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Electromobility at a dead end – European financial institutions must promote sustainable lithium

We are currently experiencing the breakthrough of electromobility. The lithium needed for electric car batteries is mined far away from Europe, in China, Australia and South America. The three countries with the largest lithium resources are Bolivia, Argentina and Chile.[1] The South American lithium triangle, the border region between Argentina, Bolivia and Chile, contains 68% of the world’s lithium deposits and 87% of the lithium found in salt flats.[2] Although the lithium companies are not based in Europe, but in China, Australia and both Americas, Europe has an influence on lithium mining, as European car companies are large buyers of lithium batteries and European financial institutions invest in lithium companies responsible for environmental damage, corruption and disregard for the rights of indigenous communities.

Initially, the beginning of the electromobility boom triggered optimism in the lithium triangle, as it offered an opportunity to finally benefit from their resources, processing lithium locally into industrial goods such as electric car batteries instead of exporting it directly as a raw material.[3] But the hope for local industrialization was not fulfilled.[4] The lithium companies, battery producers and car companies only want the raw material from South America, but no further local processing and no technology transfer.[5] The lithium companies often resist not only battery production in South America, but also the processing of lithium carbonate into lithium hydroxide with a high degree of purity required for batteries, which would mean more added value in South America. For example, Orocobre, FMC (now Livent), SQM and Albemarle prefer to produce cheaper, lower-purity lithium carbonate in South America and lithium hydroxide elsewhere, e.g. in Australia.[6]

The salt flats where South American lithium is mined are very sensitive ecosystems.[7] Water consumption in lithium production is not as high as in the mining of other raw materials, but the lithium triangle is one of the driest areas in the world.[8] According to the company, SQM, which has been mining lithium in Chile since 1997, pumps 180 litres of fresh water per second from the salt flat.[9] In addition, there is a risk of environmental damage to the salt flats due to the used chemicals, with different mining methods polluting the environment to a greater or lesser extent.[10] In Argentina’s Salar del Hombre Muerto, where the US corporation FMC mined lithium for a long time and now produces its spin-off Livent, some of the waste was discharged back into the salt flat.[11] In Chile, SQM concealed information about its actual freshwater use, manipulated pH values and broke environmental regulations in 2013-2015 by pumping more water from the Salar de Atacama than allowed.[12] Yet lithium extraction from salt flats is less environmentally damaging than other forms of resource extraction.[13] The main problem is that lithium companies are often reluctant to adopt new, environmentally friendly mining methods because they have already invested a lot of capital in their current facilities.[14] They repeatedly deny access to the salt flats to scientists who want to test environmentally friendly mining methods.[15]

The lithium companies in South America have also failed to respect the right of indigenous people to Free, Prior and Informed Consent (FPIC), as stipulated in the 169th Convention of the International Labour Organisation. For example, the lithium companies Orocobre and Minera Exar, a joint venture of Lithium Americas and Ganfeng Lithium, bribed some indigenous people from the Argentinian village Salinas Grandes to get signatures for on-site lithium mining.[16] Furthermore, lithium companies paid hardly any taxes in Chile until 2016 and in Argentina until today.[17] In Argentina, the provinces, not the central government, control the mineral resources, so the lithium companies play the provinces off against each other and there is a race to the bottom in environmental and tax regulations.[18]

The influence of the lithium companies is exemplified by the Chilean company SQM, which in 2015 triggered one of the biggest corruption scandals in South American history. In the process, 58 Chilean state officials lost their jobs because they had received illegal payments from SQM.[19] The second company that mines lithium in Chile, the US corporation Albemarle, exploits its influence too. In 2017, Albemarle refused to provide 25% of its lithium at a discounted price for possible local processing, as contractually required. Instead, Albemarle delayed the process and took advantage of a change in government a short time later, as a result of which a former Albemarle consultant became the new head of the Chilean state authority that controls the country’s lithium resources. Unsurprisingly, he was gentle with the company and did not force it to comply with the contract.[20]

Through their actions, the lithium companies have contributed to the fact that the local population in the South American lithium triangle often only experiences the disadvantages of lithium mining (environmental damage, water consumption, corruption, violation of the rights of indigenous communities) and hardly any possible advantages (environmentally friendly mining methods, creation of high-quality jobs, high tax revenues, technical progress, local processing instead of directly exported raw materials).

