Lithium Market Trends & Strategic Insights

A growing coalition of countries, cities, businesses, and other institutions are pledging to get to net-zero emissions. More than 70 countries, including the biggest polluters – China, the United States, and the European Union – have set a net-zero target, covering about 76% of global emissions. More than 3,000 businesses and financial institutions are working with the Science-Based Targets Initiative to reduce their emissions in line with climate science. Over 1000 cities, over 1000 educational institutions, and over 400 financial institutions have joined the Race to Zero, pledging to take rigorous, immediate action to halve global emissions by 2030.

The energy sector is the source of around three-quarters of greenhouse gas emissions today and holds the key to averting the worst effects of climate change. Replacing polluting coal, gas, and oil-fired power with energy from renewable sources, such as wind or solar, would dramatically reduce carbon emissions. This transition can only be achieved by increasing the use of energy storage solutions, such as Lithium-ion batteries, and electrifying transportation.

Vehicles powered by fossil fuels, such as gasoline and diesel, are set to be phased out by several countries. 

Many countries and cities worldwide have already stated they will ban the sales of passenger vehicles (primarily cars and buses) powered by fossil fuels at some time in the future.

A few places have also set dates for banning other types of vehicles, such as fossil-fueled ships and lorries.

In addition to these national bans, more than 100 countries, cities, financial institutions, and multinationals, including Ford Motor Company, General Motors, Volvo Cars, and other automakers, signed the Glasgow Declaration on Zero-Emission Cars and Vans to end the sale of internal combustion engines by 2035 in leading markets, and by 2040 worldwide.

The Inflation Reduction Act (IRA) includes several critical measures that directly support the lithium industry and the broader EV market:

Clean Vehicle Credit: To qualify for the maximum $7,500 tax credit on electric vehicles, the battery’s components must meet specific sourcing standards. A significant portion of the materials used in battery manufacturing must be sourced or processed in the United States or by trusted trade partners, promoting domestic supply chain growth and reducing reliance on foreign materials.

Programs Supporting Domestic Supply Chain Growth:

• $3 billion has been allocated to the Department of Energy's Advanced Technology Vehicle Manufacturing Loan Program, providing loans for manufacturing clean vehicles and their components in the U.S.
• An additional $2 billion is set aside for Domestic Manufacturing Conversion Grants, helping manufacturers retool their production lines to produce clean vehicles.
• The Advanced Manufacturing Production Credit incentivizes the domestic production and sale of qualified components for clean energy projects, including batteries and critical minerals like lithium.

Since the enactment of the IRA, nearly $85 billion has been invested in U.S. manufacturing of electric vehicles (EVs), batteries, and EV chargers, with EV sales tripling, according to the White House. This creates a favorable environment for lithium extraction companies and drives demand for locally sourced raw materials.

The IRA has set the stage for U.S. battery manufacturing capacity to grow from 119 GWh today to 440 GWh by 2025 and over 1000 GWh by 2030, marking a 9x increase. As more EV battery manufacturers enter the market, competition for domestic raw material supplies like lithium will intensify. This opens significant opportunities for offtake agreements and drives high demand for domestically produced lithium compounds.

Learn more about the Inflation Reduction Act.

European Union announced the Critical Raw Materials action plan in March 2023.

The Regulation sets clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify E.U. supply by 2030:

• At least 10% of the E.U.'s annual consumption for extraction, At least 40% of the E.U.'s yearly consumption for processing,
• At least 15% of the E.U.'s annual consumption is for recycling,
• Not more than 65% of the Union's annual consumption of each strategic raw material at any relevant processing stage from a single third country.

The Act will reduce the administrative burden and simplify permitting procedures for critical raw materials projects in the E.U., Strengthening the uptake and deployment of breakthrough technologies in critical raw materials. However, as the E.U. accepts to never be self-sufficient in supplying such raw materials, it has focused on supporting global production and ensuring supply diversification.

The E.U. must strengthen its global engagement with reliable partners to develop and diversify investment, promote stability in international trade, and strengthen legal certainty for investors. Additionally, to ensure the resilience of the supply chains, the Act provides for monitoring critical raw materials supply chains.

