EU accountability for Lithium extraction in Latin America
The latest IPCC report clearly states that, to maintain global temperature increase since pre-industrial levels under 2 °C, the world must reach net zero by 2050 and become net negative thereafter . This report has corroborated the widespread realisation that we must diverge from fossil fuels and transition towards renewable energy if we want to stand a chance to fight climate change. At the moment, how to satisfy contemporary energy demands with renewable energy storage systems remains the biggest obstacle to decarbonising the grid. However, focusing on battery efficiency has diverted attention from the production of the batteries themselves, namely the mining of minerals such as cobalt, nickel and lithium, all key components of electric batteries. In light of this, this proposal will look at the environmental sustainability of lithium extraction, and how can the regions with the biggest markets for this mineral be held accountable for their consumption. The first section will analyse the process of lithium extraction in the salt flats found between Argentina, Chile and Bolivia, known as the ‘Lithium triangle’. The second section will analyse one of the leading importers of this mineral, the European Union, in order to assess its accountability in the extraction process. Lastly, this paper will propose ways in which the EU can contribute to the sustainability of lithium extraction in the Lithium Triangle.
Environmental injustice in the Lithium Triangle
Around 67% of the world’s supply of lithium currently comes from only three countries. Coined as the ‘Lithium Triangle’, Bolivia, Argentina and Chile hold a unique position to export this raw mineral because the lithium is found in saltwater wetlands rather than in rock mines . This allows the mineral to be extracted by evaporating the water in the salt brine, which is a less resource intensive process than rock mining. With a 400% increase in global demand for lithium since 2015, these reserves undeniably hold the potential of bringing economic prosperity to these Latin American countries . Nonetheless, current lithium extraction is reproducing environmental injustice at a local and structural level. Locally, the main issue is that the process through which lithium is obtained is very water intensive. Estimates show that to extract one ton of lithium, nearly two million litres of water are required; a quantity that is particularly unsustainable in the Lithium Triangle region due to its low precipitation rates. This is both damaging for the wetland ecosystems and for the local inhabitants. Often indigenous to the area, these communities are largely reliant on agricultural activities such as quinoa and llama farming. Hence, competing for water resources not only becomes a threat to their water security but also to their traditional livelihoods and cultural heritage. Taking the example of the exploitation at the Salar de Atacamain Chile, 89% of locals work in agriculture whilst only 4% of them work in lithium mining, where most jobs are filled by migrant labour .
Secondly, the local impact of lithium extraction is also part of a bigger structural issue which is the distribution of the battery global value chain. Essentially, profits are largely concentrated in the manufacturing of batteries and electric vehicles rather than in the extraction of Lithium. The asymmetry this creates between countries exporting and importing lithium becomes evident when looking at the example ofthe joint venture between the Bolivian state-owned Yacimientos de Litio Bolivianos and the German energy and manufacturing private company ACI Systems (YLB-ACISA). On paper, YLB owned 51% of shares, with plans to manufacture part of the lithium extracted in newly created plants. Nonetheless, in practice only 20% of this lithium would actually be processed in Bolivia and the rest would be exported to Germany, which is one of the main reasons the Bolivian government eventually refused to go ahead with the venture.
The EU lithium market
As of 2020, lithium was added to the list of critical raw materials for the EU. This corresponds with a growing demand for lithium-ion batteries, essential for the electrification of many industries such as transport. This latter sector accounts for 23% of the EU’s total greenhouse gasses, making electric vehicles essential to achieve the European Green Deal objective of carbon neutrality by 2050. Specifically, the European Union aims to have 40% of new vehicles to be zero or low-emission by 2030 . As part of the strategy to achieve this goal, the EU launched in 2017 the European Battery Alliance, aimed at developing an ‘innovative, competitive and sustainable battery value chain in Europe’. However, this initiative pursues environmental sustainability through the development of lithium extraction in the EU, aiming to satisfy 80% of European demand by 2025. Whilst this will decrease EU dependence on lithium imports from Latin America, it does not directly address the current environmental injustices experienced in the Lithium Triangle and creates the risk of reproducing these environmental injustices in the new European mines. We therefore find billions of public aid being poured into research, development and innovation of lithium extraction projects to facilitate European lithium self-sufficiency, whilst environmental goals have overlooked .
Where can the EU take action?
The current EU regulatory framework that addresses lithium procurement for electric batteries is the Battery Directive. Dating back to 2006, it was reformed in 2020 with the Sustainable Batteries Regulation to address the increasing environmental and social concerns in the battery industry. The reform has a strong emphasis on increasing the circularity of the EU battery sector, highlighting the importance of recycling and extending the life of batteries. Despite this being crucial to decrease the rate of lithium extraction and to mitigate the impact of toxic battery waste, it fails to directly address the responsibility of the EU businesses that extract or import the lithium from Latin America at the beginning of the value chain. Although the reform calls for a ‘mandatory supply-chain due diligence approach for raw materials’, this is of minor focus, with no detail on how it would be analysed or against which indicators it would be evaluated.