Among the investors of these lithium companies are also European financial institutions. For example, the Scottish investment management firm Baillie Gifford ($676 million), the Swiss bank Pictet ($209 million), the Swedish bank Handelsbanken ($153 million), the central bank of Norway ($138 million), German financial services company Allianz ($27 million) and Deutsche Bank via DWS (more than $25 million) hold shares in Albemarle, the US corporation that broke its contract in Chile. Moreover, in December 2020, HSBC, Santander Bank and Credit Suisse among others provided a $700 million loan to Albemarle. Santander Bank, HSBC and other banks had already given Albemarle a $1 billion loan in 2018 and a $2,2 billion loan in 2019.[21] European financial institutions also hold stakes in SQM, the Chilean company that triggered the major corruption scandal, including UK-based investment company Standard Life Aberdeen (about $84 million), Allianz (more than $25 million), London-based hedge fund Marshall Wace LLP ($91 million) and the German banks DekaBank and DZ Bank. In May 2019, Santander Bank, together other banks, issued a new bond ($450 million) for SQM.[22]

European financial institutions also invest in FMC and its spin-off Livent, which achieved the easing of environmental regulations in Argentina. For example, Allianz (more than $22 million), Handelsbanken ($102 million), Deutsche Bank through DWS and Deutsche Asset Management Americas (about $17 million), DZ Bank and Landesbank Baden-Württemberg hold Livent shares. In October 2018, June 2020 and June 2021, Credit Suisse and other banks issued new Livent shares totalling $775 million.[23] Deutsche Bank through DWS and Deutsche Asset & Wealth Management (approximately $76 million), UBS ($175 million), HSBC, Credit Suisse, Barclays Bank, BNP Paribas, Allianz and DekaBank also have stakes in FMC. Additionally, different banks including BNP Paribas and Santander Bank managed a $1,5 billion bond issuance for FMC in September 2019 and provided FMC with $1,5 billion loans in May 2019 and in May 2021.[24]

European financial institutions also have a stake in the Australian mining company Orocobre and the Japanese firm Toyota Tsusho, which form a Joint Venture that has refused to produce at least higher-purity lithium in Argentina. Allianz holds Orocobre shares worth more than $14 million, Handelsbanken $74 million, the central bank of Norway $19 million and DZ Bank, through Union Investment, more than $3 million. Furthermore, the Swiss bank UBS advised the company when Toyota Tsusho bought a 11% stake in Orocobre in 2018.[25] Toyota Tsusho shareholders include the central bank of Norway ($140 million), Deutsche Bank via DWS and DBX Advisors ($27,5 million), UBS ($15 million), Credit Suisse, HSBC and Allianz via PIMCO. Furthermore, in May 2021, BNP Paribas, Crédit Agricole, Siemens AG and others provided Toyota Tsusho with a $450 million loan. Scotiabank and other financial institutions in January 2020 ($431 million) as well as different banks such as BNP Paribas and Société Générale in December 2018 ($283 million) had already given loans to Toyota Tsusho in the past.[26] Shareholders in Galaxy Resources, which is about to merge with Orocobre, include Allianz ($14 million), the central bank of Norway and UBS. The latter also managed different equity deals of Galaxy Resources in 2020.[27]

Finally, European financial institutions invest in Lithium Americas and Ganfeng Lithium, which together form the joint venture Minera Exar, which bribed villagers in Argentina. For example, DZ Bank, Credit Suisse and Deutsche Bank through DWS and Deutsche Asset Management Americas hold shares in Lithium Americas. In addition, Deutsche Bank proceeded new Lithium Americas shares ($82,5 million) in January 2021.[28] Ganfeng Lithium shareholders include Allianz ($149 million), the central bank of Norway ($93 milion), UBS, Credit Suisse and Deutsche Bank through DWS and DB Asset Management. In addition, Deutsche Bank and other financial institutions in October 2018 ($422 million) as well as UBS and other banks in June 2021 ($627 million) managed the issuance of new Ganfeng Lithium shares.[29]

