Europe plans to make all vehicles sold generate zero emissions by 2035, and its domestic suppliers to make the most sales.
The transportation sector remains a persistent barrier to Europe’s decarbonization efforts. Its transport emissions continue to rise despite the regulation framework, endangering the climate goal targets. Reversing this trend needs quick and careful action.
Europe’s goal of becoming a global player in decarbonized transportation is arguably dependent on obtaining lithium elsewhere, particularly in South America.
It needs a consistent supply of vital minerals used for batteries and other renewable energy supply chains to achieve its broader energy security and climate goals.
It sounds doable on paper, but Europe must face a trio of challenges: lack of funds, double-edged regulations, and competition from China.
China has a head start. Data from the US Geological Survey for 2024 reports that after Australia and Chile, China is the third-largest extractor, producing more than three-quarters of the electric batteries sold globally.
To establish a foothold, Europe has created a legal framework that prioritizes environmental preservation, cooperation with local communities, and the production of high-quality jobs.
It has signed bilateral agreements with 15 countries, including Argentina, the fifth-largest producer of lithium, and Chile.
But it failed as it fell short of cash. The investment gap between China and Europe is vast: China invested $6 billion in lithium projects overseas, while Europe barely contributed a billion dollars.
International Energy Agency (IEA) report shows that global demand for lithium increased by 30%, tightening the supply bottleneck.
China has invested in mines through state-owned companies with political backing to ensure the supply of raw materials. China’s Belt and Road Initiative invested $21.4 billion in mining beyond its borders.
Sebastian Galarza, founder of the Centre for Sustainable Mobility in Santiago, Chile, and Europe, is falling behind in terms of investment in these fields.
Due to a lack of a clear roadmap for the development of Europe’s mining and battery industries, other actors have filled the void.
For example, Zimbabwe is now the fourth-largest lithium producer in Africa due to demand from China.
The EU plans to make all vehicles sold generate zero emissions by 2035 and its domestic suppliers to make the most sales.
Just over 20% of the new car sales last year were electric.
Stefan Debruyne, director of external affairs at private mining company SQM, claims Europe imports only 4% of Chile’s lithium. The EU has every chance to grow its market share in the battery sector.
However, Europe’s plan to build dozens of battery factories has been hampered by shifting consumer demands and competition from South Korea (LG Energy Solution, Samsung), Japan (Panasonic), and China (Contemporary Amperex Technology Limited or CATL, BYD).
The key to securing long-term supply is to have close relations with the lithium triangle: Chile, Argentina, and Bolivia. It contains about half of the world’s lithium reserves.
European countries have suggested development pathways that would establish electric battery production in Latin America to encourage cooperation with these countries.
However, it is doubtful whether helping exporting countries create entire supply chains is a wise financial decision or if it will ultimately work in Europe’s favor.
Galarza offered a solution by observing the history of automobiles in Argentina, Brazil, and Mexico. He claimed that for the region to make money from the energy transition, it must move swiftly to electrify its transportation system.
However, it seems a long journey ahead.
According to the IEA, just 2% of new automobiles sold in Mexico and Chile, 6% in Brazil, and 7% in Colombia were electric last year.
At 15% of new car sales, Costa Rica, a tiny country, was the only one in the area where EV sales reached double digits.