Besides the Battery Directive, other frameworks through which the EU could be held accountable for its role in lithium extraction are free trade agreements. Environmental and social regulations often intervene in markets to account for the negative externalities that are not reflected in the market price, and thus trade liberalisation can pose a threat to environmental justice strategies. Currently, the most pressing lithium trade relation is the EU-Chile Association Agreement. It was signed in 2002 and then in 2019 a process of negotiations to modernise the agreement began and continues to this date. It has attempted, albeit insufficiently, to address the environmental implications of lithium extraction. For instance, increased capital flows from the EU into Chile under this agreement focus on financing exploration of new lithium reserves rather than funding ecological assessments and less resource intensive technology for extraction. Furthermore, the environmental implications of an increase in lithium extraction are seen to be largely positive due to its contribution to the green energy transition, and any negative externalities felt locally are expected to be addressed by Chilean environmental law.
In the 2019 sustainability report, a recommendation was made that Chile be allowed to intervene in the lithium industry to uphold environmental and social standards, but since then this matter has not been brought to the table in subsequent negotiations. If reformed efficiently, the modernisation of this agreement could serve as a benchmark for future lithium trade relations with Argentina and Bolivia through the EU-Mercosur free trade agreement and the EU-Andean Community Association Agreement, neither of which are currently in force.
What policy reforms are needed?
Within the existing frameworks, EU businesses extracting lithium, as well as EU battery and EV manufacturers importing lithium, have no legally-binding or standardized environmental and social obligations in relation to lithium extraction. Consequently, they are free to determine their own environmental and social standards, mechanisms of consultation, and due diligence, which have proven to be highly insufficient. The specific areas of reform needed, both within the Sustainable Batteries Regulation and trade agreements with the Lithium Triangle countries, can be grouped into two areas: regulation and investment. Despite regulation being mentioned in existing frameworks, a more comprehensive focus on lithium extraction is needed to make sure lithium extracting companies are subject to specific controls of resource use, namely water and land extension, and more just and controlled negotiation standards between companies and local communities. These regulations should be coordinated throughout the EU and enforced through audits and sanctions to prevent non-compliance. The second area of focus is investment in research and development. To this day there is very little knowledge and technology transfer coming from universities and research centers in the Lithium Triangle, due predominantly to lack of funding. Funding research in these countries would enable them to draft sustainable development strategies without being dependent on European research institutions and energy companies.
Protecting the landscape
Research into the different hydrological and geochemical processes at play in the salt flats and how climate change has affected these cycles is essential to optimize resources in lithium extraction and protect the ecological boundaries of these ecosystems. These salt flats in the Lithium Triangle are protected under the Ramsar Convention, an international agreement to conserve wetland ecosystems signed in 1971. Nonetheless, without sufficient data on the lithium extraction sites, there are no specific guidelines on how these spaces must be protected . Further research is also needed to assess the social impact of lithium mining on local communities, since despite the abundant on-site protests and local mobilisation against mining corporations, there is still a significant lack of data on how local employment and labour flows are shaped by the lithium industry .
The EU is determined to become a global leader in electric vehicle production and consumption, and the importance of achieving this goal as part of the path towards net zero emissions is evident.Nonetheless, despite the environmental and social benefits of the transition towards green energy, there is a large misalignment between the regions that enjoy the benefits of electric batteries and those which suffer the consequences of lithium extraction. Even though the environmental and social implications of lithium extraction are mentioned in existing EU frameworks, there are no specific and binding mechanisms to hold the EU accountable for its involvement in lithium extraction. In order to achieve environmental justice in the Lithium Triangle, direct acknowledgement of these issues must be present in the Sustainable Batteries Regulation and the different free trade agreements. The recognition should translate into concrete mechanisms of regulation and funding for research and development strategies, allowing for the EU to be held responsible for their impact on the local ecosystems and communities affected by lithium extraction. It is of course clear that, in the context of a global pandemic, these reforms come with serious obstacles. These include the financial constraints of the EU after the Covid-19 relief package, as well the social and political unrest present in the Lithium Triangle countries, which has been exacerbated by the pandemic. With a restricted EU budget and political frictions such as those concerning Chile’s upcoming presidential elections , the willingness on both sides to push towards an environmental justice strategy for lithium extraction will require a strong commitment. The upcoming COP 26 will show which direction the international energy transition will take in the following years. Will renewable energy be the key to an environmentally just future or will it reproduce existing unsustainable energy models?
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About the author
Irene Pérez Beltrán is an Environmental Policy Master's student at Sciences Po. She is also the director of the Energy & Environment Policy Center at King's Think Tank and the co-lead of the Global Youth Statement for the UN Conference of Youth at COY16.