Lithium, a key component in the production of electric vehicle batteries, plays a fundamental role in the global energy transition. With the growing demand for electric vehicles, two important questions arise in the industry: Can lithium production meet this growing demand and do so in an environmentally and socially responsible manner?
Chile has the world’s largest lithium reserves, with SQM, a company based in Santiago, being the country’s main producer. The largest lithium mine in Chile is located in the Salar de Atacama, an immense salt flat in the Atacama Desert, the second driest place on Earth after Antarctica. Over hundreds of thousands of years, rainwater descending from nearby mountains has accumulated minerals, including lithium, in this salt flat. Beneath the surface lies brine, an extremely salty water with a valuable lithium content.
The brine accumulates in a series of pools, where the water begins to evaporate, resulting in higher lithium content in each pool. In the final pool of the Salar, the lithium content reaches almost 5 percent. The brine is then transported by trucks to the SQM processing plant located near the coastal city of Antofagasta, where it is converted into lithium carbonate and lithium hydroxide. These products are mainly sent to Asian manufacturers for use in battery production. Notably, this processing plant accounts for nearly 20 percent of global lithium processing capacity.
While the lithium industry in Chile has propelled the country’s prominence in one of the fastest-growing sectors in the world, concerns have emerged about possible depletion of water resources due to brine extraction by lithium companies. SQM maintains that it has taken measures to minimize environmental impacts and insists that studies conducted by its own experts and external researchers do not indicate harmful effects on local water resources. However, the lack of independent information presents a challenge for scientists like Mariana Cervetto, who believe that truly objective data is necessary to address this issue conclusively.
Investors, especially in financial centers like London, are also concerned about sustainable lithium production. As billions of dollars are being invested in the lithium and other critical minerals supply chain, environmental, social, and governance considerations have become paramount. Brian Menell, founder of TechMet, an investment company involved in lithium and other essential minerals extraction and processing, acknowledges the inherent finite nature of mining but emphasizes the possibility of well-governed and transparent operations with low environmental impact and carbon footprint.
The demand for metals such as lithium in the energy transition presents a unique investment opportunity, with the goal of producing millions of electric vehicles annually by 2030. To achieve this goal, a substantial increase in lithium supply is required. Menell believes that the prices of these metals will inevitably rise as countries seek energy security. He also raises concerns about China’s dominant involvement in lithium-ion battery production and refining, advocating for additional investments to ensure a balanced and secure supply chain worldwide.
With the energy transition becoming increasingly crucial, sustainable production of lithium and other critical minerals is essential. Striking a balance between meeting global demand and minimizing environmental and social impacts remains a challenge, but advances in governance and transparency offer hope for responsible and ethical practices in the industry.