The discovery of lithium – inferred resources of 5.9 million tons – in the Union Territory of Jammu & Kashmir by the Geological Survey of India (GSI) has come at a crucial time. Lithium is one of the critical raw minerals, which are essential in the manufacturing processes for economic growth and whose disruption of the supply chain poses a risk to national security. Several states such as the United States (US) and Australia have included lithium in their list of identified critical minerals. According to the US Geological Survey (USGS), out of the world's total reserves of 22 million tons, Chile possesses nearly 41% with 9.2 million tons, followed by Australia with 5.7 million tons (around 26%), Argentina, China, and the United States. The latest findings are significant in the current environment as the resources could help India become self-reliant when China has a strong foothold over the lithium supply chain. However, this could only be possible if the resources are feasible to extract, keeping in mind the environmental and social impacts.
Lithium has gained immense prominence with the significance of the metal for energy transitions. Currently, the world is heavily dependent on fossil fuels to meet energy demands responsible for global warming. Therefore, global energy transition entails replacing the existing fossil-based infrastructure with cleaner alternatives. This has pushed the demand for renewable energy sources and electric vehicles, among other solutions. While renewable sources are relatively cleaner, the biggest challenge is that these are intermittent and require energy storage systems. Therefore, lithium batteries have emerged as the most popular form of energy storage technology. Lithium, copper, and nickel are known to give batteries higher energy density, longevity, and greater performance. According to the International Energy Agency’s (IEA) report, the demand for lithium is projected to grow the fastest, that is, over 40 times by 2040. In the rising mineral-based energy system, the supply chain of  critical mineral has become a significant component of energy security.
Chinese Investments in Lithium
While China does not hold the highest reserves of lithium, it has the highest share in  refining lithium. As per the IEA report titled ‘The Role of Critical Minerals in Clean Energy Transition’, China has around 50-70 per cent share in the refining process of lithium. Also, China  has held the largest share in the production of lithium-ion batteries since 2015. Furthermore, Chinese companies have investments  globally in the upstream, midstream, and downstream processes. For instance, China’s Zhejiang Huayou Cobalt has invested in Arcadia lithium mines in Zimbabwe.
Chinese companies have made strategic investments in upstream production as well. For example, the Chinese company Tianqi Lithium Co. has 51% stakes in Tianqi Lithium Energy Australia, which owns the Kwinana plant in Western Australia. China’s economic influence in Argentina, Bolivia, and Chile, which together constitute the “Lithium Triangle”,  has helped in increasing its dominance in the global lithium market. For instance, Chinese company Tanqui has acquired a 24% share in Socieded Quimica y Minera de Chile’s (SQM). Furthermore, the Chinese Xinjiang TBEA Group has secured a deal with Bolivia’s Yacimientos de Litio (YLB), acquiring 49% of YLB for the development of lithium extraction and processing plants. In addition, a memorandum of understanding (MoU) has been signed between China’s Ganfeng Lithium and Argentina’s mining ministry to develop a lithium battery manufacturing plant. Not only this, but to reduce dependence on lithium imports, China has focused on increasing the development of domestic salt lake lithium extraction to cater to the growing demand.
To meet the growing domestic as well as global demand and secure supplies, China has gradually taken control of the extraction process by acquiring stakes in lithium-rich developing countries. Chinese company BYD has received a contract from Chile to extract 80,000 tonnes of lithium. Another Chinese company, Ganfeng Lithium, has full stakes in the Mariana project, a lithium chloride production plant in Salta province, and 47% stakes of the Cauchari-Olaroz project in Argentina. Apart from South America, the Chinese company owns a 50% stake in the Goulamina spodumene project in Mali, a 55% stake in the Avalonia spodumene project in Ireland, and has stakes in lithium-containing clay project in Mexico.
In the current geopolitical environment, China has established the leverage to disrupt the supply chain in the event of a conflict. For instance, China embargoed rare earth elements (REEs) supply to Japan during the dispute over Senkaku Island, which is crucial in the production of wind turbines. To counter this threat and secure its supplies, the US Department of Energy (DoE) has announced measures to strengthen its domestic production capacity. In response to increasing China’s footprints and its dominance of the market, major powers such as the US, EU, Japan, Australia, and Canada have taken various measures to secure their supply chains of critical minerals. In 2022 the US convened the Minerals Security Partnership (MSP), a new multilateral initiative that included Australia, Canada, Japan, the EU, the United Kingdom (UK), and others. The aim is to bolster critical minerals supply chains essential for the energy transition. Similarly, the European Commission (EC) president announced the European Critical Raw Materials Act to reduce dependency and ensure supply resilience.
Environmental Impacts of Lithium Mining
Although lithium is extracted for sustainable development, it has several environmental impacts. For instance, in the salt flats of the Puna region in Argentina, lithium mining has been a concern due to environmental and social consequences related to the water supply system. Lithium mining in Chile has resulted in clashes between mining companies and local communities because of water and soil contamination. Similarly, in Tagong, a town on the Tibetan plateau, locals protested against the extractive activities because of water contamination from the Ganzizhou Rongda Lithium mine.
While the indigenous communities inhabiting areas close to the mining activities may have benefited through employment opportunities and the development of local infrastructure, the companies have not been fully transparent during the engagement process as well as in information sharing with local communities. To obtain approval from the communities possessing the land rights, the possible environmental risks were not clearly highlighted, as per a study on lithium extraction in Argentina. Therefore, there needs to be greater involvement of the local communities, which are directly affected; and more transparency is required during the consultation process. The environmental and social impacts could be avoided with strong regulatory measures on the activities. Additionally, achieving sustainable development requires a balance of ecology and economy, for which one of the solutions lies in technological innovation.
Significance for India
With the current geopolitical situation and relations between India and China, domestic reserves will provide a considerable impetus to India’s battery and electric vehicle manufacturing industries. Furthermore, with the development of processing and refining technology, India will reduce its imports and energy security concerns when China holds dominance over the supply chain. To meet its growing energy demands and sustainable development goals, India has increasingly shifted to renewable energy and electric vehicles. India has set its targets to increase renewable capacity to 500GW by 2030, meeting 50% of energy requirements from renewables, reduction of cumulative emissions by one billion tonnes by 2030, and reduction of emissions intensity of India’s gross domestic product (GDP) by 45% by 2030. Furthermore, India, at the Conference of the Parties 26 (COP26) Summit, has set a goal of having at least 30% of private automobiles as EVs by 2030. New Delhi has come up with initiatives to push indigenous electric vehicle production, which requires lithium batteries. This will also boost India’s efforts in the energy transition, thereby reducing dependence on oil imports from West Asia and other volatile regions.
Besides, with the first-ever lithium refinery being set up in Gujarat, India can play a significant role in both upstream and downstream markets. Further, this could encourage R&D and innovation in lithium extraction technology to make battery production cost-efficient. As traditional methods, including brine extraction and ore mining so far, have been proven less environmentally friendly. Direct Lithium Extraction (DLE) technology, a newly developed extraction technology, is regarded as relatively faster and known to cause less environmental impact. As an important mineral in energy transition, it is crucial that the extraction process is efficient as well as eco-friendly. Thus, there needs to be more emphasis on technological innovation in India for it to play a competitive role.
Disclaimer: The views expressed in the article are personal.