Lithium: Here’s why Latin America is key to the global energy transition

Latin America is home to an estimated 60% of identified lithium globally, according to the United Nations Development Programme (UNDP). While Argentina, Bolivia and Chile are considered to be in the "lithium triangle" - an area in the Andes which borders the three neighbours and is rich in lithium reserves.

The US Geological Survey (USGS) estimates that out of a global total of 86 million tons of identified lithium, Bolivia is home to 21 million tons, Argentina 19.3 million and Chile 9.6 million. However, Chile is leading the way in utilizing these reserves into commercial production, according to the Center for Strategic & International Studies. It says Argentina and Bolivia are lagging behind due to investment challenges and more difficult geographic conditions.

The UNDP says making money out of lithium production is also difficult because most of the profits from the industry come from a lengthy value chain that creates batteries. However, the top 10 battery manufacturers by market share are all based in Asian countries. It therefore says Latin American countries will need to make bigger investments to localize more of the value chain in order to derive significant profits.

The extraction of lithium requires using very high volumes of water, around 2.2 million litres per ton of lithium. This has led to serious issues around water stress – a situation where a region’s water resources are not enough to meet its needs.

Bolivia’s San Cristóbal mine reportedly uses 50,000 litres of water a day.

In Chile, lithium mining companies have been accused of depleting vital water supplies, up to 65% in the Salar de Atacama region, according to reports.

Most of the lithium production in Latin America comes from salt flats with fragile ecosystems. The UNDP says mining operations are also associated with a risk of contaminating local water basins.

Indigenous communities also rely on water supplies for their livelihoods.

Indigenous Argentinian activist Román Guitián told Time Magazine he grew up near the country’s oldest lithium mine at Hombre Muerto, and his family used to raise llamas, goats and sheep.

However, the diversion of fresh water from the Trapaich River used in lithium production has now dried up the valley. “It was beautiful. But today there are no animals because it’s all dry,” Guitián said. “In the future, we’ll have lithium, we’ll have electric cars, but we won’t have water.”

Time says US-based lithium manufacturer Livent, which operates the mine, has launched a programme to restore the valley through replanting and new irrigation systems. But it also plans to double the plant’s lithium production capacity by the end of 2023 and is busy digging a pipeline to another nearby river.

The global energy transition is predicted to trigger as much as a 40-fold increase in demand for lithium by 2040, according to the International Energy Agency (IEA). Lithium-ion batteries are used to store energy from renewable sources such as wind and solar.

Demand for electric vehicles (EVs) is also soaring as more countries pledge to phase out gasoline-powered cars. Sometimes called ‘white gold’, lithium is one of the key components in EV batteries. Globally, EV sales rose to 6.6 million in 2021, almost double the volume from a year earlier.

The huge demand for the metal has resulted in a rise in prices which is creating incentives to mine even more lithium. Identified lithium resources rose from 53 million tons in 2018 to 89 million tons in 2022, according to the USGS.

The US Department of Energy estimates that electric vehicles emit 60% less carbon pollution than gasoline-powered cars. The UN says lithium production will be vital in helping wean the world off fossil fuels and reducing greenhouse gas emissions. But Luis Felipe López-Calva, UNDP Regional Director for Latin America and the Caribbean, says this must be managed properly in the region.

“It requires a sustainable governance perspective to ensure that investment is available and that the gains of the lithium ‘rush’ are distributed in a way that improves the well-being of societies, especially those of local communities,” he said. “Natural resources can be a valuable driver of development, but without proper investment and sustainable governance their pursuit could become another quest for El Dorado.”

Increased recycling of batteries is another way to make the future of electric vehicles more sustainable. The IEA says that the amount of used EV batteries reaching the end of their initial lifespan is expected to surge after 2030.

The World Economic Forum’s A Vision for a Sustainable Battery Value Chain in 2030 report says that in the base case, an estimated 54% of end-of-life batteries are expected to be recycled in 2030. It says this could cover 7% of the demand for raw materials used in EV battery production that year.

The Forum’s Shaping the Future of Energy, Materials and Infrastructure platform aims to enable the growth of sustainable economies to help halt climate change and create a more equitable world. The issues around lithium extraction will be up for discussion at the Forum’s Annual Meeting in Davos, from 16-20 January 2023.