Energy Agency). Variable or intermittent renewable energy technologies and electromobility are more intensive in minerals, since they require a greater mass and number of them.

Likewise, the growth in demand largely explains the exponential increase in the prices of lithium and other minerals used in these technologies in recent years. Lithium prices multiplied almost nine times between 2021 and 2022, the document notes. Actors such as China, the United States and the European Union lead electromobility and have a series of policies that seek to ensure the supply of minerals considered critical for the energy transition.

Only three countries exploit lithium on a large commercial scale in the region. In 2021, Argentina represented 9.8% of world production, Brazil 0.4% and Chile 41%. That same year, the four largest lithium producers in the world (in order of importance, Australia, Chile, China and Argentina) concentrated more than 96% of global production, which has motivated ion battery-producing countries. lithium to include the mineral in its list of critical minerals.

Although the context of the energy transition and the expansion of electromobility present opportunities, they also present challenges to the countries of the region rich in lithium resources. The region has an important participation in the first stage of the lithium battery value chain (extraction / processing). But in the production stages of precursors, cathodes/anodes, cells and batteries, it is China, Japan, the Republic of Korea, the United States and Europe that lead them.

In this sense, the most immediate possibilities for the region are those originating from lithium extraction and refining activities: growth in exports, job creation, increase in tax collection and creation of upstream productive linkages (that is, , those that refer to the inputs and equipment needed for the exploration and exploitation of lithium), warns ECLAC.

In this way, a greater participation of the region in the downstream segments (that is, the production processes that use or consume lithium as an input) of production of lithium ion cells and batteries would be closely linked to the development of a vehicle industry. large-scale electricity in the region, and would require high financing, access to other minerals considered critical, and human and technological skills.

On the other hand, the extraction of lithium has challenges of a socio-environmental nature, derived mainly from the consumption of water in the extractive processes in areas that face high water stress, the impact on biodiversity and the traditional economic activities of social groups that inhabit the salt flats ( from where the majority of the resource is extracted). For this, the lithium industry will require stricter regulations and standards to ensure the sustainability of the activity, the report points out.

Although the resource governance regimes adopted in each of the countries of the region differ profoundly, the document formulates a non-exhaustive set of policy guidelines aimed at improving the region’s potential to take advantage of the opportunities offered by lithium and count with better tools to face the challenges that your exploitation presents.

In matters of environmental and social sustainability, these guidelines are related to the need to ensure that regulations and standards include the highest demands of society, proper management of socio-environmental conflicts and greater transparency and citizen participation. On the other hand, the text also offers considerations about improvements in tax regimes to ensure greater collection, progressivity, efficiency and equity in taxation in line with competitiveness and greater transparency. Finally, the document highlights the potential and the need for cooperation and regional integration to promote a joint agenda of value addition and production chains associated with lithium in Latin America and the Caribbean.