How Crucial is Lithium for Global Decarbonisation?
As the world accelerates towards net zero, the question of mineral availability has emerged as a pivotal factor in determining the speed and success of energy transitions.
Among these minerals, lithium stands out as a key player, not just as a component in batteries but as the cornerstone of clean energy infrastructure.
Without it, the global decarbonisation agenda may be delayed.
Why does clean energy demand minerals?
An energy system based on solar, wind and EVs is significantly different to one powered by fossil fuels.
Clean technologies require far more minerals to construct.
An electric car needs six times more mineral input than a conventional vehicle and an onshore wind plant nine times more than a gas-fired equivalent.
Since 2010, the mineral requirement for new power generation capacity has grown by 50% as renewables take centre stage.
The types of minerals vary by technology but for EVs and battery storage the following are key:
- Lithium
- Nickel
- Cobalt
- Manganese
- Graphite.
These determine battery longevity, performance and energy density.
Meanwhile, copper and aluminium form the backbone of electricity networks and rare earth elements support the magnets in turbines and motors.
Lithium’s explosive demand trajectory
Lithium is now the most essential mineral for achieving climate goals, according to the Internal Energy Agency (IEA).
As EVs and stationary energy storage dominate battery demand, lithium consumption is expected to increase more than 40-fold by 2040 under the IEA’s Sustainable Development Scenario (SDS).
Its share of total mineral demand from clean energy applications will rise from negligible levels in 2010 to nearly 90% by 2040.
Even in the IEA’s less ambitious Stated Policies Scenario, overall mineral needs will double by 2040.
Meeting Paris Agreement targets would quadruple demand and net zero ambitions push that figure to a sixfold increase.
This explosion of mineral consumption, particularly lithium, makes secure supply chains and diversified production more important than ever.
Lithium mining in Chile
To meet this soaring demand, countries are racing to scale up lithium production.
In Chile, home to the world's second-largest lithium reserves, a significant partnership has emerged between state-owned copper giant Codelco and lithium specialist SQM.
Their joint venture aims to extract and refine lithium from the Salar de Atacama from 2025, with Codelco assuming operational leadership from 2031 to 2060.
“Just as we have contributed to making Chile the world leader in copper production, we will now contribute to making our country a leader in the production of lithium,” says Máximo Pacheco, Chairman of Codelco.
This partnership is not only a strategic industrial move but also an environmental one.
Both companies have pledged high environmental standards, local engagement and technological investment to make lithium production more sustainable.
The initiative is set to strengthen Chile’s role as a key supplier of climate-critical minerals while supporting local development.
Rio Tinto’s Arcadium Lithium
Global mining major Rio Tinto has also taken decisive action, completing its US$6.7bn acquisition of Arcadium Lithium.
This move gives Rio access to some of the world’s top lithium assets and customers including General Motors, Tesla and BMW.
Jakob Stausholm, Rio Tinto’s CEO, said the acquisition would “create a world-class lithium business” to support the energy transition.
By integrating lithium into its wider portfolio of copper, iron ore and aluminium, Rio is positioning itself as a vertically integrated supplier of materials for low-carbon technologies.
Supply chain risks
Despite these developments, current supply and investment plans fall well short of what is needed.
In a climate-driven scenario, existing projects will only meet half of the 2030 demand for lithium and cobalt and 80% of copper requirements.
This risks delays, price volatility and ultimately a more expensive transition.
Several critical challenges persist:
- Geographical concentration: More than 70% of cobalt and 60% of rare earths are mined in just one or two countries, primarily the Democratic Republic of the Congo and China.
- Project lead times: It takes an average of 16.5 years from discovery to production in mining, far slower than the pace of clean energy deployment.
- Environmental scrutiny: Lithium extraction, particularly from water-stressed areas like the Atacama, raises concerns over local impacts, waste and emissions.
- Recycling limitations: Only 10% of demand is expected to be met through battery recycling by 2040, despite the rapid growth of EV waste streams.
The cost of inaction
Mineral inputs account for a growing share of clean energy technology costs.
For lithium-ion batteries, raw materials now make up 50–70% of the cost, up from 40–50% five years ago.
A doubling of lithium or nickel prices could raise battery costs by 6%, potentially wiping out efficiency gains from economies of scale.
Meanwhile, electricity grids, where copper and aluminium are critical, would also face higher costs, threatening investment in much-needed transmission infrastructure.
Lithium Security Is Energy Security
As clean energy transitions accelerate, energy security frameworks must evolve. While disruptions in oil markets impact all consumers, mineral supply shocks primarily affect new infrastructure. Yet the risks are no less serious.
Securing lithium supply will demand coordinated action from policymakers:
- Clear climate policies to guide private investment in new mining and refining capacity
- Diversified supply chains, supported by improved geological surveys and permitting processes
- Technological innovation to reduce material intensity, enable substitution and enhance recovery from waste
- Sustainable practices to mitigate local environmental and social risks
- Recycling ecosystems to reduce primary demand in the long term.
A critical decade for lithium
Lithium is not just a building block of batteries.
It is the foundation upon which a decarbonised, electrified future will be built.
Without it, the world’s EV fleets will stall, grid storage will falter and climate targets will recede.
Initiatives like the Codelco–SQM partnership and Rio Tinto’s acquisition of Arcadium Lithium are promising signs of industry alignment.