The E.U. will focus on improving the circularity and sustainability of critical raw materials. A partnership on critical raw materials and a Raw Materials Academy will promote skills relevant to the workforce in critical raw materials supply chains. It will further develop strategic alliances: The E.U. will work with reliable partners to promote their economic development sustainably through value chain creation in their own countries while also promoting secure, resilient, affordable, and sufficiently diversified value chains for the E.U.

Learn more about the European Critical Raw Material Act.

The European Union has initiated a significant regulatory change by introducing the new EU Battery Regulation, which began to apply on 18 February 2024. This regulation represents a landmark move towards more sustainable, circular, and safe battery production and use within the EU. However, it's important to note that the regulation's provisions are not all applied immediately but are introduced in phases over the coming years. This phased approach allows for some aspects of the regulation to become stricter over time, with certain areas of implementation still to be defined.

One of the regulation's critical requirements is that manufacturers and importers of batteries intending to enter the European market must comply with these new standards. Non-compliance could lead to significant penalties, including restricting or withdrawing non-compliant batteries from the market, depending on the enforcement policies of individual EU countries.

Carbon Footprint Disclosure

A cornerstone of the regulation is the requirement for all batteries to have their carbon footprint disclosed by 18 February 2025. This disclosure must encompass the entire life cycle of the battery, from the extraction of raw materials and processing to manufacturing and, finally, to the recycling stage. Notably, the use phase of the battery is currently excluded from this requirement. This measure aims to increase transparency and encourage the production of batteries with a lower environmental impact.

Supporting the Green Transition

Batteries are recognized as a crucial technology in driving the green transition, supporting sustainable mobility, and contributing towards the EU's goal of climate neutrality by 2050. In alignment with these objectives, the regulation will gradually introduce declaration requirements, performance classes, and maximum limits on the carbon footprint for various types of batteries. This includes batteries used in electric vehicles, light means of transport such as e-bikes and scooters, and rechargeable industrial batteries, starting from 2025.

The EU Battery Regulation is a significant step forward in ensuring that batteries contribute positively to the green transition and sustainable mobility. By setting stringent requirements for the production, use, and recycling of batteries, the EU aims to minimize the environmental impact of batteries and pave the way for a climate-neutral future.

Learn more about the EU Battery Regulation.

Your company is uniquely positioned to enter the lithium market by utilizing produced water streams - an asset already embedded in your operations. Traditionally viewed as a waste product, produced water contains lithium and other minerals that can now be efficiently extracted using Lithium Harvest’s patented technology.

By leveraging existing pipelines, processing facilities, and water-handling infrastructure, your company can quickly scale its entry into the lithium market.

Extracting lithium from produced water offers your company a significant opportunity to diversify revenue streams without making major overhauls to your core operations. As global demand for lithium continues to surge, oil and midstream companies can tap into this expanding market using their existing resources.

What was once considered a costly waste product can now become a valuable asset, contributing to economic growth and environmental sustainability. This integration allows your company to play a pivotal role in the energy transition while boosting profitability.

The growing demand for domestic lithium production represents a substantial opportunity for the oil and gas industry. U.S. electric vehicle manufacturers and battery supply chains are increasingly seeking reliable, local sources of lithium to support their expansion. With your company's vast infrastructure and expertise, we are well-positioned to meet this demand.

By entering into strategic partnerships with lithium extraction companies like Lithium Harvest, your company can seamlessly integrate lithium extraction into its operations, offering a sustainable and scalable solution that benefits both industries. These strategic partnerships create a natural synergy, fostering mutual growth while addressing the increasing need for domestically sourced lithium.

In addition to economic benefits, entering the lithium market supports national energy security by reducing reliance on foreign lithium supply chains. As the U.S. and other nations strive to secure the materials needed for the energy transition, oil and gas companies can help bridge the gap by providing a stable, domestic source of lithium. This enhances energy independence and positions your company at the forefront of a critical sector driving the future of clean energy.