View from Brussels: EU is making a lithium rod for its own back

The current generation of battery technology requires lithium, so as electric vehicle sales constantly increase and more renewable energy comes online – requiring storage – demand is only set to increase.

In 2020, the European Union added lithium to its list of critical raw materials, which is reserved for materials that are either essential to EU policy goals or which face supply shortages. In lithium’s case, it was the first criteria that secured its inclusion.

Brussels has big plans to snag a chunk of the global battery-production market, by increasing both manufacturing of the final product and the mining and refining of raw materials.

The likes of France and Germany have started to stump up billions of euros to build gigafactories as demand for vehicles in particular increases, while further efforts are underway to ramp up recycling and the reclamation of battery parts.

But lithium may soon face hurdles similar to those that materials like cobalt and lead have had to deal with over the years: negotiating tougher health and safety rules if the EU decides to list it as a hazardous substance.

According to a plan put together by the European Chemicals Agency, lithium could be subjected to stricter regulation, based on studies that suggest a link between exposure and development problems, as well as reduced fertility.

The process is by no means over. Governments, lawmakers and stakeholders will all want their say and no final decision is expected until the end of the year at the earliest. History suggests the process may drag on even longer.

Industry groups insist that there is only a tenuous link between the health factors cited by the ECA and lithium exposure. Many add that if the plan goes ahead it could deal a death blow to Europe’s still nascent energy-transition ambitions.

“Europe is playing catch-up with China, which is already over a decade ahead, now controlling most global processing for lithium and other battery metals. Europe has a narrowing window of opportunity to attract the investments needed, and lithium is a central material to our success,” reads a statement by major industry players.

China may be a world leader in battery production, but in terms of lithium mining it trails heavily behind Latin America and Australia. Chile tops the ranking with more than 9 million tons of reserves.

EU strategies to cut dependence on other countries and prevent raw materials from becoming ‘the new oil’ often trumpet the potential of advanced geological surveys to pinpoint reserves within the Union’s borders.

There is untapped potential in France, Austria and Scandinavia, while Europe’s only existing mines in Portugal could be exploited more heavily, according to energy experts. But mining may not be the right point of attack for the EU.

In May, Tesla boss Elon Musk met with the bloc’s industry tsar, Thierry Breton, to discuss everything from social media regulation to electric mobility and space exploration. Their conversation also touched on lithium refining.

Musk insisted in that chat – which has now come to light thanks to a freedom of information request – that dependence on China must be avoided and that refining capacities need to be built up elsewhere.

Tesla sources most of its lithium from Australia but still relies on China’s industry to process it into a material that can be used in its battery packs. 

“Refining capacities [built] domestically or in like-minded countries is essential given the risk of one country having an unmovable piece,” the summary of the Musk-Breton meeting reads.

Listing lithium as a hazardous material could jeopardise the massive investment needed to make those refining facilities a reality, so the EU may have to be careful not to shoot itself in the foot.

Albemarle, a US-based firm, has already indicated that it may close a plant in northern Germany if the ECA plan is accepted by the European Commission, insisting that costs and red tape would be too substantial.

Brussels may yet again call upon a special instrument known as important projects of common European interest (IPCEIs), which allows EU governments to band together and invest cash in strategic projects, free from the most stringent state aid rules.

Existing IPCEIs in battery and semiconductor production are already starting to pay off and more are planned in those sectors and other areas like hydrogen. Lithium refining would also likely tick all the boxes needed to qualify.