On July 6, the Economic Commission for Latin America and the Caribbean (ECLAC) launched the publication entitled Extraction and industrialization of lithium. Opportunities and challenges for Latin America and the Caribbean. A central idea that we have put forward in this document is that the accelerated growth of future demand for critical minerals, which is expected to be linked to the transition towards electromobility and renewable energies, opens opportunities for Latin America and the Caribbean (LAC) to promote a development agenda around the exploitation of lithium.
The fight against climate change is the main driver that triggers the current and future demand for lithium and other critical minerals. Variable or intermittent renewable energy technologies and electromobility are intensive in minerals since they require a greater mass and number of them. According to the International Energy Agency, the demand for lithium could multiply by 42 in 2040, in the scenario of Sustainable Development in accordance with the fulfillment of the objectives of the Paris Agreement.
Due to its high level of lithium resources and reserves, the region is destined to become a key global player in this industry. 56% of the world’s lithium resources are concentrated in the so-called lithium triangle, made up of Argentina, Bolivia (Plurinational State) and Chile.
With this proportion of world resources identified, it is not surprising that LAC is already a major player in world lithium production, with a share of close to a third of the total. In 2021, Chile represented 25% of world production, Argentina 6%, and Brazil close to 1%. That same year, the four largest lithium producers worldwide (in order of importance, Australia, Chile, China and Argentina) concentrated more than 96% of world production. This has motivated lithium-ion battery-producing countries to include this mineral in their lists of critical minerals.
China, the United States and the European Union lead the electromobility industry and have a series of policies that seek to ensure the supply of minerals considered critical for the energy transition. In turn, in LAC the resource is considered strategic in Argentina, Bolivia, Chile and Mexico, due to the potential to promote socioeconomic development, value addition and production chains. However, the current productive performance of LAC does not reflect its potential, which is why it is necessary for countries to accelerate the exploitation of this resource and promote a productive development agenda around lithium and other critical minerals.
In the coming years, this productive agenda in the countries of the region rich in lithium resources will present opportunities, but also challenges and threats. The most immediate opportunities for the region are those originating from lithium extraction and refining activities: export growth, job creation, increased tax collection and creation of upstream productive linkages.
For their part, the challenges are related to the fact that the expansion of participation in the downstream segments of lithium-ion cell and battery production would be closely linked to the development of a large-scale electric vehicle industry in the region, and would require high financing, access to other minerals considered critical, and human and technological skills.
The exploitation of lithium also 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 live near the salt flats. For this, the lithium industry will require, on the one hand, stricter regulations and standards that ensure the sustainability of the activity, and, on the other hand, the technological innovation of more efficient extraction methods in the use of water and less environmental footprint in the salt flats. Likewise, it is necessary to improve social and environmental governance to guarantee social participation, transparency, the benefit of communities, the minimization of environmental impacts and a better management of conflict and the social license to operate.
The main threat is the possibility of developing alternative battery technologies that are less intensive in the use of lithium or that do not use it at all, as well as the development of lithium supply in other regions and countries, which suggests that the exploitation lithium is possibly a window of opportunity with a limited horizon in time, so countries must speed up their extraction and industrialization projects. However, it is not easy to set a deadline for this window of opportunity, since it is subject to a high degree of technological uncertainty.
Finally, regional cooperation and integration are important instruments to reinforce opportunities for the industrialization of strategic minerals and the development of regional value chains, especially technologies for the energy transition and electromobility. There is ample room for strengthening the region’s position in the face of the demands of industrialized countries within the framework of global governance; the regional productive development agenda around strategic minerals; the promotion of an electromobility and renewable energy market that contributes to promoting the development of regional industrial capacities for the production of batteries and their inputs; agreement on common content in environmental and social regulations to avoid downward regulatory competition; and the exchange of knowledge and experiences.
LAC has a great opportunity to take advantage of the boom in lithium and other critical minerals to accelerate the transformation of its productive structure, create prosperity and employment, and fuel the energy transition, electromobility, and sustainable development not only of its own but also of the world.
José Manuel Salazar-Xirinachs is executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC)
2023-07-08 10:15:00
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