As shareholders and financiers, the mentioned European financial institutions are indirectly responsible for the environmental damage, violations of water use regulations, corruption and disregard for the rights of indigenous communities. They should use their influence to ensure that the lithium companies in South America pay (proper) taxes, do not play the Argentinean provinces off against each other, give up their opposition to local processing into battery components and rather produce battery-grade lithium hydroxide instead of lower-purity lithium carbonate in South America. In fact, lithium companies have announced some improvements. Thus, the European financial institutions have to ensure they really implement them and do not attempt greenwashing.

Facing Finance calls on European financial institutions to do everything they can to stop environmental damage and water loss by making sure that researchers have access to all salt flats and lithium companies use new mining techniques with low water consumption, little or no use of chemicals and small amounts of waste. They should ensure that the lithium companies finally respect all contracts, put an end to corruption and nepotism, respect the rights of indigenous groups, create high-quality jobs for the local population and involve them in the decision-making processes on an equal footing. The European financial institutions involved must ensure that the transition to electromobility does not take place at the expense of people and the environment in the global South.

 

Author: Luca Schiewe

 

[1] U.S. Geological Survey (2021) Mineral commodity summaries 2021, U.S. Geological Survey 200, Virginia, p.99.

[2] Fornillo, B., Gamba, M. & Zicari, J. (2019) “El mercado mundial del litio y el eje asiático. Dinámicas comerciales, industriales y tecnológicas”, in Fornillo, B. Litio en Sudamérica. Geopolítica, energía y territorios, El Colectivo, CLACSO, Argentina, p.51.

[3] Grupo de Estudios en Geopolítica y Bienes Comunes (2019) Litio y transición socio-ecológica en Sudamérica, Friedrich Ebert Foundation Analysis nr.51, Argentina, p.9.

Burchardt, H., Dietz, K. (2014) (Neo-)extractivism – a new challenge for development theory from Latin America, Third World Quarterly, 35:3, Great Britain, p.468.

[4] López, A., et. al (2019) Litio en la Argentina: Oportunidades y desafíos para el desarrollo de la cadena de valor, Inter-American Development Bank, Argentina, p.140.

[5] Schiewe, L. (2021) Litio y el (neo)extractivismo: ¿Por qué el triángulo del litio exporta el litio como materia prima y no hay industrialización local?, Erfurt, p.23/33.

[6] https://salesdejujuy.com/projects/

https://www.orocobre.com/operations/salar-de-olaroz/

https://s25.q4cdn.com/757756353/files/doc_news/2021/JEA_22ene2021_esp_final.pdf

https://albemarle.gcs-web.com/static-files/9c7c3aee-7afb-4324-8b9d-8c6bde692ee0

López, A., et. al (2019) Litio en la Argentina: Oportunidades y desafíos para el desarrollo de la cadena de valor, Inter-American Development Bank, Argentina, p.90.

[7] Argento, M., Puente, F. & Slipak, A. (2017) “Qué debates esconde la explotación del litio en el noroeste argentino? Perspectivas y proyecciones sobre la dinámica empresa-estado-comunidad”, in Alimonda, H., Martín, F. & Pérez, C. Ecología política latinoamericana. Pensamiento crítico, diferencia latinoamericana y rearticulación epistémica, CLACSO, Argentinia, p.425.

[8] Anlauf, A. (2015) “Secar la tierra para sacar litio? Conflictos socio-ambientales en la mineria del litio”, in Nacif, F., Lacabana, M. ABC del litio sudamericano. Soberanía, ambiente, tecnología e industria, Universidad Nacional de Quilmes, Argentina, p.171.

[9] https://www.sqm.com/wp-content/uploads/2020/10/SQM_Litio_Sustentable.pdf

[10] Kazimierski, M., Slipak, A. (2019) “Exposición de las técnicas y saberes para la extracción de litio”, in Fornillo, B. Litio en Sudamérica. Geopolítica, energía y territorios, El Colectivo, CLACSO, Argentina, p.302.

[11] López, A., et. al (2019) Litio en la Argentina: Oportunidades y desafíos para el desarrollo de la cadena de valor, Inter-American Development Bank, Argentina, p.47.

[12] Reveco, S., Slipak, A. (2019) “Historias de la extracción, dinámicas jurídico-tributarias y el litio en los modelos de desarrollo de Argentina, Bolivia y Chile”, in Fornillo, B. Litio en Sudamérica. Geopolítica, energía y territorios, El Colectivo, CLACSO, Argentina, p.111.

[13] Argento, M., Puente, F. & Slipak, A. (2017) “Qué debates esconde la explotación del litio en el noroeste argentino? Perspectivas y proyecciones sobre la dinámica empresa-estado-comunidad”, in Alimonda, H., Martín, F. & Pérez, C. Ecología política latinoamericana. Pensamiento crítico, diferencia latinoamericana y rearticulación epistémica, CLACSO, Argentina, p.424.

[14] Schiewe, L. (2021) Litio y el (neo)extractivismo: ¿Por qué el triángulo del litio exporta el litio como materia prima y no hay industrialización local?, Erfurt, p.23.

[15] Fornillo, B., Gamba, M. (2019) “Política, ciencia y energía en el triángulo del litio”, in Fornillo, B. Litio en Sudamérica. Geopolítica, energía y territorios, El Colectivo, CLACSO, Argentina, p.144.

López, A., et. al (2019) Litio en la Argentina: Oportunidades y desafíos para el desarrollo de la cadena de valor, Inter-American Development Bank, Argentina, p.57.

[16] https://www.mineraexar.com.ar

Argento, M., Puente, F. (2015) “Nuevos extractivismos, viejos conflictos. Dinámicas territoriales en torno a la explotación del litio en el Noroeste argentino”, in Latorre, S., Martínez, A. Extractivismo y conflictividad. Nuevos actores y nuevos contextos en América Latina, Revista Economía, vol. 67, no.105, Ecuador, p.117.

[17] Reveco, S., Slipak, A. (2019) “Historias de la extracción, dinámicas jurídico-tributarias y el litio en los modelos de desarrollo de Argentina, Bolivia y Chile”, in Fornillo, B. Litio en Sudamérica. Geopolítica, energía y territorios, El Colectivo, CLACSO, Argentina, p.89.

[18] López, A., et. al (2019) Litio en la Argentina: Oportunidades y desafíos para el desarrollo de la cadena de valor, Inter-American Development Bank, Argentina, p.142.

[19] Reveco, S., Slipak, A. (2019) “Historias de la extracción, dinámicas jurídico-tributarias y el litio en los modelos de desarrollo de Argentina, Bolivia y Chile”, in Fornillo, B. Litio en Sudamérica. Geopolítica, energía y territorios, El Colectivo, CLACSO, Argentina, p.112.

[20] Schiewe, L. (2021) Litio y el (neo)extractivismo: ¿Por qué el triángulo del litio exporta el litio como materia prima y no hay industrialización local?, Erfurt, p.17.

[21] Refinitiv Eikon: Retrieved 11.06.2021

[22] Refinitiv Eikon: Retrieved 17.06.2021

[23] Refinitiv Eikon: Retrieved 17.06.2021

[24] Refinitiv Eikon: Retrieved 22.06.2021

[25] Refinitiv Eikon: Retrieved 18.06.2021

[26] Refinitiv Eikon: Retrieved 18.06.2021

[27] Refinitiv Eikon: Retrieved 22.06.2021

[28] Refinitiv Eikon: Retrieved 22.06.2021

[29] Refinitiv Eikon: Retrieved 22.06.2021